Bill Text: MI HB4795 | 2019-2020 | 100th Legislature | Introduced

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Bill Title: Individual income tax; deductions; deductions; federal deduction for certain outsourcing expenses; add back. Amends sec. 623 of 1967 PA 281 (MCL 206.623).

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Introduced - Dead) 2019-07-02 - Bill Electronically Reproduced 07/02/2019 [HB4795 Detail]

Download: Michigan-2019-HB4795-Introduced.html

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HOUSE BILL No. 4795

 

 

June 26, 2019, Introduced by Reps. Manoogian, Pagan, Sowerby, Coleman, Brixie and Tyrone Carter and referred to the Committee on Tax Policy.

 

     A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending section 623 (MCL 206.623), as amended by 2014 PA 13.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     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%.

 

     (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 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.

 

     (i) To the extent deducted in arriving at federal taxable

 

income, add any specified outsourcing expenses. For purposes of

 

this subdivision:

 

     (i) "Eligible expenses" means any trade or business expenses

 

that the taxpayer is allowed to claim as a deduction under section

 

162 of the internal revenue code and any permit and license fees,

 

lease brokerage fees, equipment installation costs, and any other

 

similar expenses.

 

     (ii) "Specified outsourcing expenses" means any eligible

 

expenses paid or incurred by the taxpayer and attributable to the

 

elimination of any trade or business of the taxpayer that was

 

located in this state and any eligible expenses paid or incurred by

 

the taxpayer and attributable to the relocation of any trade or

 

business of the taxpayer that was previously located in this state

 

and subsequently reestablished outside of this state.

 

     (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.