November 3, 2005, Introduced by Senators KUIPERS, EMERSON, JOHNSON, JELINEK, SWITALSKI and PRUSI and referred to the Committee on Appropriations.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending section 4 (MCL 208.4), as amended by 2003 PA 240.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4. (1) "Casual transaction" means a transaction made or
engaged in other than in the ordinary course of repeated and
successive transactions of a like character, except that a
transaction made or engaged in by a person that is incidental to
that person's regular business activity is a business activity
within the meaning of this act.
(2) "Commissioner" means the department.
(3) Except as otherwise provided in subsection (4),
"compensation" means all wages, salaries, fees, bonuses,
commissions, or other payments made in the taxable year on behalf
of or for the benefit of employees, officers, or directors of the
taxpayers. Compensation includes, but is not limited to, payments
that are subject to or specifically exempt or excepted from
withholding under sections 3401 to 3406 of the internal revenue
code. Compensation also includes, on a cash or accrual basis
consistent with the taxpayer's method of accounting for federal
income tax purposes, payments to state and federal unemployment
compensation funds, payments under the federal insurance
contribution act and similar social insurance programs, payments,
including self-insurance, for worker's compensation insurance,
payments to individuals not currently working, payments to
dependents and heirs of individuals because of current or former
labor services rendered by those individuals, payments to a
pension, retirement, or profit sharing plan, and payments for
insurance for which employees are the beneficiaries, including
payments under health and welfare and noninsured benefit plans and
payments of fees for the administration of health and welfare and
noninsured benefit plans. Compensation does not include any of the
following:
(a) Discounts on the price of the taxpayer's merchandise or
services sold to the taxpayer's employees, officers, or directors
that are not available to other customers.
(b) Payments to an independent contractor.
(c) For tax years beginning after December 31, 1994, payments
to state and federal unemployment compensation funds.
(d) For tax years beginning after December 31, 1994, the
employer's portion of payments under the federal insurance
contributions act, chapter 21 of subtitle C of the internal revenue
code, 26 USC 3101 to 3128, the railroad retirement tax act, chapter
22 of subtitle C of the internal revenue code, 26 USC 3201 to 3233,
and similar social insurance programs.
(e) For tax years beginning after December 31, 1994, payments,
including self-insurance payments, for worker's compensation
insurance or federal employers' liability act insurance pursuant to
chapter 149, 35 Stat. 65, 45 USC 51 to 60.
(f) For tax years beginning after December 31, 2003, the
following payments under health and welfare and noninsured benefit
plans for the benefit of persons who are residents of this state
and payments of fees for the administration of health and welfare
and noninsured benefit plans for the benefit of persons who are
residents of this state for the specified years:
(i) For tax years that begin after December 31, 2003 and before
January 1, 2005, 5%.
(ii) For tax years that begin after December 31, 2004 and
before January 1, 2006, 20%.
(iii) For tax years that begin after December 31, 2005 and
before January 1, 2007, 40%.
(iv) For tax years that begin after December 31, 2006, the
percentage of payments as provided under section 4a.
(4) For tax years that begin after December 31, 2003 and
before the effective date of the amendatory act that added
subsection (5), for purposes of determining compensation of a
professional employer organization, compensation includes payments
by the professional employer organization to the officers and
employees of an entity whose employment operations are managed by
the professional employer organization. Compensation of the entity
whose employment operations are managed by a professional employer
organization does not include compensation paid by the professional
employer organization to the officers and employees of the entity
whose employment operations are managed by the professional
employer organization. As used in this subsection, "professional
employer organization" means an organization that provides the
management and administration of the human resources and employer
risk of another entity by contractually assuming substantial
employer rights, responsibilities, and risk through a professional
employer agreement that establishes an employer relationship with
the leased officers or employees assigned to the other entity by
doing all of the following:
(a) Maintaining the right of direction and control of
employees' work, although this responsibility may be shared with
the other entity.
(b) Paying wages and employment taxes of the employees out of
its own accounts.
(c) Reporting, collecting, and depositing state and federal
employment taxes for the employees.
(d) Retaining the right to hire and fire employees.
(5) For tax years that begin on and after the effective date
of the amendatory act that added this subsection, compensation of a
professional employer organization does not include compensation of
leased officers and employees of a client whose employment is
subject to a professional employment agreement between the
professional employer organization and the client. Compensation of
a client of a professional employer organization that is not a
captive provider includes compensation of leased officers and
employees of the client whose employment is subject to a
professional employer agreement with a professional employer
organization and the client. As used in this subsection:
(a) "Captive provider" means an organization that limits
itself to providing services and employees to only 1 entity and
that entity's subsidiaries and affiliates and that does not hold
itself out as available to provide its services to other entities
that do not share an ownership relationship with the captive
provider.
(b) "Client" means an entity that enters into a professional
employer agreement with a professional employer organization.
(c) "Officer" means that term as defined in section 36.
(d) "Professional employer organization" means an organization
that provides the management and administration of the human
resources and employment risk of multiple clients by contractually
assuming substantial employer rights, responsibilities, and risk
through a professional employer agreement that establishes an
employer relationship with the leased officers or employees
assigned to the client by doing or contracting with a third party
to do any or all of the following:
(i) Maintaining the right of direction and control of
employees' work, although this responsibility may be shared with
the other entity.
(ii) Paying wages and employment taxes of the leased officers
and employees out of its own accounts.
(iii) Reporting, collecting, and depositing state and federal
employment taxes for the leased officers and employees.
(iv) Retaining the right to hire and fire employees.
(6) (5)
"Department" means the department of
treasury.