SB-0203, As Passed House, December 13, 2005
HOUSE SUBSTITUTE FOR
SENATE BILL NO. 203
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending section 54 (MCL 208.54), as added by 1999 PA 115.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 54. (1) Notwithstanding sections 51 and 52, a spun off
corporation may elect to calculate its sales factor under this
section for a period of 5 years if the following criteria under
subdivisions
(a), (b), and (c) are met, and for an additional 2
years following the 5 years, and for an additional 4 years
following the additional 2 years if all of the following criteria
under this subsection are met:
(a) The spun off corporation was included in a combined or
consolidated return under this act for the tax year immediately
preceding the restructuring transaction.
(b) As a result of the restructuring transaction that occurred
on or after January 1, 1999, both of the following apply:
(i) The spun off corporation ceased to be included in the
combined or consolidated annual return under this act described in
subsection (1)(a).
(ii) Without regard to this section, the spun off corporation
would have had an increased tax liability under this act for the
tax year in which the election under this section is made.
(c) On or before the due date for filing the spun off
corporation's first annual return under this act following the
restructuring transaction, the spun off corporation shall request,
in writing, approval from the state treasurer for the election
provided under this section. The state treasurer must approve the
request under this subdivision by the spun off corporation. The
request shall include all of the following:
(i) A statement that the spun off corporation qualifies for the
election under this section.
(ii) A list of all corporations, limited liability companies,
and any other business entities that the spun off corporation
controlled at the time of the restructuring transaction.
(iii) A commitment by the spun off corporation to invest at
least $500,000,000.00 of capital investment in this state within 5
years. The 5 years under this subparagraph shall commence with the
first tax year following the tax year in which the restructuring
transaction was completed.
(d) Prior to the end of the sixth year following the
restructuring transaction and if the spun off corporation is not
required to file amended returns under subsection (3), the spun off
corporation shall request, in writing, approval from the state
treasurer
for the election provided of the 2 additional years
under this
section subsection (1). The state treasurer must
approve the request under this subdivision by the spun off
corporation. The request shall include all of the following:
(i) A statement that the spun off corporation qualifies for the
election under this section.
(ii) A list of all corporations, limited liability companies,
and any other business entities that the spun off corporation
controlled at the time of the restructuring transaction.
(iii) A commitment by the spun off corporation to invest at
least $200,000,000.00 of capital investment in this state within
the next
2 years additional 2 years or a commitment by the spun
off corporation to invest a total of $700,000,000.00 of capital
investment in this state within the 7-year period beginning with
the year in which the restructuring transaction was completed. The
2 years under this subparagraph shall commence with the sixth tax
year following the tax year in which the restructuring transaction
was completed.
(e) Prior to the end of the eighth year following the
restructuring transaction and if the spun off corporation is not
required to file amended returns under subsection (5), the spun off
corporation may request, in writing, approval from the state
treasurer for the election of the 4 additional years under
subsection (1). The state treasurer must approve the election under
this subdivision. The request shall include all of the following:
Senate Bill No. 203 (H-1) as amended December 13, 2005
(i) A statement that the spun off corporation qualifies for the
election under this section.
(ii) A list of all corporations, limited liability companies,
and any other business entities that the spun off corporation
controlled at the time of the restructuring transaction.
(iii) A commitment by the spun off corporation to invest at
least an additional $200,000,000.00 of capital investment in this
state within the additional 4 years and maintain at least 80% of
the number of full-time equivalent employees in this state based on
the number of full-time equivalent employees in this state at the
beginning of the additional 4-year period for all of the additional
4 years; a commitment by the spun off corporation to invest an
additional $400,000,000.00 in this state within the additional 4
years; or a commitment by the spun off corporation to invest a
total of $1,300,000,000.00 [in this state] within the 11-year period
commencing
with the year in which the restructuring transaction was completed.
The 4 years under this subparagraph shall commence with the eighth
year following the tax year in which the restructuring transaction
was completed. For purposes of this subparagraph, the number of
full-time equivalent employees includes employees in all of the
following circumstances:
(A) On temporary layoff.
(B) On strike.
(C) On a type of temporary leave other than the type under
sub-subparagraphs (A) and (B).
(D) Transferred by the spun off corporation to a related
entity or to its immediately preceding former parent corporation.
Senate Bill No. 203 (H-1) as amended December 13, 2005
(E) Transferred by the spun off corporation to another
employer because of the sale of the spun off corporation's location
in this state that was the work site of the employees.
(2) Prior to the end of the eleventh year following the
restructuring transaction, a taxpayer that is a buyer of a plant [located
in this state]
that was included in the initial restructuring transaction under
subsection (1) may elect to calculate its sales factor under
subsection (3) and disregard sales by the taxpayer attributable to
that plant to a former parent of a spun off corporation and the
sales attributable to the plant shall be treated as sales by a spun
off corporation. This election shall extend for a period of 4 years
following the date that the plant was purchased. On or before the
due date for filing the buyer's first annual return following the
purchase of the plant, the buyer shall request, in writing,
approval from the state treasurer for the election provided under
this section and shall attach a statement that the buyer qualifies
for the election under this section.
(3) (2)
A spun off corporation qualified under subsection
(1) or (2) and that makes an election and is approved under
subsection (1) or (2) calculates its sales factor under sections 51
and 52 subject to both of the following:
(a) A purchaser in this state under section 52 does not
include a person who purchases from a seller that was included in
the purchaser's combined or consolidated annual return under this
act but, as a result of the restructuring transaction, ceased to be
included in the purchaser's combined or consolidated annual return
under this act. [For tax years that begin after December 31, 2005, for a
taxpayer that has filed for bankruptcy protection under federal law in calendar year 2005 and for tax years that begin after december 31, 2006 for all other taxpayers, this subdivision applies only to sales that originate from a plant located in this state.]
Senate Bill No. 203 (H-1) as amended December 13, 2005
(b) Total sales under section 51 do not include sales to a
purchaser that was a member of a Michigan affiliated group that had
included the seller in the filing of a combined or consolidated
annual return under this act but, as a result of the restructuring
transaction, ceased to include the seller. [For tax years that begin
after December 31, 2005, for a taxpayer that has filed for bankruptcy protection under federal law in calendar year 2005 and for tax years that begin after December 31, 2006 for all other taxpayers, this subdivision applies only to sales that originate from a plant located in this state to a location in this state.]
(4) (3)
At the end of the fifth year following the
restructuring transaction, if a spun off corporation that elected
to calculate its sales factor under this section for the additional
2 years allowed under subsection (1) has failed to pay or accrue
the amount of capital investment required under subsection (1)(c),
the
spun off corporation shall be required to file amended annual
returns under this act for each of the years the spun off
corporation calculated its sales factor under this section
regardless of the applicable statute of limitations under section
27a of 1941 PA 122, MCL 205.27a, and pay any additional tax plus
interest based on the sales factor as calculated under sections 51
and 52. Interest shall be calculated from the due date of the
original return.
(5) (4)
At the end of the seventh tax year following the
restructuring transaction, if a spun off corporation that elected
to calculate its sales factor under this section has failed to pay
or accrue the capital investment required under subsection (1)(d),
the spun off corporation shall be required to file amended annual
returns under this act for the sixth and seventh tax years
following the restructuring transaction and pay any additional tax
plus interest based on the sales factor as calculated under
sections 51 and 52. Interest shall be calculated from the due date
Senate Bill No. 203 (H-1) as amended December 13, 2005
of the original return.
(6) At the end of the eleventh tax year following the
restructuring transaction, if the spun off corporation that elected
to calculate its sales factor under this section for the additional
2 years and the additional 4 years allowed under subsection (1) has
failed [to maintain the required number of emplOYEES or failed] to pay or
accrue the capital investment required under
subsection (1)(e), the spun off corporation shall file amended
annual returns under this act for the eighth through eleventh tax
years following the restructuring transaction, regardless of the
statute of limitations under section 27a of 1941 PA 122, MCL
205.27a, and pay any additional tax plus interest based on the
sales factor as calculated under sections 51 and 52. Interest shall
be calculated from the due date of the original return.
(7) The amount of the spun off corporation's investment
commitments required under this section shall not be reduced by the
amount of any qualifying investments in Michigan plants that are
sold.
(8) (5)
As used in this section:
(a) "Spun off corporation" means an entity treated as a
controlled corporation under section 355 of the internal revenue
code. Controlled corporation includes a corporate subsidiary
created for the purpose of a restructuring transaction, a limited
liability company, or an operational unit or division with business
activities that were previously carried out as a part of the
distributing corporation.
(b) "Restructuring transaction" means a tax free distribution
under section 355 of the internal revenue code and includes tax
free transactions under section 355 that are commonly referred to
as spin offs, split ups, split offs, or type D reorganizations.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 93rd Legislature are
enacted into law:
(a) Senate Bill No. 909.
(b) Senate Bill No. 910.
(c) House Bill No. 4982.
(d) House Bill No. 5459.
(e) House Bill No. 5460.
(f) House Bill No. 5461.