SB-1051, As Passed Senate, February 12, 2008

SENATE BILL No. 1051

January 23, 2008, Introduced by Senators GILBERT and CASSIS and referred to the Committee on Finance.

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending section 261 (MCL 208.1261).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 261. As used in this chapter:

(a) "Billing address" means the location indicated in the

books and records of the financial institution on the first day of

the tax year or on a later date in the tax year when the customer

relationship began as the address where any notice, statement, or

bill relating to a customer's account is mailed.

(b) "Borrower is located in this state" or "credit card holder

is located in this state" means a borrower, other than a credit

card holder, that is engaged in a trade or business which maintains

its commercial domicile in this state, or a borrower that is not

engaged in a trade or business or a credit card holder whose

billing address is in this state.

or business, that is the place from which the trade or business is

principally managed and directed, or if a financial institution is

organized under the laws of a foreign country, ~~of the commonwealth~~

of ~~Puerto Rico~~, or any territory or possession of the United

States, such financial institution's commercial domicile shall be

deemed for the purposes of this chapter to be the state of the

United States or the District of Columbia from which such financial

institution's trade or business in the United States is principally

managed and directed. It shall be presumed, subject to rebuttal,

that the location from which the financial institution's trade or

business is principally managed and directed is the state of the

United States or the District of Columbia to which the greatest

number of employees are regularly connected or out of which they

are working, irrespective of where the services of such employees

are performed, as of the last day of the tax year.

(d) "Credit card" means a credit, travel, or entertainment

card.

(e) "Credit card issuer's reimbursement fee" means the fee a

financial institution receives from a merchant's bank because 1 of

the persons to whom the financial institution has issued a credit

card has charged merchandise or services to the credit card.

(f) "Financial institution" means any of the following:

(i) A bank holding company, a national bank, a state chartered

bank, an office of thrift supervision chartered bank or thrift

institution, or a savings and loan holding company other than a

diversified savings and loan holding company as defined in 12 USC

1467a(a)(F).

(ii) Any person, other than a person subject to the tax imposed

under chapter 2A, who is directly or indirectly owned by an entity

described in subparagraph (i) and is a member of the unitary

business group.

(iii) A unitary business group of entities described in

subparagraph (i) or (ii), or both.

(g) "Gross business" means the sum of the following less

transactions between those entities included in a unitary business

group:

(i) Fees, commissions, or other compensation for financial

services.

(ii) Net gains, not less than zero, from the sale of loans and

other intangibles.

(iii) Net gains, not less than zero, from trading in stocks,

bonds, or other securities.

(iv) Interest charged to customers for carrying debit balances

of margin accounts.

(v) Interest and dividends received.

(vi) Any other gross proceeds resulting from the operation as a

financial institution.

(h) "Loan" means any extension of credit resulting from direct

negotiations between the financial institution and its customer, or

the purchase, in whole or in part, of such extension of credit from

another. Loans include participations, syndications, and leases

treated as loans for federal income tax purposes. Loans shall not

include properties treated as loans under section 595 of the

internal revenue code, futures or forward contracts, options,

notional principal contracts such as swaps, credit card

receivables, including purchased credit card relationships, non-

interest-bearing balances due from depository institutions, cash

items in the process of collection, federal funds sold, securities

purchased under agreements to resell, assets held in a trading

account, securities, interests in a real estate mortgage investment

conduit, or other mortgage-backed or asset-backed security, and

other similar items.

(i) "Loan secured by real property" means that 50% or more of

the aggregate value of the collateral used to secure a loan or

other obligation, when valued at fair market value as of the time

the original loan or obligation was incurred, was real property.

(j) "Merchant discount" means the fee or negotiated discount

charged to a merchant by the financial institution for the

privilege of participating in a program whereby a credit card is

accepted in payment for merchandise or services sold to the credit

card holder.

(k) "Michigan obligations" means a bond, note, or other

obligation issued by a governmental unit described in section 3 of

the shared credit rating act, 1985 PA 227, MCL 141.1053.

(l) "Participation" means an extension of credit in which an

undivided ownership interest is held on a pro rata basis in a

single loan or pool of loans and related collateral. In a loan

participation, the credit originator initially makes the loan and

then subsequently resells all or a portion of it to other lenders.

The participation may or may not be known to the borrower.

(m) "Principal base of operation", with respect to

transportation property, means the place of more or less permanent

nature from which said property is regularly directed or

controlled. With respect to an employee, the principal base of

operations means the place of more or less permanent nature from

which the employee regularly does any of the following:

(i) Starts his or her work and to which he or she customarily

returns in order to receive instructions from his or her employer.

(ii) Communicates with his or her customers or other persons.

(iii) Performs any other functions necessary to the exercise of

his or her trade or profession at some other point or points.

(n) "Real property owned" and "tangible personal property

owned" mean real and tangible personal property respectively on

which the financial institution may claim depreciation for federal

income tax purposes or to which the financial institution holds

legal title and on which no other person may claim depreciation for

federal income tax purposes or could claim depreciation if subject

to federal income tax. Real and tangible personal properties do not

include coin, currency, or property acquired in lieu of or pursuant

to a foreclosure.

(o) "Regular place of business" means an office at which the

financial institution carries on its business in a regular and

systematic manner and which is continuously maintained, occupied,

and used by employees of the financial institution. The financial

institution shall have the burden of proving that an investment

asset or activity or trading asset or activity was properly

assigned to a regular place of business outside of this state by

demonstrating that the day-to-day decisions regarding the asset or

activity occurred at a regular place of business outside this

state. Where the day-to-day decisions regarding an investment asset

or activity or trading asset or activity occur at more than 1

regular place of business and 1 such regular place of business is

in this state and 1 such regular place of business is outside this

state, such asset or activity shall be considered to be located at

the regular place of business of the financial institution where

the investment or trading policies or guidelines with respect to

the asset or activity are established. Unless the financial

institution demonstrates to the contrary, such policies and

guidelines shall be presumed to be established at the commercial

domicile of the financial institution.

(p) "Rolling stock" means railroad freight or passenger cars,

locomotives, or other rail cars.

(q) "Syndication" means an extension of credit in which 2 or

more persons finance the credit and each person is at risk only up

to a specified percentage of the total extension of the credit or

up to a specified dollar amount.

(r) "Transportation property" means vehicles and vessels

capable of moving under their own power, such as aircraft, trains,

water vessels, and motor vehicles, as well as any equipment or

containers attached to such property, such as rolling stock,

barges, or trailers.

(s) "United States obligations" means all obligations of the