June 29, 2005, Introduced by Rep. Green and referred to the Committee on Banking and Financial Services.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending section 9 (MCL 208.9), as amended by 2004 PA 258, and
by adding section 35e.
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,
to the extent included in federal taxable income, the amount
contributed by the taxpayer in the tax year to the reserve fund of
a community development organization pursuant to the individual or
family development account program act. As used in this subsection,
"community development organization" means that term as defined in
the individual or family development account program act.
Sec. 35e. (1) For tax years that begin after December 31,
2005, a taxpayer that is a qualified financial institution may
claim a credit against the tax imposed by this act equal to the
contributions made to individual or family development accounts
established with that financial institution not to exceed $500.00
and an additional credit of $50.00 each tax year for the
administration of individual or family development accounts
established with that financial institution.
(2) If the credit allowed under this section for the tax year
and any unused carryforward of the credit allowed under this
section exceed the tax liability of the taxpayer for the tax year,
the excess shall not be refunded, but may be carried forward as an
offset to the tax liability in subsequent tax years for 10 tax
years or until the excess credit is used up, whichever occurs
first.
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.____ or House Bill No. 5027(request no.
02527'05).
(b) Senate Bill No.____ or House Bill No.____ (request no.
03309'05).