HOUSE BILL No. 5271

 

October 6, 2005, Introduced by Reps. Baxter, Gosselin, Steil, Huizenga, Hoogendyk, Elsenheimer, Amos and Drolet 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:

 

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

 

income from any source whatsoever, there is levied and imposed upon

 

the taxable income of every person other than a corporation a tax

 

at the following rates in the following circumstances:

 

     (a) Before May 1, 1994, 4.6%.

 

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

 

     (c) For tax years that begin on and after January 1, 2000 and

 

before January 1, 2002,  and on and after January 1, 2003, the rate

 

under section 51b, 51c, 51d, or 51e, as applicable  4.2%.


 

     (d) For tax years that begin on and after January 1, 2002 and

 

before January 1, 2003, 4.1%.

 

     (e) For tax years that begin on and after January 1, 2003 and

 

before July 1, 2004, 4.0%.

 

     (f) For tax years that begin on and after July 1, 2004 and

 

except as otherwise provided in subdivision (g), 3.9%.

 

     (g) For tax years that begin on and after January 1, 2006, a

 

taxpayer may elect to pay any rate that is greater than 3.9% for a

 

tax year.

 

     (2) The following percentages of the net revenues collected

 

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

 

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

 

article IX of the state constitution of 1963:

 

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

 

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

 

under this section.

 

     (b) After September 30, 1996 and before January 1, 2000, 23.0%

 

of the gross collections before refunds from the tax levied under

 

this section.

 

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

 

collections before refunds from the tax levied under this section

 

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

 

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

 

     (3) The department shall annualize rates provided in

 

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

 

1994. The applicable annualized rate shall be imposed upon the

 

taxable income of every person other than a corporation for those


 

tax years.

 

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

 

the same manner that the taxable income of a resident is computed,

 

subject to the allocation and apportionment provisions of this act.

 

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

 

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

 

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

 

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

 

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

 

trust under this act for any preceding taxable year that would not

 

have been payable if the trust had in fact made distribution to its

 

beneficiaries at the times and in the amounts specified in section

 

666 of the internal revenue code. The credit shall not reduce the

 

tax otherwise due from the beneficiary to an amount less than would

 

have been due if the accumulation distribution were excluded from

 

taxable income.

 

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

 

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

 

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

 

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

 

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

 

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

 

property owned outright.

 

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

 

subject to tax of every person other than corporations shall be

 

computed in like manner and be the same as provided in the internal

 

revenue code subject to adjustments specifically provided for in


 

this act.

 

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

 

51e:  

 

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

 

nonresident individual or any of the following:

 

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

 

revenue code.

 

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

 

internal revenue code.

 

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

 

code.

 

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

 

act subject to the applicable source and attribution rules

 

contained in this act.

 

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

 

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

 

are repealed.