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.