October 31, 2007, Introduced by Rep. Gillard and referred to the Committee on Tax Policy.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending section 201 (MCL 208.1201), as amended by 2007 PA 90;
and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 201. (1) Except as otherwise provided in this act, there
is levied and imposed a business income tax on every taxpayer with
business
activity within in this state unless prohibited by 15 USC
381 to 384. The business income tax is imposed on the business
income tax base, after allocation or apportionment to this state,
at the rate of 4.95%.
(2) The business income tax base means a taxpayer's business
income subject to the following adjustments, before allocation or
apportionment, and the adjustment in subsection (5) after
allocation or apportionment:
(a) Add interest income and dividends derived from obligations
or
securities of states a state
other than this state, 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.
(b) Add all taxes on or measured by net income and the tax
imposed under this act to the extent the taxes were deducted in
arriving at federal taxable income.
(c) Add any carryback or carryover of a net operating loss to
the extent deducted in arriving at federal taxable income.
(d) To the extent included in federal taxable income, deduct
dividends and royalties received from entities or persons other
than United States persons and foreign operating entities,
including, but not limited to, amounts determined under section 78
of the internal revenue code or sections 951 to 964 of the internal
revenue code.
(e) To the extent included in federal taxable income, add the
loss or subtract the income from the business income tax base that
is attributable to another entity or person whose business
activities are taxable under this section or would be subject to
the tax under this section if the business activities were in this
state.
(f) Except as otherwise provided under this subdivision, to
the extent deducted in arriving at federal taxable income, add any
royalty,
interest, or other expense paid to a an entity or person
related to the taxpayer by ownership or control for the use of an
intangible asset if the person is not included in the taxpayer's
unitary business group. The addition of any royalty, interest, or
other expense described under this subdivision is not required to
be added if the taxpayer can demonstrate that the transaction has a
nontax business purpose other than avoidance of this tax, is
conducted with arm's-length pricing and rates and terms as applied
in accordance with sections 482 and 1274(d) of the internal revenue
code, and satisfies 1 of the following:
(i) Is a pass through of another transaction between a third
party and the related person with comparable rates and terms.
(ii) Results in double taxation. For purposes of this
subparagraph, double taxation exists if the transaction is subject
to tax in another jurisdiction.
(iii) Is unreasonable as determined by the treasurer, and the
taxpayer agrees that the addition would be unreasonable based on
the taxpayer's facts and circumstances.
(g) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(h) To the extent included in federal taxable income, deduct
any earnings that are net earnings from self-employment as defined
under section 1402 of the internal revenue code of the taxpayer or
a partner or limited liability company member of the taxpayer
except to the extent that those net earnings represent a reasonable
return on capital.
(i) Subject to the limitation provided under this subdivision,
if the book-tax differences for the first fiscal period ending
after July 12, 2007 result in a deferred liability for a person
subject to tax under this act, deduct the following percentages of
the total book-tax difference for each qualifying asset, for each
of the successive 15 tax years beginning with the 2015 tax year:
(i) For the 2015 through 2019 tax years, 4%.
(ii) For the 2020 through 2024 tax years, 6%.
(iii) For the 2025 through 2029 tax years, 10%.
(3) The deduction under subsection (2)(i) shall not exceed the
amount necessary to offset the net deferred tax liability of the
taxpayer as computed in accordance with generally accepted
accounting principles which would otherwise result from the
imposition of the business income tax under this section and the
modified gross receipts tax under section 203 if the deduction
provided under this subdivision were not allowed. For purposes of
the calculation of the deduction under subsection (2)(i), a book-
tax difference shall only be used once in the calculation of the
deduction arising from the taxpayer's business income tax base
under this section and once in the calculation of the deduction
arising from the taxpayer's modified gross receipts tax base under
section 203. The adjustment under subsection (2)(i) shall be
calculated without regard to the federal effect of the deduction.
If the adjustment under subsection (2)(i) is greater than the
taxpayer's business income tax base, any adjustment that is unused
may be carried forward and applied as an adjustment to the
taxpayer's business income tax base before apportionment in future
years. In order to claim this deduction, the department may require
the taxpayer to report the amount of this deduction on a form as
prescribed by the department that is to be filed on or after the
date that the first quarterly return and estimated payment are due
under this act. As used in subsection (2)(i) and this subsection:
(a) "Book-tax difference" means the difference, if any,
between the person's qualifying asset's net book value shown on the
person's books and records for the first fiscal period ending after
July 12, 2007 and the qualifying asset's tax basis on that same
date.
(b) "Qualifying asset" means any asset shown on the person's
books and records for the first fiscal period ending after July 12,
2007, in accordance with generally accepted accounting principles.
(4) For purposes of subsections (2) and (3), the business
income of a unitary business group is the sum of the business
income of each entity or person, other than a foreign operating
entity or a person subject to the tax imposed under chapter 2A or
2B, included in the unitary business group less any items of income
and related deductions arising from transactions including
dividends between persons included in the unitary business group.
(5) Deduct any available business loss incurred after December
31, 2007. As used in this subsection, "business loss" means a
negative business income taxable amount after allocation or
apportionment. The business loss shall be carried forward to the
year immediately succeeding the loss year as an offset to the
allocated or apportioned business income tax base, then
successively to the next 9 taxable years following the loss year or
until the loss is used up, whichever occurs first, but for not more
than 10 taxable years after the loss year.
Enacting section 1. Section 6a of the use tax act, 1937 PA 94,
MCL 205.96a, is repealed effective December 31, 2010.
Enacting section 2. This amendatory act takes effect January
1, 2008 and applies to all business activity occurring after
December 31, 2007.
Enacting section 3. This amendatory act does not take effect
unless all of the following bills of the 94th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 5402(request no.
05499'07 *).
(b) Senate Bill No.____ or House Bill No. 5403(request no.
05500'07 *).
(c) Senate Bill No.____ or House Bill No. 5404(request no.
05501'07 *).
(d) Senate Bill No.____ or House Bill No. 5405(request no.
05502'07 *).
(e) Senate Bill No.____ or House Bill No. 5406(request no.
05503'07 *).