HOUSE BILL No. 5863


     April 9, 2002, Introduced by Reps. Callahan, Plakas, Switalski and Jacobs and referred to the Committee on Tax Policy.


        A bill to amend 1967 PA 281, entitled

   "Income tax act of 1967,"

   by amending section 51 (MCL 206.51), as amended by 1999 PA 6; and

   to repeal acts and parts of acts.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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             Sec. 51. (1) For receiving, earning, or otherwise acquiring

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        income from any source whatsoever, there is levied and imposed

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        upon the taxable income of every person other than a corporation

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        a tax at the following rates in the following circumstances:

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             (a) Before May 1, 1994, 4.6%.

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             (b) After April 30, 1994 and before January 1, 2000, 4.4%.

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             (c)  For tax years that begin on  ON and after January 1,

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        2000 and before  January 1, 2002 and on and after January 1,

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        2003, the rate under section 51b, 51c, 51d, or 51e, as

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        applicable  OCTOBER 1, 2001, 4.2%.


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             (d)  For tax years that begin on  ON and after  January 1,

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        2002  OCTOBER 1, 2001 and before  January 1, 2003  OCTOBER 1,

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        2002, 4.1%.

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             (E) ON AND AFTER OCTOBER 1, 2002, 4.0%.

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             (2) The following percentages of the net revenues collected

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        under this section  and sections 51b, 51c, 51d, and 51e  shall be

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        deposited in the state school aid fund created in section 11 of

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        article IX of the state constitution of 1963:

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             (a) Beginning October 1, 1994 and before October 1, 1996,

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        14.4% of the gross collections before refunds from the tax levied

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        under this section.

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             (b) After September 30, 1996 and before January 1, 2000,

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        23.0% of the gross collections before refunds from the tax levied

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        under this section.

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             (c) Beginning January 1, 2000, that percentage of the gross

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        collections before refunds from the tax levied under this section

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        that is equal to 1.012% divided by the income tax rate levied

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        under this section.  or section 51b, 51c, 51d, or 51e, as

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        applicable.

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             (3) The department shall annualize rates provided in subsec-

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        tion (1) as necessary for tax years that end after April 30,

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        1994.  The applicable annualized rate shall be imposed upon the

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        taxable income of every person other than a corporation for those

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        tax years.

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             (4) The taxable income of a nonresident shall be computed in

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        the same manner that the taxable income of a resident is





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        computed, subject to the allocation and apportionment provisions

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        of this act.

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             (5) A resident beneficiary of a trust whose taxable income

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        includes all or part of an accumulation distribution by a trust,

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        as defined in section 665 of the internal revenue code, shall be

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        allowed a credit against the tax otherwise due under this act.

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        The credit shall be all or a proportionate part of any tax paid

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        by the trust under this act for any preceding taxable year that

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        would not have been payable if the trust had in fact made distri-

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        bution to its beneficiaries at the times and in the amounts spec-

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        ified in section 666 of the internal revenue code.  The credit

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        shall not reduce the tax otherwise due from the beneficiary to an

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        amount less than would have been due if the accumulation distri-

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        bution were excluded from taxable income.

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             (6) The taxable income of a resident who is required to

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        include income from a trust in his or her federal income tax

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        return under the provisions of subpart E of part I of subchapter

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        J of chapter 1 of the internal revenue code, 26 U.S.C. 671 to

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        679, shall include items of income and deductions from the trust

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        in taxable income to the extent required by this act with respect

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        to property owned outright.

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             (7) It is the intention of this section that the income

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        subject to tax of every person other than corporations shall be

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        computed in like manner and be the same as provided in the inter-

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        nal revenue code subject to adjustments specifically provided for

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        in this act.





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             (8) As used in this section:  and sections 51b, 51c, 51d,

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        and 51e:

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             (a) "Person other than a corporation" means a resident or

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        nonresident individual or any of the following:

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             (i) A partner in a partnership as defined in the internal

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        revenue code.

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             (ii) A beneficiary of an estate or a trust as defined in the

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        internal revenue code.

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             (iii) An estate or trust as defined in the internal revenue

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        code.

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             (b) "Taxable income" means taxable income as defined in this

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        act subject to the applicable source and attribution rules con-

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        tained in this act.

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             Enacting section 1.  Sections 51c, 51d, and 51e of the

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        income tax act of 1967, 1967 PA 281, MCL 206.51c, 206.51d, and

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        206.51e, are repealed.

























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