Bill Text: MI SB1154 | 2015-2016 | 98th Legislature | Engrossed
Bill Title: Individual income tax; withholding requirements; redirect withholdings from state to certain businesses for economic development; provide for. Amends secs. 703 & 711 of 1967 PA 281 (MCL 206.703 & 206.711). TIE BAR WITH: SB 1153'16
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2016-11-29 - Referred To Committee On Local Government [SB1154 Detail]
Download: Michigan-2015-SB1154-Engrossed.html
SB-1154, As Passed Senate, November 29, 2016
SUBSTITUTE FOR
SENATE BILL NO. 1154
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 703 and 711 (MCL 206.703 and 206.711), as
amended by 2016 PA 158.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 703. (1) A person who disburses pension or annuity
payments, except as otherwise provided under this section, shall
withhold a tax in an amount computed by applying the rate
prescribed in section 51 on the taxable part of payments from an
employer pension, annuity, profit-sharing, stock bonus, or other
deferred compensation plan as well as from an individual retirement
arrangement, an annuity, an endowment, or a life insurance contract
issued by a life insurance company. Withholding shall be calculated
on the taxable disbursement after deducting from the taxable
portion the same proportion of the total amount of personal and
dependency exemptions of the individual allowed under this act.
Withholding is not required on any part of a distribution that is
not expected to be includable in the recipient's gross income or
that is deductible from adjusted gross income under section
30(1)(e) or (f).
(2) Every employer in this state required under the provisions
of the internal revenue code to withhold a tax on the compensation
of an individual, except as otherwise provided, shall deduct and
withhold a tax in an amount computed by applying, except as
provided by subsection (14), the rate prescribed in section 51 to
the remainder of the compensation after deducting from compensation
the same proportion of the total amount of personal and dependency
exemptions of the individual allowed under this act that the period
of time covered by the compensation is of 1 year. The department
may prescribe withholding tables that may be used by employers to
compute the amount of tax required to be withheld.
(3) Except as otherwise provided under this section, for tax
years that begin before July 1, 2016, every flow-through entity in
this state shall withhold a tax in an amount computed by applying
the rate prescribed in section 51 to the distributive share of
taxable income reasonably expected to accrue after allocation and
apportionment under chapter 3 of each nonresident member who is an
individual after deducting from that distributive income the same
proportion of the total amount of personal and dependency
exemptions of the individual allowed under this act. All of the
taxes withheld under this section shall accrue to the state on
April 15, July 15, and October 15 of the flow-through entity's tax
year and January 15 of the following year, except a flow-through
entity that is not on a calendar year basis shall substitute the
appropriate due dates in the flow-through entity's fiscal year that
correspond to those in a calendar year. Withholding for each period
shall be equal to 1/4 of the total withholding calculated on the
distributive share that is reasonably expected to accrue during the
tax year of the flow-through entity.
(4) Except as otherwise provided under this section, for tax
years that begin before July 1, 2016, every flow-through entity
with business activity in this state that has more than $200,000.00
of business income reasonably expected to accrue in the tax year
after allocation or apportionment shall withhold a tax in an amount
computed by applying the rate prescribed in section 623 to the
distributive share of the business income of each member that is a
corporation or that is a flow-through entity. For purposes of
calculating the $200,000.00 withholding threshold, the business
income of a flow-through entity shall be apportioned to this state
by multiplying the business income by the sales factor of the flow-
through entity. The sales factor of the flow-through entity is a
fraction, the numerator of which is the total sales of the flow-
through entity in this state during the tax year and the
denominator of which is the total sales of the flow-through entity
everywhere during the tax year. As used in this subsection,
"business income" means that term as defined in section 603(2). For
a partnership or S corporation, business income includes payments
and items of income and expense that are attributable to business
activity of the partnership or S corporation and separately
reported to the members. As used in this subsection, "sales" means
that term as defined in section 609 and sales in this state is
determined as provided in sections 665 and 669. All of the taxes
withheld under this section shall accrue to the state on April 15,
July 15, and October 15 of the flow-through entity's tax year and
January 15 of the following year, except a flow-through entity that
is not on a calendar year basis shall substitute the appropriate
due dates in the flow-through entity's fiscal year that correspond
to those in a calendar year. Withholding for each period shall be
equal to 1/4 of the total withholding calculated on the
distributive share of business income that is reasonably expected
to accrue during the tax year of the flow-through entity.
(5) For tax years that begin before July 1, 2016, if a flow-
through entity is subject to the withholding requirements of
subsection (4), then a member of that flow-through entity that is
itself a flow-through entity shall withhold a tax on the
distributive share of business income as described in subsection
(4) of each of its members. The department shall apply tax withheld
by a flow-through entity on the distributive share of business
income of a member flow-through entity to the withholding required
of that member flow-through entity. All of the taxes withheld under
this section shall accrue to the state on April 15, July 15, and
October 15 of the flow-through entity's tax year and January 15 of
the following year, except a flow-through entity that is not on a
calendar year basis shall substitute the appropriate due dates in
the flow-through entity's fiscal year that correspond to those in a
calendar year. Withholding for each period shall be equal to 1/4 of
the total withholding calculated on the distributive share of
business income that is reasonably expected to accrue during the
tax year of the flow-through entity.
(6) Every casino licensee shall withhold a tax in an amount
computed by applying the rate prescribed in section 51 to the
winnings of a nonresident reportable by the casino licensee under
the internal revenue code.
(7) Every race meeting licensee or track licensee shall
withhold a tax in an amount computed by applying the rate
prescribed in section 51 to a payoff price on a winning ticket of a
nonresident reportable by the race meeting licensee or track
licensee under the internal revenue code that is the result of
pari-mutuel wagering at a licensed race meeting.
(8) Every casino licensee or race meeting licensee or track
licensee shall report winnings of a resident reportable by the
casino licensee or race meeting licensee or track licensee under
the internal revenue code to the department in the same manner and
format as required under the internal revenue code.
(9) Every eligible production company shall, to the extent not
withheld by a professional services corporation or professional
employer organization, deduct and withhold a tax in an amount
computed by applying the rate prescribed in section 51 to the
remainder of the payments made to the professional services
corporation or professional employer organization for the services
of a performing artist or crew member after deducting from those
payments the same proportion of the total amount of personal and
dependency exemptions of the individuals allowed under this act.
(10) Every publicly traded partnership that has equity
securities registered with the securities and exchange commission
under section 12 of title I of the securities and exchange act of
1934, 15 USC 78l, shall not be subject to withholding.
(11) Except as otherwise provided under this subsection, all
of the taxes withheld under this section shall accrue to the state
on the last day of the month in which the taxes are withheld but
shall be returned and paid to the department by the employer,
eligible production company, casino licensee, or race meeting
licensee or track licensee within 15 days after the end of any
month or as provided in section 705. For an employer that has
entered into an agreement with a community college pursuant to
chapter 13 of the community college act of 1966, 1966 PA 331, MCL
389.161 to 389.166, a portion of the taxes withheld under this
section that are attributable to each employee in a new job created
pursuant to the agreement shall accrue to the community college on
the last day of the month in which the taxes are withheld but shall
be returned and paid to the community college by the employer
within 15 days after the end of any month or as provided in section
705 for as long as the agreement remains in effect. For purposes of
this act and 1941 PA 122, MCL 205.1 to 205.31, payments made by an
employer to a community college under this subsection shall be
considered income taxes paid to this state. For an employer that is
an authorized business pursuant to a written agreement entered into
with the Michigan strategic fund pursuant to chapter 8D of the
Michigan strategic fund act, 1984 PA 270, MCL 125.2090g to
125.2090i, a portion of the taxes withheld under this section that
are attributable to each certified new job created pursuant to the
agreement does not accrue to the state but shall be retained by the
employer in accordance with the terms of the written agreement. For
purposes of this act and 1941 PA 122, MCL 205.1 to 205.31, the
withholdings retained by the employer under this subsection shall
be considered income taxes paid to this state.
(12)
A Except as otherwise
provided under this subsection, a
person required by this section to deduct and withhold taxes on
income under this section holds the amount of tax withheld as a
trustee for this state and is liable for the payment of the tax to
this state or, if applicable, to the community college and is not
liable to any individual for the amount of the payment. An employer
that is an authorized business pursuant to a written agreement
entered into with the Michigan strategic fund for a withholding
abatement pursuant to chapter 8D of the Michigan strategic fund
act, 1984 PA 270, MCL 125.2090g to 125.2090i, that is required by
this section to deduct and withhold taxes on compensation does not
hold that portion of the withholdings tax attributable to those
certified new jobs as a trustee for this state and is not liable
for the payment of that tax to this state and is not liable to any
individual for the amount of the payment.
(13) An employer in this state is not required to deduct and
withhold a tax on the compensation paid to a nonresident individual
employee, who, under section 256, may claim a tax credit equal to
or in excess of the tax estimated to be due for the tax year or is
exempted from liability for the tax imposed by this act. In each
tax year, the nonresident individual shall furnish to the employer,
on a form approved by the department, a verified statement of
nonresidence.
(14) A person required to withhold a tax under this act, by
the fifteenth day of the following month, shall provide the
department with a copy of any exemption certificate on which a
person with income subject to withholding under subsection (6) or
(7) claims more than 9 personal or dependency exemptions, claims a
status that exempts the person subject to withholding under
subsection (6) or (7) from withholding under this section.
(15) A person who disburses annuity payments pursuant to the
terms of a qualified charitable gift annuity is not required to
deduct and withhold a tax on those payments as prescribed under
subsection (1). As used in this subsection, "qualified charitable
gift annuity" means an annuity described under section 501(m)(5) of
the internal revenue code and issued by an organization exempt
under section 501(c)(3) of the internal revenue code.
(16) Notwithstanding the requirements of subsections (4) and
(5), if a flow-through entity receives an exemption certificate
from a member other than a nonresident individual, the flow-through
entity shall not withhold a tax on the distributive share of the
business income of that member if all of the following conditions
are met:
(a) The exemption certificate is completed by the member in
the form and manner prescribed by the department and certifies that
the member will do all of the following:
(i) File the returns required under this act.
(ii) Pay or withhold the tax required under this act on the
distributive share of the business income received from any flow-
through entity in which the member has an ownership or beneficial
interest, directly or indirectly through 1 or more other flow-
through entities.
(iii) Submit to the taxing jurisdiction of this state for
purposes of collection of the tax under this act together with
related interest and penalties under 1941 PA 122, MCL 205.1 to
205.31, imposed on the member with respect to the distributive
share of the business income of that member.
(b) The department may require the member to file the
exemption certificate with the department and provide a copy to the
flow-through entity.
(c) The department may require a flow-through entity that
receives an exemption certificate to attach a copy of the exemption
certificate to the annual reconciliation return as required by
section 711. A flow-through entity that is entirely exempt from the
withholding requirements of subsection (4) or (5) by this
subsection may be required to furnish a copy of the exemption
certificate in another manner prescribed by the department.
(d) A copy of the exemption certificate shall be retained by
the member and flow-through entity and made available to the
department upon request. Any copy of the exemption certificate
shall be maintained in a format and for the period required by 1941
PA 122, MCL 205.1 to 205.31.
(17) The department may revoke the election provided for in
subsection (16) if it determines that the member or a flow-through
entity is not abiding by the terms of the exemption certificate or
the requirements of subsection (16). If the department does revoke
the election option under subsection (16), the department shall
notify the affected flow-through entity that withholding is
required on the member under subsection (4) or (5), beginning 60
days after notice of revocation is received.
(18) Notwithstanding the requirements of subsections (4) and
(5), a flow-through entity is not required to withhold in
accordance with this section for a member that voluntarily elects
to file a return and pay the tax imposed by the Michigan business
tax act under section 680 or section 500 of the Michigan business
tax act, 2007 PA 36, MCL 208.1500.
(19) Notwithstanding the withholding requirements of
subsection (3), (4), or (5), a flow-through entity is not required
to comply with those withholding requirements to the extent that
the withholding would violate any of the following:
(a) Housing assistance payment programs distribution
restrictions under 24 CFR part 880, 881, 883, or 891.
(b) Rural housing service return on investment restrictions
under 7 CFR 3560.68 or 3560.305.
(c) Articles of incorporation or other document of
organization adopted pursuant to section 83 or 93 of the state
housing development authority act of 1966, 1966 PA 346, MCL
125.1483 and 125.1493.
Sec. 711. (1) Every person required by this part to deduct and
withhold taxes for a tax year on income other than distributive
share of income from a flow-through entity shall furnish to the
person who received the income a statement in duplicate on or
before January 31 of the succeeding year of the total income paid
during the tax year and the amount deducted or withheld. However,
if employment is terminated before the close of a calendar year by
a person that goes out of business or permanently ceases to exist,
then the statement required by this subsection shall be issued
within 30 days after the last compensation, winnings, or payoff of
a winning ticket is paid. A duplicate of a statement made pursuant
to this section and an annual reconciliation return, MI-W3, shall
be filed with the department by February 28 of the succeeding year
except that a person that goes out of business or permanently
ceases to exist shall file the statement and the annual
reconciliation return within 30 days after going out of business or
permanently ceasing to exist. For tax years that begin before July
1, 2016, a flow-through entity that was required to withhold taxes
on distributive shares of business income shall file an annual
reconciliation return with the department no later than the last
day of the second month following the end of the flow-through
entity's federal tax year. The department may require a flow-
through entity to file an annual business income information return
with the department on the due date, including extensions, of its
annual federal information return.
(2) Every person required by this part to deduct or withhold
taxes shall make a return or report in form and content and at
times as prescribed by the department. An employer that has entered
into an agreement with a community college pursuant to chapter 13
of the community college act of 1966, 1966 PA 331, MCL 389.161 to
389.166, and is required to deduct or withhold taxes from
compensation and make payments to a community college pursuant to
the agreement for a portion of those taxes withheld shall, for as
long as the agreement remains in effect, delineate in the return or
report required under this subsection between the amount deducted
or withheld and paid to the state and that amount paid to a
community college. An employer that is an authorized business
pursuant to a written agreement entered into with the Michigan
strategic fund for a withholding abatement pursuant to chapter 8D
of the Michigan strategic fund act, 1984 PA 270, MCL 125.2090g to
125.2090i, and is required to deduct and withhold taxes from
compensation but may retain a portion of the withholdings tax
pursuant to the written agreement shall, for a period of time as
provided in the written agreement, delineate in the return or
report required under this subsection between the amount deducted
or withheld and paid to the state and that amount retained by the
employer.
(3) Every person who receives income subject to withholding
under this part shall furnish to the person required by this part
to deduct and withhold taxes information required to make an
accurate withholding. A person who receives income subject to
withholding under this part shall file with the person required by
this part to deduct and withhold taxes revised information within
10 days after a decrease in the number of exemptions or a change in
status from a nonresident to a resident. The person who receives
income subject to withholding under this part may file revised
information when the number of exemptions increases or when a
change in status occurs from that of a resident of this state to a
nonresident of this state. Revised information shall not be given
retroactive effect for withholding purposes. A person required by
this part to deduct and withhold taxes shall rely on this
information for withholding purposes unless directed by the
department to withhold on some other basis. If a person who
receives income subject to withholding under this part fails or
refuses to furnish information, the person required by this part to
deduct and withhold taxes shall withhold at the full rate of tax
from the person's income subject to withholding under this part.
Enacting section 1. This amendatory act does not take effect
unless Senate Bill No. 1153 of the 98th Legislature is enacted into
law.
