Bill Text: MI SB0069 | 2009-2010 | 95th Legislature | Engrossed

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Bill Title: Michigan business tax; credit; small business credit and entrepreneurial credit; revise. Amends secs. 417 & 441 of 2007 PA 36 (MCL 208.1417 & 208.1441).

Spectrum: Partisan Bill (Republican 8-0)

Status: (Engrossed - Dead) 2009-03-12 - Referred To Committee On Tax Policy [SB0069 Detail]

Download: Michigan-2009-SB0069-Engrossed.html

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SB-0069, As Passed Senate, March 12, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

SENATE BILL NO. 69

 

 

 

 

 

 

 

 

 

 

     A bill to amend 2007 PA 36, entitled

 

"Michigan business tax act,"

 

by amending sections 417 and 441 (MCL 208.1417 and 208.1441).

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 417. (1) The credit provided in this section shall be

 

taken after the credits under sections 403 and 405 and before any

 

other credit under this act and is available to any taxpayer with

 

gross receipts that do not exceed $20,000,000.00 and with adjusted

 

business income minus the loss adjustment that does not exceed

 

$1,300,000.00 $1,500,000.00 as adjusted annually for inflation

 

using the Detroit consumer price index and subject to the

 

following:

 

     (a) An individual, a partnership, a limited liability company,

 

or a subchapter S corporation is disqualified if the individual,

 

any 1 partner of the partnership, any 1 member of the limited

 

liability company, or any 1 shareholder of the subchapter S

 

corporation receives more than $180,000.00 $210,000.00 as a

 

distributive share of the adjusted business income minus the loss

 

adjustment of the individual, the partnership, the limited

 

liability company, or the subchapter S corporation.

 

     (b) A corporation other than a subchapter S corporation is

 

disqualified if either of the following occur for the respective

 

tax year:

 

     (i) Compensation and directors' fees of a shareholder or

 

officer exceed $180,000.00 $210,000.00.

 

     (ii) The sum of the following amounts exceeds $180,000.00

 

$210,000.00:

 

     (A) Compensation and directors' fees of a shareholder.

 

     (B) The product of the percentage of outstanding ownership or

 

of outstanding stock owned by that shareholder multiplied by the

 

difference between the sum of business income and, to the extent

 

deducted in determining federal taxable income, a carryback or a

 

carryover of a net operating loss or capital loss, minus the loss

 

adjustment.

 

     (c) Subject to the reduction percentage determined under

 

subsection (3), the credit determined under this subsection shall

 

be reduced by the following percentages in the following

 

circumstances:

 

     (i) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is more than $160,000.00 $165,000.00 but less than $165,000.00

 

$170,000.00, the credit is reduced by 20% 10%.

 

     (ii) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $165,000.00 $170,000.00 or more but less than $170,000.00

 

$175,000.00, the credit is reduced by 40% 20%.

 

     (iii) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $170,000.00 $175,000.00 or more but less than $175,000.00

 

$180,000.00, the credit is reduced by 60% 30%.

 

     (iv) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $175,000.00 $180,000.00 or more but not in excess of $180,000.00

 

less than $185,000.00, the credit is reduced by 80% 40%.

 

     (v) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $185,000.00 or more but less than $190,000.00, the credit is

 

reduced by 50%.

 

     (vi) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $190,000.00 or more but less than $195,000.00, the credit is

 

reduced by 60%.

 

     (vii) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $195,000.00 or more but less than $200,000.00, the credit is

 

reduced by 70%.

 

     (viii) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $200,000.00 or more but less than $205,000.00, the credit is

 

reduced by 80%.

 

     (ix) If an individual, any 1 partner of the partnership, any 1

 

member of the limited liability company, or any 1 shareholder of

 

the subchapter S corporation receives as a distributive share of

 

adjusted business income minus the loss adjustment of the

 

individual, partnership, limited liability company, or subchapter S

 

corporation; if compensation and directors' fees of a shareholder

 

or officer of a corporation other than a subchapter S corporation

 

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

 

is $205,000.00 or more but less than or equal to $210,000.00, the

 

credit is reduced by 90%.

 

     (2) For the purposes of determining disqualification under

 

subsection (1), an active shareholder's share of business income

 

shall not be attributed to another active shareholder.

 

     (3) To determine the reduction percentage under subsection

 

(1)(c), the following apply:

 

     (a) The reduction percentage for a partnership, limited

 

liability company, or subchapter S corporation is based on the

 

distributive share of adjusted business income minus loss

 

adjustment of the partner, member, or shareholder with the greatest

 

distributive share of adjusted business income minus loss

 

adjustment.

 

     (b) The reduction percentage for a corporation other than a

 

subchapter S corporation is the greater of the following:

 

     (i) The reduction percentage based on the compensation and

 

directors' fees of the shareholder or officer with the greatest

 

amount of compensation and directors' fees.

 

     (ii) The reduction percentage based on the sum of the amounts

 

in subsection (1)(b)(ii)(A) and (B) for the shareholder or officer

 

with the greatest sum of the amounts in subsection (1)(b)(ii)(A) and

 

(B).

 

     (4) A taxpayer that qualifies under subsection (1) is allowed

 

a credit against the tax imposed under this act. The credit under

 

this subsection is the amount by which the tax imposed under this

 

act exceeds 1.8% of adjusted business income.

 

     (5) If gross receipts exceed $19,000,000.00, the credit shall

 

be reduced by a fraction, the numerator of which is the amount of

 

gross receipts over $19,000,000.00 and the denominator of which is

 

$1,000,000.00. The credit shall not exceed 100% of the tax

 

liability imposed under this act.

 

     (6) For a taxpayer that reports for a tax year less than 12

 

months, the amounts specified in this section for gross receipts,

 

adjusted business income, and share of business income shall be

 

multiplied by a fraction, the numerator of which is the number of

 

months in the tax year and the denominator of which is 12.

 

     (7) The department shall permit a taxpayer that elects to

 

claim the credit allowed under this section based on the amount by

 

which the tax imposed under this act exceeds the percentage of

 

adjusted business income for the tax year as determined under

 

subsection (4), and that is not required to reduce the credit

 

pursuant to subsection (1) or (5), to file and pay the tax imposed

 

by this act without computing the tax imposed under sections 201

 

and 203.

 

     (8) Compensation paid by the professional employer

 

organization to the officers of the client and to employees of the

 

professional employer organization who are assigned or leased to

 

and perform services for the client shall be included in

 

determining eligibility of the client under this section.

 

     (9) As used in this section:

 

     (a) "Active shareholder" means a shareholder who receives at

 

least $10,000.00 in compensation, directors' fees, or dividends

 

from the business, and who owns at least 5% of the outstanding

 

stock or other ownership interest.

 

     (b) "Adjusted business income" means business income as

 

defined in section 105 with all of the following adjustments:

 

     (i) Add compensation and directors' fees of active shareholders

 

of a corporation.

 

     (ii) Add, to the extent deducted in determining federal taxable

 

income, a carryback or a carryover of a net operating loss.

 

     (iii) Add, to the extent deducted in determining federal taxable

 

income, a capital loss.

 

     (iv) Add compensation and directors' fees of officers of a

 

corporation.

 

     (c) "Detroit consumer price index" means the most

 

comprehensive index of consumer prices available for the Detroit

 

area from the United States department of labor, bureau of labor

 

statistics.

 

     (d) "Loss adjustment" means the amount by which adjusted

 

business income was less than zero in any of the 5 tax years

 

immediately preceding the tax year for which eligibility for the

 

credit under this section is being determined. In determining the

 

loss adjustment for a tax year, a taxpayer is not required to use

 

more of the taxpayer's total negative adjusted business income than

 

the amount needed to qualify the taxpayer for the credit under this

 

section. A taxpayer shall not be considered to have used any

 

portion of the taxpayer's negative adjusted business income amount

 

unless the portion used is necessary to qualify for the credit

 

under this section. A taxpayer shall not reuse a negative adjusted

 

business income amount used as a loss adjustment in a previous tax

 

year or use a negative adjusted business income amount from a year

 

in which the taxpayer did not receive the credit under this

 

section.

 

     Sec. 441. (1) For the 2008, 2009, and 2010, 2011, 2012, and

 

2013 tax years, except as otherwise provided under subsection (2),

 

a taxpayer may claim the Michigan entrepreneurial credit equal to

 

100% of the eligible taxpayer's tax liability imposed by this act

 

attributable to increased employment under subdivision (b) for 3

 

years each year if the taxpayer meets all of the following

 

conditions:

 

     (a) Had less than $25,000,000.00 in gross receipts in the

 

immediately preceding tax year. The $25,000,000.00 amount shall be

 

annually adjusted for inflation using the Detroit consumer price

 

index.

 

     (b) Has For the 2008 tax year, has created in this state or

 

transferred into this state not fewer than 20 new jobs in the

 

immediately preceding tax year . or, for each tax year after 2008

 

that the credit is available, has created in this state or

 

transferred into this state not fewer than 8 new jobs in the

 

immediately preceding tax year.

 

     (c) Has For the 2008 tax year, has made a capital investment

 

in this state of not less than $1,250,000.00 in the immediately

 

preceding tax year . or, for each tax year after 2008 that the

 

credit is available, has made a capital investment in this state of

 

not less than $500,000.00 in the immediately preceding tax year.

 

For purposes of determining eligibility under this subdivision, the

 

capital investment shall not include the purchase of an existing

 

plant or the purchase of existing equipment.

 

     (d) Is not a retail establishment as described in major groups

 

52 through 59 and 70 under the standard industrial classification

 

code as compiled by the United States department of labor. However,

 

a restaurant that did not exist, as determined by the treasurer, in

 

this state in the immediately preceding year before which the

 

credit is claimed and that is not a franchise or a part of a

 

unitary business group may qualify for the credit under this

 

section.

 

     (2) A taxpayer that is an eligible business as defined in

 

section 407 and that received an eligible contribution as defined

 

in section 407 for which a credit was claimed by another taxpayer

 

may claim the Michigan entrepreneurial credit equal to 100% of the

 

taxpayer's tax liability imposed by this act attributable to the

 

increased employment under subdivision (b) for 3 years each year if

 

the taxpayer meets all of the following conditions:

 

     (a) Had less than $25,000,000.00 in gross receipts in the

 

immediately preceding tax year.

 

     (b) Has increased the number of new jobs in this state by at

 

least 20% from the immediately preceding tax year.

 

     (3) An eligible taxpayer may claim the credit under this

 

section on a form prescribed by the department.

 

     (4) If the new jobs for which the taxpayer qualifies for this

 

credit are relocated outside of this state within 5 years after

 

claiming the credit under this section or if the taxpayer reduces

 

the employment levels by more than 10% of the jobs for which the

 

taxpayer qualifies for the credit under this section, that taxpayer

 

is liable in an amount equal to the total of all credits received

 

under this section. Any liability under this subsection shall be

 

collected under 1941 PA 122, MCL 205.1 to 205.31.

 

     (5) A taxpayer's liability attributable to the increased

 

employment is the total liability of the taxpayer multiplied by a

 

fraction the numerator of which is the payroll of the increased

 

jobs of the facility meeting the requirements of this section and

 

the denominator of which is the taxpayer's total payroll in this

 

state.

 

     (6) As used in this section:

 

     (a) "Detroit consumer price index" means the most

 

comprehensive index of consumer prices available for the Detroit

 

area from the United States department of labor, bureau of labor

 

statistics.

 

     (b) "New jobs" means jobs that meet all of the following

 

criteria:

 

     (i) Did not exist in this state in the immediately preceding

 

tax year.

 

     (ii) Represent an overall increase in full-time equivalent jobs

 

of the taxpayer in this state in the immediately preceding tax

 

year.

 

     (iii) Are not jobs into which employees transfer if the

 

employees worked in this state for the taxpayer in other jobs prior

 

to beginning the new jobs.

 

     (c) "Payroll" means total salaries and wages before deducting

 

any personal or dependency exemptions.