Bill Text: MI SB0983 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Michigan business tax; gross receipts; amount received pursuant to discharge of indebtedness; exclude. Amends sec. 111 of 2007 PA 36 (MCL 208.1111).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2012-02-28 - Referred To Committee On Finance [SB0983 Detail]
Download: Michigan-2011-SB0983-Introduced.html
SENATE BILL No. 983
February 28, 2012, Introduced by Senator BRANDENBURG and referred to the Committee on Finance.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending section 111 (MCL 208.1111), as amended by 2011 PA 305.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 111. (1) "Gross receipts" means the entire amount
received by the taxpayer as determined by using the taxpayer's
method of accounting used for federal income tax purposes, less any
amount deducted as bad debt for federal income tax purposes that
corresponds to items of gross receipts included in the modified
gross receipts tax base for the current tax year or a past tax year
phased in over a 5-year period starting with 50% of that amount in
the 2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax
year, 75% in the 2011 tax year, and 100% in the 2012 tax year and
each tax year thereafter, 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) that is
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) Amounts received by a newspaper to acquire advertising
space not owned by that newspaper in another newspaper on behalf of
another person. This subdivision does not apply to any
consideration received by the taxpayer for acquiring that
advertising space.
(f) Notwithstanding any other provision of this section,
amounts received by a taxpayer that manages real property owned by
a third party that are deposited into a separate account kept in
the name of that third party and that are not reimbursements to the
taxpayer and are not indirect payments for management services that
the taxpayer provides to that third party.
(g) 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.
(h) Proceeds from any of the following:
(i) The original issue of stock or equity instruments or equity
issued by a regulated investment company as that term is defined
under section 851 of the internal revenue code.
(ii) The original issue of debt instruments.
(i) Refunds from returned merchandise.
(j) Cash and in-kind discounts.
(k) Trade discounts.
(l) Federal, state, or local tax refunds.
(m) Security deposits.
(n) Payment of the principal portion of loans.
(o) Value of property received in a like-kind exchange.
(p) Proceeds from a sale, transaction, exchange, involuntary
conversion, maturity, redemption, repurchase, recapitalization, or
other disposition or reorganization of tangible, intangible, or
real property, less any gain from the disposition or reorganization
to the extent that the gain is included in the taxpayer's federal
taxable income, if the property satisfies 1 or more of the
following:
(i) The property is a capital asset as defined in section
1221(a) of the internal revenue code.
(ii) The property is land that qualifies as property used in
the trade or business as defined in section 1231(b) of the internal
revenue code.
(iii) The property is used in a hedging transaction entered into
by the taxpayer in the normal course of the taxpayer's trade or
business primarily to manage the risk of exposure to foreign
currency fluctuations that affect assets, liabilities, profits,
losses, equity, or investments in foreign operations; interest rate
fluctuations; or commodity price fluctuations. For purposes of this
subparagraph, the actual transfer of title of real or tangible
personal property to another person is not a hedging transaction.
Only the overall net gain from the hedging transactions entered
into during the tax year is included in gross receipts. As used in
this subparagraph, "hedging transaction" means that term as defined
under section 1221 of the internal revenue code regardless of
whether the transaction was identified by the taxpayer as a hedge
for federal income tax purposes, provided, however, that
transactions excluded under this subparagraph and not identified as
a hedge for federal income tax purposes shall be identifiable to
the department by the taxpayer as a hedge in its books and records.
(iv) The property is investment and trading assets managed as
part of the person's treasury function. For purposes of this
subparagraph, a person principally engaged in the trade or business
of purchasing and selling investment and trading assets is not
performing a treasury function. Only the overall net gain from the
treasury function incurred during the tax year is included in gross
receipts. As used in this subparagraph, "treasury function" means
the pooling and management of investment and trading assets for the
purpose of satisfying the cash flow or liquidity needs of the
taxpayer's trade or business.
(q) 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.
(r) For a sales finance company, as defined in section 2 of
the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL
492.102, and directly or indirectly owned in whole or in part by a
motor vehicle manufacturer as of January 1, 2008, and for a person
that is a broker or dealer as defined under section 78c(a)(4) or
(5) of the securities exchange act of 1934, 15 USC 78c, or a person
included in the unitary business group of that broker or dealer
that buys and sells for its own account, contracts that are subject
to the commodity exchange act, 7 USC 1 to 27f, amounts realized
from the repayment, maturity, sale, or redemption of the principal
of a loan, bond, or mutual fund, certificate of deposit, or similar
marketable instrument provided such instruments are not held as
inventory.
(s) For a sales finance company, as defined in section 2 of
the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL
492.102, and directly or indirectly owned in whole or in part by a
motor vehicle manufacturer as of January 1, 2008, and for a person
that is a broker or dealer as defined under section 78c(a)(4) or
(5) of the securities exchange act of 1934, 15 USC 78c, or a person
included in the unitary business group of that broker or dealer
that buys and sells for its own account, contracts that are subject
to the commodity exchange act, 7 USC 1 to 27f, the principal amount
received under a repurchase agreement or other transaction properly
characterized as a loan.
(t) For a mortgage company, proceeds representing the
principal balance of loans transferred or sold in the tax year. For
purposes of this subdivision, "mortgage company" means a person
that is licensed under the mortgage brokers, lenders, and servicers
licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, or the
secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, and
has greater than 90% of its revenues, in the ordinary course of
business, from the origination, sale, or servicing of residential
mortgage loans.
(u) For a professional employer organization, any amount
charged by a professional employer organization that represents the
actual cost of wages and salaries, benefits, worker's compensation,
payroll taxes, withholding, or other assessments paid to or on
behalf of a covered employee by the professional employer
organization under a professional employer arrangement.
(v) Any invoiced items used to provide more favorable floor
plan assistance to a person subject to the tax imposed under this
act than to a person not subject to this tax and paid by a
manufacturer, distributor, or supplier.
(w) For an individual, estate, or person organized for estate
or gift planning purposes, amounts received other than those from
transactions, activities, and sources in the regular course of the
person's trade or business. For purposes of this subdivision, all
of the following apply:
(i) Amounts received from transactions, activities, and sources
in the regular course of the person's business include, but are not
limited to, the following:
(A) Receipts from tangible and intangible property if the
acquisition, rental, lease, management, or disposition of the
property constitutes integral parts of the person's regular trade
or business operations.
(B) Receipts received in the course of the person's trade or
business from stock and securities of any foreign or domestic
corporation and dividend and interest income.
(C) Receipts derived from isolated sales, leases, assignments,
licenses, divisions, or other infrequently occurring dispositions,
transfers, or transactions involving tangible, intangible, or real
property if the property is or was used in the person's trade or
business operation.
(D) Receipts derived from the sale of an interest in a
business that constitutes an integral part of the person's regular
trade or business.
(E) Receipts derived from the lease or rental of real
property.
(ii) Receipts excluded from gross receipts include, but are not
limited to, the following:
(A) Receipts derived from investment activity, including
interest, dividends, royalties, and gains from an investment
portfolio or retirement account, if the investment activity is not
part of the person's trade or business.
(B) Receipts derived from the disposition of tangible,
intangible, or real property held for personal use and enjoyment,
such as a personal residence or personal assets.
(x) Receipts derived from investment activity other than
receipts from transactions, activities, and sources in the regular
course of the person's trade or business by a person that is
organized exclusively to conduct investment activity and that does
not conduct investment activity for any person other than an
individual or a person related to that individual or by a common
trust fund established under the collective investment funds act,
1941 PA 174, MCL 555.101 to 555.113. For purposes of this
subdivision, a person is related to an individual if that person is
a spouse, brother or sister, whether of the whole or half blood or
by adoption, ancestor, lineal descendent of that individual or
related person, or a trust benefiting that individual or 1 or more
persons related to that individual.
(y) Interest income and dividends derived from obligations or
securities of the United States government, this state, or any
governmental unit of this state. As used in this subdivision,
"governmental unit" means that term as defined in section 3 of the
shared credit rating act, 1985 PA 227, MCL 141.1053.
(z) Dividends and royalties received or deemed received from a
foreign operating entity or a person other than a United States
person, including, but not limited to, the amounts determined under
section 78 of the internal revenue code and sections 951 to 964 of
the internal revenue code, phased in over a 5-year period starting
with 50% of that amount in the 2008 tax year, 60% in the 2009 tax
year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%
in the 2012 tax year and each tax year thereafter.
(aa) To the extent not deducted as purchases from other firms
under section 203, each of the following:
(i) Sales or use taxes collected from or reimbursed by a
consumer or other taxes the taxpayer collected directly from or was
reimbursed by a purchaser and remitted to a local, state, or
federal tax authority, phased in over a 5-year period starting with
50% of that amount in the 2008 tax year, 60% in the 2009 tax year,
60% in the 2010 tax year, 75% in the 2011 tax year, and 100% in the
2012 tax year and each tax year thereafter.
(ii) In the case of receipts from the sale of cigarettes or
tobacco products by a wholesale dealer, retail dealer, distributor,
manufacturer, or seller, an amount equal to the federal and state
excise taxes paid by any person on or for such cigarettes or
tobacco products under subtitle E of the internal revenue code or
other applicable state law, phased in over a 3-year period starting
with 60% of that amount in the 2008 tax year, 75% in the 2009 tax
year, and 100% in the 2010 tax year and each tax year thereafter.
(iii) In the case of receipts from the sale of motor fuel by a
person with a motor fuel tax license or a retail dealer, an amount
equal to federal and state excise taxes paid by any person on such
motor fuel under section 4081 of the internal revenue code or under
other applicable state law, phased in over a 5-year period starting
with 50% of that amount in the 2008 tax year, 60% in the 2009 tax
year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%
in the 2012 tax year and each tax year thereafter.
(iv) In the case of receipts from the sale of beer, wine, or
intoxicating liquor by a person holding a license to sell,
distribute, or produce those products, an amount equal to federal
and state excise taxes paid by any person on or for such beer,
wine, or intoxicating liquor under subtitle E of the internal
revenue code or other applicable state law, phased in over a 5-year
period starting with 50% of that amount in the 2008 tax year, 60%
in the 2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax
year, and 100% in the 2012 tax year and each tax year thereafter.
(v) In the case of receipts from the sale of communication,
video, internet access and related services and equipment, any
government imposed tax, fee, or other imposition in the nature of a
tax or fee required by law, ordinance, regulation, ruling, or other
legal authority and authorized to be charged on a customer's bill
or invoice, phased in over a 5-year period starting with 50% of
that amount in the 2008 tax year, 60% in the 2009 tax year, 60% in
the 2010 tax year, 75% in the 2011 tax year, and 100% in the 2012
tax year and each tax year thereafter. This subparagraph does not
include the recovery of net income taxes, net worth taxes, property
taxes, or the tax imposed under this act.
(vi) In the case of receipts from the sale of electricity,
natural gas, or other energy source, any government imposed tax,
fee, or other imposition in the nature of a tax or fee required by
law, ordinance, regulation, ruling, or other legal authority and
authorized to be charged on a customer's bill or invoice, phased in
over a 5-year period starting with 50% of that amount in the 2008
tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%
in the 2011 tax year, and 100% in the 2012 tax year and each tax
year thereafter. This subparagraph does not include the recovery of
net income taxes, net worth taxes, property taxes, or the tax
imposed under this act.
(vii) Any deposit required under any of the following, phased
in over a 5-year period starting with 50% of that amount in the
2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax year,
75% in the 2011 tax year, and 100% in the 2012 tax year and each
tax year thereafter:
(A) 1976 IL 1, MCL 445.571 to 445.576.
(B) R 436.1629 of the Michigan administrative code.
(C) R 436.1723a of the Michigan administrative code.
(D) Any substantially similar beverage container deposit law
of another state.
(viii) An excise tax collected pursuant to the airport parking
tax act, 1987 PA 248, MCL 207.371 to 207.383, collected from or
reimbursed by a consumer and remitted as provided in the airport
parking tax act, 1987 PA 248, MCL 207.371 to 207.383, phased in
over a 5-year period starting with 50% of that amount in the 2008
tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%
in the 2011 tax year, and 100% in the 2012 tax year and each tax
year thereafter.
(bb) Amounts attributable to an ownership interest in a pass-
through entity, regulated investment company, real estate
investment trust, or cooperative corporation whose business
activities are taxable under section 203 or would be subject to the
tax under section 203 if the business activities were in this
state. For purposes of this subdivision:
(i) "Cooperative corporation" means those organizations
described under subchapter T of the internal revenue code.
(ii) "Pass-through" entity means a partnership, subchapter S
corporation, or other person, other than an individual, that is not
classified for federal income tax purposes as an association taxed
as a corporation.
(iii) "Real estate investment trust" means that term as defined
under section 856 of the internal revenue code.
(iv) "Regulated investment company" means that term as defined
under section 851 of the internal revenue code.
(cc) For a regulated investment company as that term is
defined under section 851 of the internal revenue code, receipts
derived from investment activity by that regulated investment
company.
(dd) For fiscal years that begin after September 30, 2009,
unless the state budget director certifies to the state treasurer
by January 1 of that fiscal year that the federally certified rates
for actuarial soundness required under 42 CFR 438.6 and that are
specifically developed for Michigan's health maintenance
organizations that hold a contract with this state for medicaid
services provide explicit adjustment for their obligations required
for payment of the tax under this act, amounts received by the
taxpayer during that fiscal year for medicaid premium or
reimbursement of costs associated with service provided to a
medicaid recipient or beneficiary.
(ee) For a taxpayer that provides health care management
consulting services, amounts received by the taxpayer as fees from
its clients that are expended by the taxpayer to reimburse those
clients for labor and nonlabor services that are paid by the client
and reimbursed to the client pursuant to a services agreement.
(ff) Amounts received pursuant to a discharge of indebtedness
as described under section 61(a)(12) of the internal revenue code,
including forgiveness of a nonrecourse debt, in the case of a
taxpayer in a title II case within the meaning of section 108(d)(2)
of the internal revenue code or to the extent the taxpayer is
insolvent within the meaning of section 108(d)(3) of the internal
revenue code.
(2) "Insurance company" means an authorized insurer as defined
in section 106 of the insurance code of 1956, 1956 PA 218, MCL
500.106.
(3) "Internal revenue code" means the United States internal
revenue code of 1986 in effect on January 1, 2008 or, at the option
of the taxpayer, in effect for the tax year.
(4) "Inventory" means, except as provided in subdivision (e),
all of the following:
(a) The stock of goods held for resale in the regular course
of trade of a retail or wholesale business, including electricity
or natural gas purchased for resale.
(b) Finished goods, goods in process, and raw materials of a
manufacturing business purchased from another person.
(c) For a person that is a new motor vehicle dealer licensed
under the Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923,
floor plan interest expenses for new motor vehicles. For purposes
of this subdivision, "floor plan interest" means interest paid that
finances any part of the person's purchase of new motor vehicle
inventory from a manufacturer, distributor, or supplier. However,
amounts attributable to any invoiced items used to provide more
favorable floor plan assistance to a person subject to the tax
imposed under this act than to a person not subject to this tax is
considered interest paid by a manufacturer, distributor, or
supplier.
(d) For a person that is a securities trader, broker, or
dealer or a person included in the unitary business group of that
securities trader, broker, or dealer that buys and sells for its
own account, contracts that are subject to the commodity exchange
act, 7 USC 1 to 27f, the cost of securities as defined under
section 475(c)(2) of the internal revenue code and for a securities
trader the cost of commodities as defined under section 475(e)(2)
and for a broker or dealer the cost of commodities as defined under
section 475(e)(2)(b), (c), and (d) of the internal revenue code,
excluding interest expense other than interest expense related to
repurchase agreements. As used in this subdivision:
(i) "Broker" means that term as defined under section 78c(a)(4)
of the securities exchange act of 1934, 15 USC 78c.
(ii) "Dealer" means that term as defined under section
78c(a)(5) of the securities exchange act of 1934, 15 USC 78c.
(iii) "Securities trader" means a person that engages in the
trade or business of purchasing and selling investments and trading
assets.
(e) Inventory does not include either of the following:
(i) Personal property under lease or principally intended for
lease rather than sale.
(ii) Property allowed a deduction or allowance for depreciation
or depletion under the internal revenue code.
(5) "Officer" means an officer of a corporation other than a
subchapter S corporation, including all of the following:
(a) The chairperson of the board.
(b) The president, vice president, secretary, or treasurer of
the corporation or board.
(c) Persons performing similar duties to persons described in
subdivisions (a) and (b).
