Bill Text: MI HB4781 | 2019-2020 | 100th Legislature | Introduced
Bill Title: Corporate income tax; flow-through entities; flow-through entity tax, retirement or pension benefits, corporate income tax rate, credits and revenue distribution; create, and modify. Amends secs. 30, 623 & 695 of 1967 PA 281 (MCL 206.30 et seq.) & adds secs. 254 & 675 & pt. 4. TIE BAR WITH: HB 4782'19
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2019-07-02 - Bill Electronically Reproduced 07/02/2019 [HB4781 Detail]
Download: Michigan-2019-HB4781-Introduced.html
HOUSE BILL No. 4781
June 26, 2019, Introduced by Rep. Rabhi and referred to the Committee on Tax Policy.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 30, 623, and 695 (MCL 206.30, 206.623, and
206.695), section 30 as amended by 2018 PA 589, section 623 as
amended by 2014 PA 13, and section 695 as added by 2011 PA 38, and
by adding sections 254 and 675 and part 4.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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 including the
taxpayer's direct or indirect allocated share of taxes paid by a
flow-through entity under part 4 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 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
unless otherwise elected 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 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 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 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 all of the following:
(i) 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 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) To the extent included in adjusted gross income, interest
earned in the tax year on the contributions to the taxpayer's
education savings accounts if the contributions were deductible
under subparagraph (i).
(iii) To the extent included in adjusted gross income,
distributions that are qualified withdrawals from an education
savings account to the designated beneficiary of that education
savings account.
(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
all of the following:
(i) 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 achieving
a better life
experience (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) To the extent included in 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) 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 achieving a better
life experience (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.
(z) For tax years that begin after December 31, 2018, deduct,
to the extent included in adjusted gross income, compensation
received in the tax year pursuant to the wrongful imprisonment
compensation act, 2016 PA 343, MCL 691.1751 to 691.1757.
(2) Except as otherwise provided in subsection (7) and section
30a, a personal exemption of $3,700.00 multiplied by the number of
personal and dependency exemptions 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.
(c) For tax years beginning on and after January 1, 2019, a
taxpayer may claim an additional exemption under this subsection in
the tax year for which the taxpayer has a certificate of stillbirth
from the department of health and human services as provided under
section 2834 of the public health code, 1978 PA 368, MCL 333.2834.
(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.
(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
subsection (2) is allowable to another taxpayer during the tax year
is not 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 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 for the 2010-2011 state fiscal year. For the 2022 tax year
and each tax year after 2022, the adjusted amount determined under
this subsection shall be increased by an additional $600.00. The
resultant product shall be rounded to the nearest $100.00
increment. 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 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 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, for a
person who does not claim a deduction under subsection (1)(e) the
following options and the respective limitations and restrictions
apply for tax years beginning on and after January 1, 2020:
(a)
For a person born before 1946, this subsection provides no
additional
restrictions or limitations under subsection (1)(f).
(a) (b)
Except as otherwise provided in
subdivision (c), for
(b),
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
may elect to claim 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 elects to
claim the unrestricted deduction of $20,000.00 for a single return
and $40,000.00 for a joint return under this subdivision is not
eligible for the deductions under subsection (1)(f)(i), (ii), and
(iv).
(b) (c)
Beginning January 1, 2013 for a A
person born in 1946
through
1952 and beginning January 1, 2018 for or a person born
after
1945 who has retired as of January 1, 2013, if that person
who 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 may elect to
claim 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,
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, 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 elects to claim 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 is not eligible for the deductions under subsection
(1)(f)(i), (ii), and (iv).
(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.
(c) (e)
Except as otherwise provided under
subdivision (c) or
(d),
for (b), a person born after 1952 ,
the deduction under
subsection
(1)(f)(i), (ii), or (iv) does not apply. When that
person
reaches who has reached the age of 67 , that person is
eligible
for may elect to claim 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 A person takes who
elects to claim the unrestricted 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.under this subdivision is not eligible for the
deductions under subsection (1)(f)(i), (ii), (iii), and (iv) and
shall not claim the personal exemption under subsection (2).
(d) (f)
For a joint return, the options and the respective
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:
(a) "Oil and gas" means oil and gas subject to severance tax
under 1929 PA 48, MCL 205.301 to 205.317.
(b) "Senior citizen" means that term as defined in section
514.
(c) (b)
"United States Consumer Price
Index" means the United
States Consumer Price Index for all urban consumers as defined and
reported by the United States Department of Labor, Bureau of Labor
Statistics.
Sec. 254. (1) For tax years beginning on and after January 1,
2020, a taxpayer who is a direct or indirect member of a flow-
through entity that filed a return and paid the tax imposed under
part 4 may claim a credit against the tax imposed under this part
in an amount equal to the taxpayer's allocated share of the tax
levied and imposed under part 4 for the tax year ending on or
within the taxpayer's same tax year multiplied by a fraction, the
numerator of which is the rate at which tax is imposed for that tax
year under section 51 and the denominator of which is the rate at
which tax is imposed for that tax year under section 755.
(2) For tax years beginning on and after January 1, 2020, a
taxpayer that is an estate or trust, may claim a credit against the
tax imposed by this part in an amount determined by multiplying the
amount calculated under subsection (1) by a fraction, the numerator
of which is the allocated share of flow-through income that is
retained by the estate or trust and the denominator of which is the
total allocated share of flow-through income.
(3) If the credit allowed under this section exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability must be refunded.
(4) As used in this section, "flow-through income" means that
term as defined in section 753.
Sec. 623. (1) Except as otherwise provided in this part, there
is levied and imposed a corporate income tax on every taxpayer with
business activity within this state or ownership interest or
beneficial interest in a flow-through entity that has business
activity in this state unless prohibited by 15 USC 381 to 384. The
corporate income tax is imposed on the corporate income tax base,
after
allocation or apportionment to this state, at the rate of
6.0%.following rates:
(a) Through the 2019 tax year, 6.0%.
(b) For the 2020 tax year and each tax year after 2020, 8.5%.
(2) The corporate income tax base means a taxpayer's business
income subject to the following adjustments, before allocation or
apportionment, and the adjustment in subsection (4) after
allocation or apportionment:
(a) Add interest income and dividends derived from obligations
or securities of states 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 including the
tax imposed under this part and the taxpayer's direct or indirect
share of taxes paid by a flow-through entity under part 4, to the
extent that 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 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 964 965
of the internal revenue
code.
(e) 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 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, 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 1 of the following is true:
(i) The transaction is a pass through of another transaction
between a third party and the related person with comparable rates
and terms.
(ii) An addition would result in double taxation. For purposes
of this subparagraph, double taxation exists if the transaction is
subject to tax in another jurisdiction.
(iii) An addition would be unreasonable as determined by the
state treasurer.
(iv) The related person recipient of the transaction is
organized under the laws of a foreign nation which has in force a
comprehensive income tax treaty with the United States.
(f) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(g) 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 federal taxable income.
(ii) Expenses of producing oil and gas to the extent deducted
in arriving at federal taxable income.
(h) For tax years beginning after December 31, 2012, for a
qualified taxpayer, eliminate all of the following:
(i) Income derived from a mineral to the extent included in
federal taxable income.
(ii) Expenses related to the income deductible under
subparagraph (i) to the extent deducted in arriving at federal
taxable income.
(3) For purposes of subsection (2), the business income of a
unitary business group is the sum of the business income of each
person 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.
(4) Deduct any available business loss incurred after December
31, 2011. As used in this subsection, "business loss" means a
negative business income taxable amount after allocation or
apportionment. For purposes of this subsection, a taxpayer that
acquires the assets of another corporation in a transaction
described under section 381(a)(1) or (2) of the internal revenue
code may deduct any business loss attributable to that distributor
or transferor corporation. The business loss shall be carried
forward to the year immediately succeeding the loss year as an
offset to the allocated or apportioned corporate 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.
(5) As used in this section, "oil and gas" means oil and gas
that is subject to severance tax under 1929 PA 48, MCL 205.301 to
205.317.
Sec. 675. (1) For tax years beginning on and after January 1,
2020, a taxpayer who is a direct or indirect member of a flow-
through entity that filed a return and paid the tax imposed under
part 4 may claim a credit against the tax imposed under this part
in an amount equal to the taxpayer's allocated share of the tax
levied and imposed under part 4 for the tax year ending on or
within the taxpayer's same tax year multiplied by a fraction, the
numerator of which is the rate at which tax is imposed for that tax
year under section 623 and the denominator of which is the rate at
which tax is imposed for the tax year under section 755.
(2) If the credit allowed under this section exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability must be refunded.
Sec. 695. (1) Beginning October 1, 2020 and each October 1
thereafter, from the tax levied under this part 29.4% of the
revenue collected shall be deposited into the state treasury to the
credit of the fixing Michigan roads fund created in section 27 of
1951 PA 51, MCL 247.676.
(2) The balance of the revenue collected under this part after
the distribution under subsection (1) shall be distributed to the
general fund.
PART 4
CHAPTER 18
Sec. 751. For the purposes of this part, the words, terms, and
phrases used in this part and not defined differently in this
chapter shall have the same meaning as used and defined in part 1.
Sec. 753. (1) "Flow-through entity" means an entity that for
the tax year is treated as an S corporation under sections 1361 to
1379 of the internal revenue code, a general partnership, 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 for federal income tax
purposes, a publicly traded partnership as defined under section
7704 of the internal revenue code, or a financial institution or an
insurance company, as defined in part 2.
(2) "Flow-through income" means the separately and
nonseparately computed items of federal income and deductions, as
described in section 702(a) of the internal revenue code with
respect to a partnership or section 1366 of the internal revenue
code with respect to an S corporation, of the flow-through entity.
(3) "Member" means a shareholder of an S corporation, a
partner in a general partnership, a limited partnership, or a
limited liability partnership, or a member of a limited liability
company.
(4) "Taxable income" means the flow-through income of the
taxpayer subject to the following adjustments under this
subsection:
(a) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan that are
identified as tax-exempt interest income that were not included as
items of flow-through income, less related expenses that would not
be deductible under section 265(a)(1) of the internal revenue code.
(b) 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 flow-through income.
(c) Deduct, to the extent included in flow-through 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 included in flow-through income.
(d) Add charitable contributions to the extent included in
flow-through income.
(e) Adjustments resulting from the allocation and
apportionment provisions of chapter 3.
(f) Add all taxes on or measured by net income including the
tax imposed under this part to the extent that the taxes were
deducted in arriving at flow-through income.
(g) Deduct guaranteed payments, to the extent included in
flow-through income, if the payments were for services rendered by
a member who is an individual.
(h) Deduct, to the extent included in flow-through income, 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.
(i) Eliminate the following:
(i) Income from producing oil and gas to the extent included
in flow-through income.
(ii) Expenses of producing oil and gas that were deducted in
arriving at flow-through income.
(iii) Income derived from a mineral to the extent included in
flow-through income, if the taxpayer is a qualified taxpayer.
(iv) Expenses related to the income derived from a mineral
that were deducted in arriving at flow-through income, if the
taxpayer is a qualified taxpayer. As used in this subparagraph and
subparagraph (iii):
(A) "Mineral" means that term as defined in section 2 of the
nonferrous metallic minerals extraction severance tax act, 2012 PA
410, MCL 211.782.
(B) "Qualified taxpayer" means a taxpayer subject to the
minerals severance tax levied under the nonferrous metallic
minerals extraction severance tax act, 2012 PA 410, MCL 211.781 to
211.791.
(j) Deduct flow-through income received as a member of another
flow-through entity to the extent that it increased flow-through
income.
(k) Add flow-through income received as a member of another
flow-through entity to the extent that it decreased flow-through
income.
(l) Deduct an amount equal to $50,000.00 multiplied by the
sales factor of the flow-through entity as calculated under section
121.
(5) "Taxpayer" means a flow-through entity.
Sec. 755. (1) For tax years that begin on or after January 1,
2020 and each tax year after 2020, there is levied and imposed a
flow-through entity tax on every taxpayer. The flow-through entity
tax is imposed on the taxpayer's taxable income for the tax year at
the rate of 8.5%.
(2) Flow-through income shall be apportioned in accordance
with the allocation and apportionment provisions in chapter 3.
Sec. 757. (1) A taxpayer on a calendar year basis that
reasonably expects an annual tax liability to exceed $800.00 shall
pay to the department quarterly installments of estimated tax under
this part on or before April 15, June 15, and September 15 of the
taxpayer's tax year and January 15 in the following year.
(2) A taxpayer not on a calendar year basis that reasonably
expects an annual tax liability to exceed $800.00 shall pay
quarterly installments of an estimated tax on or before the
appropriate due dates in the taxpayer's fiscal year that correspond
to those in the calendar year.
(3) Each installment must be equal to 1/4 of the taxpayer's
estimated tax under this part. However, for a taxpayer that pays
estimated tax for the taxpayer's first tax year of less than 12
months, the amount paid must be that fraction of the estimated tax
that is obtained by dividing the total amount of estimated tax by
the number of payments to be made with respect to the tax year.
(4) The amounts paid to the department pursuant to this
section by the taxpayer must be applied as a credit against the tax
imposed by this part.
(5) Payments in excess of the amount levied and imposed under
this part must be refunded to the taxpayer. Any overpayment of the
tax levied under this part must not be reported to a member of the
flow-through entity in accordance with section 763 and must not be
claimed as a credit by any member of the flow-through entity under
section 254 or section 675.
Sec. 759. (1) The taxpayer on or before the due date set for
the filing of a return or the payment of the tax, except as
otherwise provided in this part, shall file a return in the form
and content as prescribed by the department, verify the return, and
transmit it, together with a remittance of the amount of the tax,
to the department on or before the fifteenth day of the third month
after the end of the taxpayer's tax year. The department may
require transmission in electronic form.
(2) Except as otherwise provided in subsection (3), the
department, upon application of the taxpayer and for good cause
shown, may extend under prescribed conditions the time for filing
the annual or final return required by this part. Before the
original due date, the taxpayer shall remit with an application for
extension the estimated tax due. In computing the tax due for the
tax year, interest at the rate established in, and penalties
imposed by, section 23 of 1941 PA 122, MCL 205.23, shall be added
to the amount of tax unpaid for the period of the extension. The
department may require a tentative return and payment of an
estimated tax.
(3) If the taxpayer is granted an extension or extensions of
time within which to file its federal income tax return for a tax
year, the filing of a copy of the extension or extensions
automatically extends the due date of the final return under this
part for an equivalent period. The taxpayer shall remit with the
copy of the extension or extensions the estimated tax due. In
computing the tax due for the tax year, interest at the rate
established in, and penalties imposed by, section 23 of 1941 pa
122, mcl 205.23, shall be added to the amount of tax unpaid for the
period of the extension.
Sec. 761. (1) A taxpayer may be required to furnish a true and
correct copy of any tax return or portion of any tax return and
supporting schedules that the taxpayer has filed under the
provisions of the internal revenue code.
(2) A taxpayer shall file an amended return with the
department showing any final alteration in, or modification of, the
taxpayer's flow-through income under this part and of any similarly
related recomputation of separately and nonseparately stated items
of income and deductions under the internal revenue code. If an
increase in taxable income results from a federal audit that
increases the taxpayer's tax under this part by less than $500.00,
the requirement under this subsection to file an amended return
does not apply but the department may assess an increase in tax
resulting from the audit. The amended return shall be filed within
120 days after the final alteration, modification, or
recomputation. If the department finds upon all the facts that an
additional tax under this part is owing, the taxpayer shall
immediately pay the additional tax. If the department finds that
the taxpayer has overpaid the tax imposed by this part, the
overpayment must be refunded to the taxpayer. Any adjustment to the
amount of tax levied and imposed under this part must be reported
to the member of the flow-through entity in accordance with section
763.
(3) A flow-through entity that is subject to a federal audit
under sections 6221 to 6241 of the internal revenue code that
results in an increase in flow-through income, shall pay the tax
under this part at the applicable rate for the tax year subject to
audit plus applicable interest and penalties imposed under 1941 PA
122, MCL 205.1 to 205.31.
Sec. 763. A flow-through entity, shall provide on or before
the due date of the return under this part, or upon the amendment
of a return or the adjustment of the tax under this part by the
department, to any person to which the provision of information is
required by the internal revenue code, all information regarding
the allocation and apportionment of the taxable income described
under this part and each member's share of the tax levied and
imposed under this part that was paid by the taxpayer under this
part and any tax levied and imposed under this part on a flow-
through entity owned directly or indirectly by the taxpayer.
Sec. 765. (1) The tax imposed by this part shall be
administered by the department pursuant to 1941 PA 122, MCL 205.1
to 205.31, and this part. If a conflict exists between 1941 PA 122,
MCL 205.1 to 205.31, and this part, the provisions of this part
apply.
(2) The department shall prescribe forms for use by taxpayers
and may promulgate rules in conformity with this part for the
maintenance by taxpayers of records, books, and accounts, and for
the computation of the tax, the manner and time of changing or
electing accounting methods and of exercising the various options
contained in this part, the making of returns, and the
ascertainment, assessment, and collection of the tax imposed under
this part.
(3) The department shall prepare and publish statistics from
the records kept to administer the tax imposed by this part that
detail the distribution of tax receipts by type of business, legal
form of organization, sources of tax base, timing of tax receipts,
and types of deductions. The statistics shall not result in the
disclosure of information regarding any specific taxpayer.
Sec. 767. From the tax levied under this part, the revenue
collected shall be distributed as follows:
(a) 9.2% to the state school aid fund created in section 11 of
article IX of the state constitution of 1963.
(b) 32.0% to the general fund.
(c) The balance of the revenue collected under this part after
the distributions under subdivisions (a) and (b) to the fixing
Michigan roads fund created in section 27 of 1951 PA 51, MCL
247.676.
Enacting section 1. This amendatory act takes effect January
1, 2020 and is effective for tax years beginning on and after
January 1, 2020.
Enacting section 2. This amendatory act does not take effect
unless Senate Bill No.____ or House Bill No. 4782 (request no.
02771'19) of the 100th Legislature is enacted into law.
