January 16, 2018, Introduced by Reps. Hauck, Tedder and Noble and referred to the Committee on Tax Policy.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 8, 12, 30, 30a, 52, 512, and 607 (MCL 206.8,
206.12, 206.30, 206.30a, 206.52, 206.512, and 206.607), section 12
as amended by 2003 PA 45, section 30 as amended by 2017 PA 149,
section 30a as added by 2012 PA 224, sections 52 and 512 as amended
by 2011 PA 38, and section 607 as amended by 2011 PA 306; and to
repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 8. (1) "Department" means the revenue division of the
department of treasury.
(2) "Dependent" means a dependent as defined in section 152 of
the internal revenue code.
(3) (2)
"Employee" means an
employee as defined in section
3401(c) of the internal revenue code. Any person from whom an
employer is required to withhold for federal income tax purposes
shall prima facie be deemed an employee.
(4) (3)
"Employer" means an
employer as defined in section
3401(d) of the internal revenue code. Any person required to
withhold for federal income tax purposes shall prima facie be
deemed an employer.
Sec. 12. (1) "Flow-through entity" means an S corporation,
partnership, limited partnership, limited liability partnership, or
limited liability company. Flow-through entity does not include a
publicly traded partnership as that term is defined in section 7704
of the internal revenue code that has equity securities registered
with the securities and exchange commission under section 12 of
title
I of the securities exchange act of 1934, chapter 404, 48
Stat.
881, 15 U.S.C. USC 78l.
(2) "Gross income" means gross income as defined in section 61
of the internal revenue code.
(3) "Internal revenue code" means the United States internal
revenue
code of 1986 in effect on January 1, 1996 2018 or at the
option of the taxpayer, in effect for the tax year.
(4) "Member of a flow-through entity" means a shareholder of
an S corporation; a partner in a partnership or limited
partnership; or a member of a limited liability company.
(5) "Nonresident member" means any of the following that is a
member of a flow-through entity:
(a) An individual who is not domiciled in this state.
(b) A nonresident estate or trust.
(c) A flow-through entity with a nonresident member.
Sec. 30. (1) "Taxable income" means, for a person other than a
corporation, estate, or trust, adjusted gross income as defined in
the internal revenue code subject to the following adjustments
under this section:
(a) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, in the
same amount that has been excluded from adjusted gross income less
related expenses not deducted in computing adjusted gross income
because of section 265(a)(1) of the internal revenue code.
(b) Add taxes on or measured by income to the extent the taxes
have been deducted in arriving at adjusted gross income.
(c) Add losses on the sale or exchange of obligations of the
United States government, the income of which this state is
prohibited from subjecting to a net income tax, to the extent that
the loss has been deducted in arriving at adjusted gross income.
(d) Deduct, to the extent included in adjusted gross income,
income derived from obligations, or the sale or exchange of
obligations, of the United States government that this state is
prohibited by law from subjecting to a net income tax, reduced by
any interest on indebtedness incurred in carrying the obligations
and by any expenses incurred in the production of that income to
the extent that the expenses, including amortizable bond premiums,
were deducted in arriving at adjusted gross income.
(e) Deduct, to the extent included in adjusted gross income,
the following:
(i) Compensation, including retirement or pension benefits,
received
for services in the armed forces Armed Forces of the
United States.
(ii) Retirement or pension benefits under the railroad
retirement act of 1974, 45 USC 231 to 231v.
(iii) Beginning January 1, 2012, retirement or pension
benefits received for services in the Michigan National Guard.
(f) Deduct the following to the extent included in adjusted
gross income subject to the limitations and restrictions set forth
in subsection (9):
(i) Retirement or pension benefits received from a federal
public retirement system or from a public retirement system of or
created by this state or a political subdivision of this state.
(ii) Retirement or pension benefits received from a public
retirement system of or created by another state or any of its
political subdivisions if the income tax laws of the other state
permit a similar deduction or exemption or a reciprocal deduction
or exemption of a retirement or pension benefit received from a
public retirement system of or created by this state or any of the
political subdivisions of this state.
(iii) Social security Security benefits
as defined in section
86 of the internal revenue code.
(iv) Beginning on and after January 1, 2007, retirement or
pension benefits not deductible under subparagraph (i) or
subdivision (e) from any other retirement or pension system or
benefits from a retirement annuity policy in which payments are
made for life to a senior citizen, to a maximum of $42,240.00 for a
single return and $84,480.00 for a joint return. The maximum
amounts allowed under this subparagraph shall be reduced by the
amount of the deduction for retirement or pension benefits claimed
under subparagraph (i) or subdivision (e) and by the amount of a
deduction claimed under subdivision (p). For the 2008 tax year and
each tax year after 2008, the maximum amounts allowed under this
subparagraph shall be adjusted by the percentage increase in the
United
States consumer price index Consumer
Price Index for the
immediately preceding calendar year. The department shall annualize
the amounts provided in this subparagraph as necessary. As used in
this subparagraph, "senior citizen" means that term as defined in
section 514.
(v) The amount determined to be the section 22 amount eligible
for the elderly and the permanently and totally disabled credit
provided in section 22 of the internal revenue code.
(g) Adjustments resulting from the application of section 271.
(h) Adjustments with respect to estate and trust income as
provided in section 36.
(i) Adjustments resulting from the allocation and
apportionment provisions of chapter 3.
(j) Deduct the following payments made by the taxpayer in the
tax year:
(i) For the 2010 tax year and each tax year after 2010, the
amount of a charitable contribution made to the advance tuition
payment fund created under section 9 of the Michigan education
trust act, 1986 PA 316, MCL 390.1429.
(ii) The amount of payment made under an advance tuition
payment contract as provided in the Michigan education trust act,
1986 PA 316, MCL 390.1421 to 390.1442.
(iii) The amount of payment made under a contract with a
private sector investment manager that meets all of the following
criteria:
(A) The contract is certified and approved by the board of
directors of the Michigan education trust to provide equivalent
benefits and rights to purchasers and beneficiaries as an advance
tuition payment contract as described in subparagraph (ii).
(B) The contract applies only for a state institution of
higher education as defined in the Michigan education trust act,
1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior
college in Michigan.
(C) The contract provides for enrollment by the contract's
qualified beneficiary in not less than 4 years after the date on
which the contract is entered into.
(D) The contract is entered into after either of the
following:
(I) The purchaser has had his or her offer to enter into an
advance tuition payment contract rejected by the board of directors
of the Michigan education trust, if the board determines that the
trust cannot accept an unlimited number of enrollees upon an
actuarially sound basis.
(II) The board of directors of the Michigan education trust
determines that the trust can accept an unlimited number of
enrollees upon an actuarially sound basis.
(k) If an advance tuition payment contract under the Michigan
education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, or
another contract for which the payment was deductible under
subdivision (j) is terminated and the qualified beneficiary under
that contract does not attend a university, college, junior or
community college, or other institution of higher education, add
the amount of a refund received by the taxpayer as a result of that
termination or the amount of the deduction taken under subdivision
(j) for payment made under that contract, whichever is less.
(l) Deduct from the taxable income of a purchaser the amount
included as income to the purchaser under the internal revenue code
after the advance tuition payment contract entered into under the
Michigan education trust act, 1986 PA 316, MCL 390.1421 to
390.1442, is terminated because the qualified beneficiary attends
an institution of postsecondary education other than either a state
institution of higher education or an institution of postsecondary
education located outside this state with which a state institution
of higher education has reciprocity.
(m) Add, to the extent deducted in determining adjusted gross
income, the net operating loss deduction under section 172 of the
internal revenue code.
(n) Deduct a net operating loss deduction for the taxable year
as determined under section 172 of the internal revenue code
subject to the modifications under section 172(b)(2) of the
internal revenue code and subject to the allocation and
apportionment provisions of chapter 3 of this part for the taxable
year in which the loss was incurred.
(o) Deduct, to the extent included in adjusted gross income,
benefits from a discriminatory self-insurance medical expense
reimbursement plan.
(p) Beginning on and after January 1, 2007, subject to any
limitation provided in this subdivision, a taxpayer who is a senior
citizen may deduct to the extent included in adjusted gross income,
interest, dividends, and capital gains received in the tax year not
to exceed $9,420.00 for a single return and $18,840.00 for a joint
return. The maximum amounts allowed under this subdivision shall be
reduced by the amount of a deduction claimed for retirement or
pension benefits under subdivision (e) or a deduction claimed under
subdivision (f)(i), (ii), (iv), or (v). For the 2008 tax year and
each tax year after 2008, the maximum amounts allowed under this
subdivision shall be adjusted by the percentage increase in the
United
States consumer price index Consumer
Price Index for the
immediately preceding calendar year. The department shall annualize
the amounts provided in this subdivision as necessary. Beginning
January 1, 2012, the deduction under this subdivision is not
available to a senior citizen born after 1945. As used in this
subdivision, "senior citizen" means that term as defined in section
514.
(q) Deduct, to the extent included in adjusted gross income,
all of the following:
(i) The amount of a refund received in the tax year based on
taxes paid under this part.
(ii) The amount of a refund received in the tax year based on
taxes paid under the city income tax act, 1964 PA 284, MCL 141.501
to 141.787.
(iii) The amount of a credit received in the tax year based on
a claim filed under sections 520 and 522 to the extent that the
taxes used to calculate the credit were not used to reduce adjusted
gross income for a prior year.
(r) Add the amount paid by the state on behalf of the taxpayer
in the tax year to repay the outstanding principal on a loan taken
on which the taxpayer defaulted that was to fund an advance tuition
payment contract entered into under the Michigan education trust
act, 1986 PA 316, MCL 390.1421 to 390.1442, if the cost of the
advance tuition payment contract was deducted under subdivision (j)
and was financed with a Michigan education trust secured loan.
(s) Deduct, to the extent included in adjusted gross income,
any amount, and any interest earned on that amount, received in the
tax year by a taxpayer who is a Holocaust victim as a result of a
settlement of claims against any entity or individual for any
recovered asset pursuant to the German act regulating unresolved
property claims, also known as Gesetz zur Regelung offener
Vermogensfragen, as a result of the settlement of the action
entitled In re: Holocaust victim assets litigation, CV-96-4849, CV-
96-5161, and CV-97-0461 (E.D. NY), or as a result of any similar
action if the income and interest are not commingled in any way
with and are kept separate from all other funds and assets of the
taxpayer. As used in this subdivision:
(i) "Holocaust victim" means a person, or the heir or
beneficiary of that person, who was persecuted by Nazi Germany or
any Axis regime during any period from 1933 to 1945.
(ii) "Recovered asset" means any asset of any type and any
interest earned on that asset including, but not limited to, bank
deposits, insurance proceeds, or artwork owned by a Holocaust
victim during the period from 1920 to 1945, withheld from that
Holocaust victim from and after 1945, and not recovered, returned,
or otherwise compensated to the Holocaust victim until after 1993.
(t) Deduct, to the extent not deducted in determining adjusted
gross income, both of the following:
(i) Contributions made by the taxpayer in the tax year less
qualified withdrawals made in the tax year from education savings
accounts, calculated on a per education savings account basis,
pursuant to the Michigan education savings program act, 2000 PA
161, MCL 390.1471 to 390.1486, not to exceed a total deduction of
$5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for each
education savings account shall not be less than zero.
(ii) The amount under section 30f.
(u) Add, to the extent not included in adjusted gross income,
the amount of money withdrawn by the taxpayer in the tax year from
education savings accounts, not to exceed the total amount deducted
under subdivision (t) in the tax year and all previous tax years,
if the withdrawal was not a qualified withdrawal as provided in the
Michigan education savings program act, 2000 PA 161, MCL 390.1471
to 390.1486. This subdivision does not apply to withdrawals that
are less than the sum of all contributions made to an education
savings account in all previous tax years for which no deduction
was claimed under subdivision (t), less any contributions for which
no deduction was claimed under subdivision (t) that were withdrawn
in all previous tax years.
(v) A taxpayer who is a resident tribal member may deduct, to
the extent included in adjusted gross income, all nonbusiness
income earned or received in the tax year and during the period in
which an agreement entered into between the taxpayer's tribe and
this state pursuant to section 30c of 1941 PA 122, MCL 205.30c, is
in full force and effect. As used in this subdivision:
(i) "Business income" means business income as defined in
section 4 and apportioned under chapter 3.
(ii) "Nonbusiness income" means nonbusiness income as defined
in section 14 and, to the extent not included in business income,
all of the following:
(A) All income derived from wages whether the wages are earned
within the agreement area or outside of the agreement area.
(B) All interest and passive dividends.
(C) All rents and royalties derived from real property located
within the agreement area.
(D) All rents and royalties derived from tangible personal
property, to the extent the personal property is utilized within
the agreement area.
(E) Capital gains from the sale or exchange of real property
located within the agreement area.
(F) Capital gains from the sale or exchange of tangible
personal property located within the agreement area at the time of
sale.
(G) Capital gains from the sale or exchange of intangible
personal property.
(H) All pension income and benefits including, but not limited
to, distributions from a 401(k) plan, individual retirement
accounts under section 408 of the internal revenue code, or a
defined contribution plan, or payments from a defined benefit plan.
(I) All per capita payments by the tribe to resident tribal
members, without regard to the source of payment.
(J) All gaming winnings.
(iii) "Resident tribal member" means an individual who meets
all of the following criteria:
(A) Is an enrolled member of a federally recognized tribe.
(B) The individual's tribe has an agreement with this state
pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in
full force and effect.
(C) The individual's principal place of residence is located
within the agreement area as designated in the agreement under sub-
subparagraph (B).
(w) For tax years beginning after December 31, 2011, eliminate
all of the following:
(i) Income from producing oil and gas to the extent included
in adjusted gross income.
(ii) Expenses of producing oil and gas to the extent deducted
in arriving at adjusted gross income.
(x)
For tax years that begin after December 31, 2015, deduct ,
to
the extent not deducted in determining adjusted gross income,
all of the following:
(i) Contributions To the extent not deducted in determining
adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from an
ABLE savings account, pursuant to the Michigan ABLE program act,
2015 PA 160, MCL 206.981 to 206.997, not to exceed a total
deduction of $5,000.00 for a single return or $10,000.00 for a
joint return per tax year. The amount calculated under this
subparagraph for an ABLE savings account shall not be less than
zero.
(ii) Interest To the extent not deducted in determining
adjusted gross income, interest earned in the tax year on the
contributions to the taxpayer's ABLE savings account if the
contributions were deductible under subparagraph (i).
(iii) Distributions To the extent included in adjusted gross
income, distributions that are qualified withdrawals from an ABLE
savings account to the designated beneficiary of that ABLE savings
account.
(y) Add, to the extent not included in adjusted gross income,
the amount of money withdrawn by the taxpayer in the tax year from
an ABLE savings account, not to exceed the total amount deducted
under subdivision (x) in the tax year and all previous tax years,
if the withdrawal was not a qualified withdrawal as provided in the
Michigan ABLE program act, 2015 PA 160, MCL 206.981 to 206.997.
This subdivision does not apply to withdrawals that are less than
the sum of all contributions made to an ABLE savings account in all
previous tax years for which no deduction was claimed under
subdivision (x), less any contributions for which no deduction was
claimed under subdivision (x) that were withdrawn in all previous
tax years.
(2) Except as otherwise provided in subsection (7) and section
30a, a personal exemption of $3,700.00 multiplied by the number of
personal
or and dependency exemptions allowable on the taxpayer's
federal
income tax return pursuant to the internal revenue code
shall be subtracted in the calculation that determines taxable
income. The number of personal and dependency exemptions allowed
shall be determined as follows:
(a) Each taxpayer may claim 1 personal exemption. However, if
a joint return is not made by the taxpayer and his or her spouse,
the taxpayer may claim a personal exemption for the spouse if the
spouse, for the calendar year in which the taxable year of the
taxpayer begins, does not have any gross income and is not the
dependent of another taxpayer.
(b) A taxpayer may claim a dependency exemption for each
individual who is a dependent of the taxpayer for the tax year.
(3) Except as otherwise provided in subsection (7), a single
additional exemption determined as follows shall be subtracted in
the calculation that determines taxable income in each of the
following circumstances:
(a) $1,800.00 for each taxpayer and every dependent of the
taxpayer who is a deaf person as defined in section 2 of the deaf
persons' interpreters act, 1982 PA 204, MCL 393.502; a paraplegic,
a quadriplegic, or a hemiplegic; a person who is blind as defined
in section 504; or a person who is totally and permanently disabled
as defined in section 522. When a dependent of a taxpayer files an
annual return under this part, the taxpayer or dependent of the
taxpayer, but not both, may claim the additional exemption allowed
under
this subdivision. As used in this subdivision, "dependent"
means
that term as defined in section 30e.
(b) For tax years beginning after 2007, $250.00 for each
taxpayer and every dependent of the taxpayer who is a qualified
disabled veteran. When a dependent of a taxpayer files an annual
return under this part, the taxpayer or dependent of the taxpayer,
but not both, may claim the additional exemption allowed under this
subdivision. As used in this subdivision:
(i) "Qualified disabled veteran" means a veteran with a
service-connected disability.
(ii) "Service-connected disability" means a disability
incurred or aggravated in the line of duty in the active military,
naval, or air service as described in 38 USC 101(16).
(iii) "Veteran" means a person who served in the active
military, naval, marine, coast guard, or air service and who was
discharged or released from his or her service with an honorable or
general discharge.
(4) An individual with respect to whom a deduction under
section
151 of the internal revenue code subsection
(2) is
allowable
to another federal taxpayer during the tax year is not
considered
to have an allowable federal entitled
to an exemption
for purposes of subsection (2), but may subtract $1,500.00 in the
calculation that determines taxable income for a tax year.
(5) A nonresident or a part-year resident is allowed that
proportion of an exemption or deduction allowed under subsection
(2), (3), or (4) that the taxpayer's portion of adjusted gross
income from Michigan sources bears to the taxpayer's total adjusted
gross income.
(6) In calculating taxable income, a taxpayer shall not
subtract from adjusted gross income the amount of prizes won by the
taxpayer under the McCauley-Traxler-Law-Bowman-McNeely lottery act,
1972 PA 239, MCL 432.1 to 432.47.
(7) For each tax year beginning on and after January 1, 2013,
the personal exemption allowed under subsection (2) shall be
adjusted by multiplying the exemption for the tax year beginning in
2012 by a fraction, the numerator of which is the United States
consumer
price index Consumer Price
Index for the state fiscal year
ending in the tax year prior to the tax year for which the
adjustment is being made and the denominator of which is the United
States
consumer price index Consumer
Price Index for the 2010-2011
state fiscal year. The resultant product shall be rounded to the
nearest $100.00 increment. For the 2020 tax year and each tax year
after 2020, the adjusted amount determined under this subsection
shall be increased by an additional $600.00. As used in this
section,
"United States consumer price index" Consumer Price Index"
means
the United States consumer price index Consumer Price Index
for all urban consumers as defined and reported by the United
States Department of Labor, Bureau of Labor Statistics. For each
tax year, the exemptions allowed under subsection (3) shall be
adjusted by multiplying the exemption amount under subsection (3)
for the tax year by a fraction, the numerator of which is the
United
States consumer price index Consumer
Price Index for the
state fiscal year ending the tax year prior to the tax year for
which the adjustment is being made and the denominator of which is
the
United States consumer price index Consumer Price Index for the
1998-1999 state fiscal year. The resultant product shall be rounded
to the nearest $100.00 increment.
(8) As used in this section, "retirement or pension benefits"
means distributions from all of the following:
(a) Except as provided in subdivision (d), qualified pension
trusts and annuity plans that qualify under section 401(a) of the
internal revenue code, including all of the following:
(i) Plans for self-employed persons, commonly known as Keogh
or HR10 plans.
(ii) Individual retirement accounts that qualify under section
408 of the internal revenue code if the distributions are not made
until the participant has reached 59-1/2 years of age, except in
the case of death, disability, or distributions described by
section 72(t)(2)(A)(iv) of the internal revenue code.
(iii) Employee annuities or tax-sheltered annuities purchased
under section 403(b) of the internal revenue code by organizations
exempt under section 501(c)(3) of the internal revenue code, or by
public school systems.
(iv) Distributions from a 401(k) plan attributable to employee
contributions mandated by the plan or attributable to employer
contributions.
(b) The following retirement and pension plans not qualified
under the internal revenue code:
(i) Plans of the United States, state governments other than
this state, and political subdivisions, agencies, or
instrumentalities of this state.
(ii) Plans maintained by a church or a convention or
association of churches.
(iii) All other unqualified pension plans that prescribe
eligibility for retirement and predetermine contributions and
benefits if the distributions are made from a pension trust.
(c) Retirement or pension benefits received by a surviving
spouse if those benefits qualified for a deduction prior to the
decedent's death. Benefits received by a surviving child are not
deductible.
(d) Retirement and pension benefits do not include:
(i) Amounts received from a plan that allows the employee to
set the amount of compensation to be deferred and does not
prescribe retirement age or years of service. These plans include,
but are not limited to, all of the following:
(A) Deferred compensation plans under section 457 of the
internal revenue code.
(B) Distributions from plans under section 401(k) of the
internal revenue code other than plans described in subdivision
(a)(iv).
(C) Distributions from plans under section 403(b) of the
internal revenue code other than plans described in subdivision
(a)(iii).
(ii) Premature distributions paid on separation, withdrawal,
or discontinuance of a plan prior to the earliest date the
recipient could have retired under the provisions of the plan.
(iii) Payments received as an incentive to retire early unless
the distributions are from a pension trust.
(9) In determining taxable income under this section, the
following limitations and restrictions apply:
(a) For a person born before 1946, this subsection provides no
additional restrictions or limitations under subsection (1)(f).
(b) Except as otherwise provided in subdivision (c), for a
person born in 1946 through 1952, the sum of the deductions under
subsection (1)(f)(i), (ii), and (iv) is limited to $20,000.00 for a
single return and $40,000.00 for a joint return. After that person
reaches the age of 67, the deductions under subsection (1)(f)(i),
(ii), and (iv) do not apply and that person is eligible for a
deduction of $20,000.00 for a single return and $40,000.00 for a
joint return, which deduction is available against all types of
income and is not restricted to income from retirement or pension
benefits. A person who takes the deduction under subsection (1)(e)
is not eligible for the unrestricted deduction of $20,000.00 for a
single return and $40,000.00 for a joint return under this
subdivision.
(c) Beginning January 1, 2013 for a person born in 1946
through 1952 and beginning January 1, 2018 for a person born after
1945 who has retired as of January 1, 2013, if that person receives
retirement or pension benefits from employment with a governmental
agency that was not covered by the federal social security act,
chapter 531, 49 Stat 620, the sum of the deductions under
subsection (1)(f)(i), (ii), and (iv) is limited to $35,000.00 for a
single return and, except as otherwise provided under this
subdivision, $55,000.00 for a joint return. If both spouses filing
a joint return receive retirement or pension benefits from
employment with a governmental agency that was not covered by the
federal social security act, chapter 531, 49 Stat 620, the sum of
the deductions under subsection (1)(f)(i), (ii), and (iv) is
limited to $70,000.00 for a joint return. After that person reaches
the age of 67, the deductions under subsection (1)(f)(i), (ii), and
(iv) do not apply and that person is eligible for a deduction of
$35,000.00 for a single return and $55,000.00 for a joint return,
or $70,000.00 for a joint return if applicable, which deduction is
available against all types of income and is not restricted to
income from retirement or pension benefits. A person who takes the
deduction under subsection (1)(e) is not eligible for the
unrestricted deduction of $35,000.00 for a single return and
$55,000.00 for a joint return, or $70,000.00 for a joint return if
applicable, under this subdivision.
(d) Except as otherwise provided under subdivision (c) for a
person who was retired as of January 1, 2013, for a person born
after 1952 who has reached the age of 62 through 66 years of age
and who receives retirement or pension benefits from employment
with a governmental agency that was not covered by the federal
social security act, chapter 532, 49 Stat 620, the sum of the
deductions under subsection (1)(f)(i), (ii), and (iv) is limited to
$15,000.00 for a single return and, except as otherwise provided
under this subdivision, $15,000.00 for a joint return. If both
spouses filing a joint return receive retirement or pension
benefits from employment with a governmental agency that was not
covered by the federal social security act, chapter 532, 49 Stat
620, the sum of the deductions under subsection (1)(f)(i), (ii),
and (iv) is limited to $30,000.00 for a joint return.
(e) Except as otherwise provided under subdivision (c) or (d),
for a person born after 1952, the deduction under subsection
(1)(f)(i), (ii), or (iv) does not apply. When that person reaches
the age of 67, that person is eligible for a deduction of
$20,000.00 for a single return and $40,000.00 for a joint return,
which deduction is available against all types of income and is not
restricted to income from retirement or pension benefits. If a
person takes the deduction of $20,000.00 for a single return and
$40,000.00 for a joint return, that person shall not take the
deduction under subsection (1)(f)(iii) and shall not take the
personal exemption under subsection (2). That person may elect not
to take the deduction of $20,000.00 for a single return and
$40,000.00 for a joint return and elect to take the deduction under
subsection (1)(f)(iii) and the personal exemption under subsection
(2) if that election would reduce that person's tax liability. A
person who takes the deduction under subsection (1)(e) is not
eligible for the unrestricted deduction of $20,000.00 for a single
return and $40,000.00 for a joint return under this subdivision.
(f) For a joint return, the limitations and restrictions in
this subsection shall be applied based on the age of the older
spouse filing the joint return.
(10) As used in this section, "oil and gas" means oil and gas
subject to severance tax under 1929 PA 48, MCL 205.301 to 205.317.
Sec. 30a. Notwithstanding any other provision of this part,
for the 2012 tax year and each tax year after 2012 through the 2019
tax year, taxable income for purposes of this part means taxable
income as determined under section 30 with the following
adjustment. For the 2012 tax year and each tax year after 2012
through the 2019 tax year, to determine taxable income, a taxpayer
shall claim a personal exemption deduction equal to the amount
calculated pursuant to section 30(2) or equal to the following
amounts
multiplied by the number of personal or and dependency
exemptions
allowable on the taxpayer's federal income tax return
pursuant
to the internal revenue code, under
section 30(2),
whichever calculation is greater:
(a) Beginning on and after October 1, 2012 and before January
1, 2014, $3,950.00. The department shall annualize the personal
exemption deduction for the 2012 tax year, rounded to the nearest
$1.00.
(b)
Beginning on and after January 1, 2014 and each year after
2014,
before January 1, 2018, $4,000.00.
(c) For the 2018 tax year, $4,300.00.
(d) For the 2019 tax year, $4,600.00.
Sec.
52. For tax years beginning after 1986, a A person with
respect
to whom a deduction under section 151 of the internal
revenue
code is allowable to another federal
taxpayer during the
tax
year is not considered to have an allowable federal exemption
for purposes of section 30(2) and, notwithstanding sections 51 and
315, if that person has an adjusted gross income for that tax year
of $1,500.00 or less, is exempt from the tax levied and imposed in
section 51 and is not required to file a return under this part.
Sec. 512. (1) "Paraplegic, hemiplegic, or quadriplegic" means
an individual, or either 1 of 2 persons filing a joint tax return
under this part, who is a paraplegic, hemiplegic, or quadriplegic
at the end of the tax year.
(2)
"Property taxes" means, for tax years before the 2003 tax
year,
general ad valorem taxes due and payable, levied on a
homestead
within this state including property tax administration
fees,
but does not include penalties, interest, or special
assessments
unless assessed in the entire city, village, or
township,
levied using a uniform millage rate on all real property
not
exempt by state law from the levy of the special assessment,
and
levied and based on state equalized valuation or taxable value.
(3)
"Qualified person" means a claimant and any person,
domiciled
in Michigan, who can be claimed as a dependent under the
internal
revenue code and who does not file a claim under this part
for
the same tax year. The term does not include the additional
exemptions
allowed for age or blindness.
(2) (4)
"Renter" means a person
who rents or leases a
homestead.
Sec. 607. (1) "Federal taxable income" means taxable income as
defined in section 63 of the internal revenue code, except that
federal taxable income shall be calculated as if section 168(k) and
section 199 of the internal revenue code were not in effect.
(2) "Flow-through entity" means an entity that for the
applicable tax year is treated as a subchapter S corporation under
section 1362(a) of the internal revenue code, a general
partnership, a trust, a limited partnership, a limited liability
partnership, or a limited liability company, that for the tax year
is not taxed as a corporation for federal income tax purposes.
Flow-through entity does not include any entity disregarded under
section 699.
(3) "Foreign operating entity" means a United States
corporation that satisfies each of the following:
(a) Would otherwise be a part of a unitary business group that
has at least 1 corporation included in the unitary business group
that is taxable in this state.
(b) Has substantial operations outside the United States, the
District of Columbia, any territory or possession of the United
States except for the Commonwealth of Puerto Rico, or a political
subdivision of any of the foregoing.
(c) At least 80% of its income is active foreign business
income as defined in section 861(c)(1)(B) of the internal revenue
code.
(4) "Gross receipts" means the entire amount received by the
taxpayer from any activity whether in intrastate, interstate, or
foreign commerce carried on for direct or indirect gain, benefit,
or advantage to the taxpayer or to others except for the following:
(a) Proceeds from sales by a principal that the taxpayer
collects in an agency capacity solely on behalf of the principal
and delivers to the principal.
(b) Amounts received by the taxpayer as an agent solely on
behalf of the principal that are expended by the taxpayer for any
of the following:
(i) The performance of a service by a third party for the
benefit of the principal that is required by law to be performed by
a licensed person.
(ii) The performance of a service by a third party for the
benefit of the principal that the taxpayer has not undertaken a
contractual duty to perform.
(iii) Principal and interest under a mortgage loan or land
contract, lease or rental payments, or taxes, utilities, or
insurance premiums relating to real or personal property owned or
leased by the principal.
(iv) A capital asset of a type that is, or under the internal
revenue code will become, eligible for depreciation, amortization,
or accelerated cost recovery by the principal for federal income
tax purposes, or for real property owned or leased by the
principal.
(v) Property not described under subparagraph (iv) purchased
by the taxpayer on behalf of the principal and that the taxpayer
does not take title to or use in the course of performing its
contractual business activities.
(vi) Fees, taxes, assessments, levies, fines, penalties, or
other payments established by law that are paid to a governmental
entity and that are the legal obligation of the principal.
(c) Amounts that are excluded from gross income of a foreign
corporation engaged in the international operation of aircraft
under section 883(a) of the internal revenue code.
(d) Amounts received by an advertising agency used to acquire
advertising media time, space, production, or talent on behalf of
another person.
(e) Notwithstanding any other provision of this section,
amounts received by a taxpayer that manages real property owned by
the taxpayer's client that are deposited into a separate account
kept in the name of the taxpayer's client and that are not
reimbursements to the taxpayer and are not indirect payments for
management services that the taxpayer provides to that client.
(f) Proceeds from the taxpayer's transfer of an account
receivable if the sale that generated the account receivable was
included in gross receipts for federal income tax purposes. This
subdivision does not apply to a taxpayer that during the tax year
both buys and sells any receivables.
(g) Proceeds from any of the following:
(i) The original issue of stock or equity instruments.
(ii) The original issue of debt instruments.
(h) Refunds from returned merchandise.
(i) Cash and in-kind discounts.
(j) Trade discounts.
(k) Federal, state, or local tax refunds.
(l) Security deposits.
(m) Payment of the principal portion of loans.
(n) Value of property received in a like-kind exchange.
(o) Proceeds from a sale, transaction, exchange, involuntary
conversion, or other disposition of tangible, intangible, or real
property that is a capital asset as defined in section 1221(a) of
the internal revenue code or land that qualifies as property used
in the trade or business as defined in section 1231(b) of the
internal revenue code, less any gain from the disposition to the
extent that gain is included in federal taxable income.
(p) The proceeds from a policy of insurance, a settlement of a
claim, or a judgment in a civil action less any proceeds under this
subdivision that are included in federal taxable income.
(5) "Insurance company" means an authorized insurer as defined
in section 108 of the insurance code of 1956, 1956 PA 218, MCL
500.108.
(6) "Internal revenue code" means the United States internal
revenue
code of 1986 in effect on January 1, 2012 2018 or, at the
option of the taxpayer, in effect for the tax year.
(7) "Member", when used in reference to a flow-through entity,
means a shareholder of a subchapter S corporation, a partner in a
general partnership, a limited partnership, or a limited liability
partnership, a member of a limited liability company, or a
beneficiary of a trust that is a flow-through entity.
Enacting section 1. Section 30e of the income tax act of 1967,
1967 PA 281, MCL 206.30e, is repealed.
Enacting section 2. This amendatory act does not take effect
unless all of the following bills of the 99th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 5422 (request no.
04390'17).
(b) Senate Bill No.____ or House Bill No. 5421 (request no.
05272'18).