February 15, 2005, Introduced by Reps. Hoogendyk, Gosselin, Garfield, Baxter, Drolet, Sheen and Stahl and referred to the Committee on Tax Policy.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending sections 9, 39e, and 73 (MCL 208.9, 208.39e, and
208.73), section 9 as amended by 2004 PA 258, section 39e as
amended by 2002 PA 622, and section 73 as amended by 1995 PA 80.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 9. (1) "Tax base" means business income, before
apportionment or allocation as provided in chapter 3, even if zero
or negative, subject to the adjustments in this section.
(2) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, in the
same amount that was excluded from federal taxable income, less the
related portion of expenses not deducted in computing federal
taxable income because of sections 265 and 291 of the internal
revenue code.
(3) Add all taxes on or measured by net income and the tax
imposed by this act to the extent the taxes were deducted in
arriving at federal taxable income.
(4) Add the following, to the extent deducted in arriving at
federal taxable income:
(a) A carryback or carryover of a net operating loss.
(b) A carryback or carryover of a capital loss.
(c) A deduction for depreciation, amortization, or immediate
or accelerated write-off related to the cost of tangible assets.
(d) A dividend paid or accrued except a dividend that
represents a reduction of premiums to policyholders of insurance
companies.
(e) A deduction or exclusion by a taxpayer due to a
classification as, or the payment of commissions or other fees to,
a domestic international sales corporation or any like special
classification the purpose of which is to reduce or postpone the
federal income tax liability. This subdivision does not apply to
the special provisions of sections 805, 809, and 815(c)(2)(A) of
the internal revenue code.
(f) All interest including amounts paid, credited, or reserved
by insurance companies as amounts necessary to fulfill the policy
and other contract liability requirements of sections 805 and 809
of the internal revenue code. Interest does not include payments or
credits made to or on behalf of a taxpayer by a manufacturer,
distributor, or supplier of inventory to defray any part of the
taxpayer's floor plan interest, if these payments are used by the
taxpayer to reduce interest expense in determining federal taxable
income. For purposes of this section, "floor plan interest" means
interest paid that finances any part of the taxpayer's purchase of
automobile inventory from a manufacturer, distributor, or supplier.
However, amounts attributable to any invoiced items used to provide
more favorable floor plan assistance to a taxpayer than to a person
who is not a taxpayer is considered interest paid by a
manufacturer, distributor, or supplier.
(g) All royalties except for the following:
(i) On and after July 1, 1985, oil and gas royalties that are
excluded in the depletion deduction calculation under the internal
revenue code.
(ii) Cable television franchise fees described in section 622
of part III of title VI of the communications act of 1934, 47
U.S.C. USC 542.
(iii) Except as provided in subparagraph (iv), for the tax years
1986 and after 1986, a franchise fee as defined by section 3 of the
franchise investment law, 1974 PA 269, MCL 445.1503, in the
following amounts:
(A) For the tax years 1986, 1987, and 1988, 20% of the
franchise fee.
(B) For the tax years 1989 and 1990, 50% of the franchise fee.
(C) For the tax years 1991 and after 1991, 100% of the
franchise fee.
(iv) For the tax years ending before 1991, this subdivision
does not apply to a fee for services paid by a franchisee that,
with respect to a specific provision of a franchise agreement, a
court of competent jurisdiction, before June 5, 1985, has
determined is not a royalty payment under this act.
(v) Film rental or royalty payments paid by a theater owner to
a film distributor, a film producer, or a film distributor and
producer.
(vi) Royalties, fees, charges, or other payments or
consideration paid or incurred by radio or television broadcasters
for program matter or signals.
(vii) Royalties, fees, charges, or other payments or
consideration paid by a film distributor for copyrighted motion
picture films, program matter, or signals to a film producer.
(viii) For tax years that begin after December 31, 1993,
royalties paid by a licensee of application computer software,
operating system software, or system software pursuant to a license
agreement. As used in this subparagraph and subsection (7)(c)(vii):
(A) "Application computer software" means a set of statements
or instructions that when incorporated in a machine usable medium
is capable of causing a machine or device having information
processing capabilities to indicate, perform, or achieve a
particular business function, task, or result for the nontechnical
end user. Application computer software includes any other computer
software that does not qualify under sub-subparagraph (B) or (C).
(B) "Operating system software" means a set of statements or
instructions that when incorporated into a machine or device having
information processing capabilities is an interface between the
computer hardware and the application computer software or system
software.
(C) "System software" means a set of statements or
instructions that interacts with operating system software that is
developed, licensed, and intended for the exclusive use of data
processing professionals to build, test, manage, or maintain
application computer software for which a license agreement is
signed by the licensor and licensee at the time of the transfer of
the software and that is not transferred to the licensee as part of
or in conjunction with a sale or lease of computer hardware.
(ix) For tax years that begin after December 31, 2000,
royalties, fees, or other payments or consideration paid or
incurred by a franchisee to a franchisor to establish or maintain
the franchise relationship other than payments for the sale or
lease of inventory, equipment, fixtures, or real property at fair
rental or fair market value.
(h) A deduction for rent attributable to a lease back that
continues in effect under the former provisions of section
168(f)(8) of the internal revenue code of 1954 as that section
provided immediately before the tax reform act of 1986, Public Law
99-514, became effective or to a lease back of property to which
the amendments made by the tax reform act of 1986 do not apply as
provided in section 204 of the tax reform act of 1986.
(5) Add compensation.
(6) Add a capital gain related to business activity of
individuals to the extent excluded in arriving at federal taxable
income.
(7) Deduct the following, to the extent included in arriving
at federal taxable income:
(a) A dividend received or considered received, including the
foreign dividend gross-up provided for in the internal revenue
code.
(b) All interest except amounts paid, credited, or reserved by
an insurance company as amounts necessary to fulfill the policy and
other contract liability requirements of sections 805 and 809 of
the internal revenue code.
(c) All royalties except for the following:
(i) On and after July 1, 1985, oil and gas royalties that are
included in the depletion deduction calculation under the internal
revenue code.
(ii) Except as provided in subparagraph (iii), for the 1986 tax
year and after the 1986 tax year, a franchise fee as defined in
section 3 of the franchise investment law, 1974 PA 269, MCL
445.1503, in the following amounts:
(A) For the tax years 1986, 1987, and 1988, 20% of the
franchise fee.
(B) For the tax years 1989 and 1990, 50% of the franchise fee.
(C) For the tax years 1991 and after 1991, 100% of the
franchise fee.
(iii) For the tax years ending before 1991, this subdivision
does not apply to a fee for services paid by a franchisee that,
with respect to a specific provision of a franchise agreement, a
court of competent jurisdiction, before June 5, 1985, has
determined is not a royalty payment under this act.
(iv) Film rental or royalty payments paid by a theater owner to
a film distributor, a film producer, or a film distributor and
producer.
(v) Royalties, fees, charges, or other payments or
consideration paid or incurred by radio or television broadcasters
for program matter or signals.
(vi) Royalties, fees, charges, or other payments or
consideration paid by a film distributor for copyrighted motion
picture films, program matter, or signals to a film producer.
(vii) For tax years that begin after December 31, 1997,
royalties received by a licensor, distributor, developer, marketer,
or copyright holder of application computer software or operating
system software pursuant to a license agreement. System software is
not included within the exception under this subparagraph.
(viii) For tax years that begin after December 31, 2000,
royalties, fees, or other payments or consideration paid or
incurred by a franchisee to a franchisor to establish or maintain
the franchise relationship other than payments for the sale or
lease of inventory, equipment, fixtures, or real property at fair
rental or fair market value.
(d) Rent attributable to a lease back that continues in effect
under the former provisions of section 168(f)(8) of the internal
revenue code of 1954 as that section provided immediately before
the tax reform act of 1986, Public Law 99-514, became effective or
to a lease back of property to which the amendments made by the tax
reform act of 1986 do not apply as provided in section 204 of the
tax reform act of 1986.
(8) Deduct a capital loss not deducted in arriving at federal
taxable income in the year the loss occurred.
(9) To the extent included in federal taxable income, add the
loss or subtract the gain from the tax base that is attributable to
another entity whose business activities are taxable under this act
or would be taxable under this act if the business activities were
in this state.
(10) For tax years that begin after December 31, 2004, deduct,
to the extent included in federal taxable income, income received
from either of the following:
(a) Small business innovation research grants and small
business technology transfer programs established under the small
business innovation development act of 1982, Public Law 97-219,
reauthorized under the small business research and development
enhancement act, Public Law 102-564, and subsequently reauthorized
under the small business reauthorization act of 2000, Public Law
106-554.
(b) Grants from the Michigan technology tri-corridor SBIR
emerging business fund administered by the Michigan economic
development corporation.
(11) For tax years that begin after December 31, 2005, deduct
$350,000.00. For tax years that begin after December 31, 2005, the
deduction allowed under this subsection shall be adjusted by the
percentage increase in the United States consumer price index for
the immediately preceding calendar year. As used in this
subsection, "United States consumer price index" means the United
States consumer price index for all urban consumers as defined and
reported by the United States department of labor, bureau of labor
statistics.
Sec. 39e. (1) A taxpayer may claim a credit against the tax
imposed by this act for 1 or more of the following as applicable:
(a) The credit allowed under subsection (2).
(b) The credit allowed under subsection (6).
(2) For tax years that begin after December 31, 2002, a
taxpayer that is certified under the Michigan next energy authority
act, 2002 PA 593, MCL 207.821 to 207.827, as an eligible taxpayer
may claim a nonrefundable credit for the tax year equal to the
amount determined under subdivision (a) or (b), whichever is less:
(a) The amount by which the taxpayer's tax liability
attributable to qualified business activity for the tax year
exceeds the taxpayer's baseline tax liability attributable to
qualified business activity.
(b) For tax years that begin after December 31, 2002, 10% of
the amount by which the taxpayer's adjusted qualified business
activity performed in this state outside of a renaissance zone for
the tax year exceeds the taxpayer's adjusted qualified business
activity performed in this state outside of a renaissance zone for
the 2001 tax year.
(3) For any tax year in which the eligible taxpayer's tax
liability attributable to qualified business activity for the tax
year does not exceed the taxpayer's baseline tax liability
attributable to qualified business activity, the eligible taxpayer
shall not claim the credit allowed under subsection (2).
(4) An affiliated group as defined in this act, a controlled
group of corporations as defined in section 1563 of the internal
revenue
code and further described in 26 C.F.R. CFR 1.414(b)-1
and 1.414(c)-1 to 1.414(c)-5, or an entity under common control as
defined by the internal revenue code shall not take the credit
allowed under subsection (2) unless the qualified business activity
of the group or entities is consolidated.
(5) A taxpayer that claims a credit under subsection (2) shall
attach a copy of each of the following as issued pursuant to the
Michigan next energy authority act, 2002 PA 593, MCL 207.821 to
207.827, to the annual return required under this act for each tax
year in which the taxpayer claims the credit allowed under
subsection (2):
(a) The proof of certification that the taxpayer is an
eligible taxpayer for the tax year.
(b) The proof of certification of the taxpayer's tax liability
attributable to qualified business activity for the tax year.
(c) The proof of certification of the taxpayer's baseline tax
liability attributable to qualified business activity.
(6) For tax years that begin after December 31, 2002, a
taxpayer that is a qualified alternative energy entity may claim a
credit for the taxpayer's qualified payroll amount. A taxpayer
shall claim the credit under this subsection after all allowable
nonrefundable credits under this act.
(7) If the credit allowed under subsection (6) exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability shall be refunded.
(8) Notwithstanding any other provision of this act and for
tax years that begin after December 31, 2002 and before January 1,
2006, a person whose apportioned or allocated gross receipts are
less than $350,000.00 for the tax year need not file a return or
pay the tax as provided under this act.
(9) As used in this section:
(a) "Adjusted qualified business activity performed in this
state outside of a renaissance zone" means either of the following:
(i) Except as provided in subparagraph (ii), the taxpayer's
payroll for qualified business activity performed in this state
outside of a renaissance zone.
(ii) For a partnership, limited liability company, S
corporation, or individual, the amount determined under
subparagraph (i) plus the product of the following as related to the
taxpayer:
(A) Business income.
(B) The apportionment factor as determined under chapter 3.
(C) The alternative energy business activity factor.
(b) "Alternative energy business activity factor" means a
fraction the numerator of which is the ratio of the value of the
taxpayer's property used for qualified business activity and
located in this state outside of a renaissance zone for the year
for which the factor is being calculated to the value of all of the
taxpayer's property located in this state for that year plus the
ratio of the taxpayer's payroll for qualified business activity
performed in this state outside of a renaissance zone for that year
to all of the taxpayer's payroll in this state for that year and
the denominator of which is 2.
(c) "Alternative energy marine propulsion system",
"alternative energy system", "alternative energy vehicle", and
"alternative energy technology" mean those terms as defined in the
Michigan next energy authority act, 2002 PA 593, MCL 207.821 to
207.827.
(d) "Alternative energy zone" means a renaissance zone
designated as an alternative energy zone by the board of the
Michigan strategic fund under section 8a of the Michigan
renaissance zone act, 1996 PA 376, MCL 125.2688a.
(e) "Baseline tax liability attributable to qualified business
activity" means the taxpayer's tax liability for the 2001 tax year
multiplied by the taxpayer's alternative energy business activity
factor for the 2001 tax year. A taxpayer with a 2001 tax year of
less than 12 months shall annualize the amount calculated under
this subdivision as necessary to determine baseline tax liability
attributable to qualified business activity that reflects a 12-
month period.
(f) "Eligible taxpayer" means a taxpayer that has proof of
certification of qualified business activity under the Michigan
next energy authority act, 2002 PA 593, MCL 207.821 to 207.827.
(g) "Payroll" means total salaries and wages before deducting
any personal or dependency exemptions.
(h) "Qualified alternative energy entity" means a taxpayer
located in an alternative energy zone.
(i) "Qualified business activity" means research, development,
or manufacturing of an alternative energy marine propulsion system,
an alternative energy system, an alternative energy vehicle,
alternative energy technology, or renewable fuel.
(j) "Qualified employee" means an individual who is employed
by a qualified alternative energy entity, whose job
responsibilities are related to the research, development, or
manufacturing activities of the qualified alternative energy
entity, and whose regular place of employment is within an
alternative energy zone.
(k) "Qualified payroll amount" means an amount equal to
payroll of the qualified alternative energy entity attributable to
all qualified employees in the tax year of the qualified
alternative energy entity for which the credit under subsection (6)
is being claimed, multiplied by the tax rate for that tax year.
(l) "Renaissance zone" means a renaissance zone designated
under the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681
to 125.2696.
(m) "Renewable fuel" means 1 or more of the following:
(i) Biodiesel or biodiesel blends containing at least 20%
biodiesel. As used in this subparagraph, "biodiesel" means a diesel
fuel substitute consisting of methyl or ethyl esters produced from
the transesterification of animal or vegetable fats with methanol
or ethanol.
(ii) Biomass. As used in this subparagraph, "biomass" means
residues from the wood and paper products industries, residues from
food production and processing, trees and grasses grown
specifically to be used as energy crops, and gaseous fuels produced
from solid biomass, animal wastes, municipal waste, or landfills.
(n) "Tax liability attributable to qualified business
activity" means the taxpayer's tax liability multiplied by the
taxpayer's alternative energy business activity factor for the tax
year.
(o) "Tax rate" means the rate imposed under sections 51, 51d,
and 51e of the income tax act of 1967, 1967 PA 281, MCL 206.51,
206.51d, and 206.51e, annualized as necessary, for the tax year in
which the qualified alternative energy entity claims a credit under
subsection (6).
Sec. 73. (1) An annual or final return shall be filed with the
department in the form and content prescribed by the department by
the last day of the fourth month after the end of the taxpayer's
tax
year. Any final liability shall be remitted with this return.
A person whose apportioned or allocated gross receipts plus the
adjustments
provided in section 23b(a) , (b), and (c) to (g) are
less than the following amount for the appropriate year need not
file a return or pay the tax provided under this act:
(a) $40,000.00 for tax years beginning before January 1, 1991.
(b) $60,000.00 for tax years beginning after December 31, 1990
and before January 1, 1992.
(c) $100,000.00 for tax years beginning after December 31,
1991 and before January 1, 1994.
(d) $137,500.00 for tax years beginning after December 31,
1993 and before January 1, 1995.
(e) $250,000.00 for tax years beginning after December 31,
1994 and before January 1, 2003.
(f) $350,000.00 for tax years beginning after December 31,
2002 and before January 1, 2006.
(2) For a person whose apportioned or allocated gross receipts
plus the adjustments provided in section 23b(a), (b), and (c), are
for a tax year less than 12 months, the amount in subsection (1)
shall be multiplied by a fraction, the numerator of which is the
number of months in the tax year and the denominator of which is
12.
(3)
The commissioner department upon application of the
taxpayer and for good cause shown may extend the date for filing
the annual return. Interest at the rate of 9% per annum shall be
added to the amount of the tax unpaid for the period of the
extension.
The commissioner department shall require a tentative
return and payment of an estimated tax.
(4) If a taxpayer is granted an extension of time within
which to file the federal income tax return for any taxable year,
the filing of a copy of the request for extension together with a
tentative return and payment of an estimated tax with the
commissioner by the due date provided in subsection (1) shall
automatically extend the due date for the filing of a final return
under this act for an equivalent period plus 60 days. Interest at
the rate of 9% per annum shall be added to the amount of the tax
unpaid for the period of the extension.
(5) For tax years that end after July 6, 1994, an affiliated
group as defined in this act, a controlled group of corporations as
defined in section 1563 of the internal revenue code and further
described
in 26 C.F.R. CFR 1.414(b)-1 and 1.414(c)-1 to 1.414(c)-
5, or an entity under common control as defined in the internal
revenue code shall consolidate the gross receipts of the members of
the affiliated group, member corporations of the controlled group,
or entities under common control that have apportioned or allocated
gross
receipts, plus the adjustments provided in section 23b(a) ,
(b),
and (c) to (g),
of $100,000.00 or more to determine if the
group or entity shall pay a tax or file a return as provided under
subsection (1). An individual member of an affiliated group or
controlled group of corporations or an entity under common control
is not required to file a return or pay the tax under this act if
that member or entity has apportioned or allocated gross receipts,
plus
the adjustments provided in section 23b(a) , (b), and (c) to
(g), of less than $100,000.00.