HB-4361, As Passed House, May 12, 2011HB-4361, As Passed Senate, May 12, 2011

 

 

 

 

 

 

 

 

 

 

 

SENATE SUBSTITUTE FOR

 

HOUSE BILL NO. 4361

 

 

 

 

 

 

 

 

 

 

 

      A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending the title and sections 2, 4, 6, 24, 26, 30, 30f, 36,

 

51, 52, 91, 102, 103, 105, 110, 115, 132, 195, 201, 251, 255,

 

256, 265, 266, 270, 271, 272, 278, 301, 311, 315, 322, 325, 351,

 

355, 365, 402, 408, 451, 455, 471, 475, 508, 510, 512, 514, 520,

 

522, 526, 527a, 530, and 532 (MCL 206.2, 206.4, 206.6, 206.24,

 

206.26, 206.30, 206.30f, 206.36, 206.51, 206.52, 206.91, 206.102,

 

206.103, 206.105, 206.110, 206.115, 206.132, 206.195, 206.201,

 

206.251, 206.255, 206.256, 206.265, 206.266, 206.270, 206.271,

 

206.272, 206.278, 206.301, 206.311, 206.315, 206.322, 206.325,

 

206.351, 206.355, 206.365, 206.402, 206.408, 206.451, 206.455,

 

206.471, 206.475, 206.508, 206.510, 206.512, 206.514, 206.520,

 

206.522, 206.526, 206.527a, 206.530, and 206.532), section 4 as

 

amended by 2003 PA 52, section 26 as amended by 2003 PA 50,

 

section 30 as amended by 2009 PA 134, section 30f as added by

 

2000 PA 163, sections 51 and 270 as amended by 2007 PA 94,

 

section 52 as added by 1988 PA 1, section 110 as amended by 2003

 

PA 21, sections 255, 256, 301, and 475 as amended by 1996 PA 484,

 

section 265 as amended by 1998 PA 19, section 266 as amended by

 

2008 PA 447, section 272 as added by 2006 PA 372, section 278 as

 

added by 2010 PA 235, section 311 as amended by 2004 PA 199,

 

section 315 as amended by 2003 PA 49, sections 325 and 514 as

 

amended by 1987 PA 254, sections 351, 355, and 365 as amended by

 

2008 PA 360, section 402 as added and section 408 as amended by

 

1980 PA 169, section 451 as amended by 2003 PA 46, section 471 as

 

amended by 2002 PA 486, section 508 as amended by 1990 PA 283,

 

sections 510 and 520 as amended by 1995 PA 245, section 512 as

 

amended by 2003 PA 29, section 522 as amended by 2000 PA 41,

 

section 527a as amended by 2004 PA 335, and section 530 as

 

amended by 1982 PA 480, by designating sections 1 to 532 as part

 

1, and by adding parts 2 and 3; and to repeal acts and parts of

 

acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1                              TITLE

 

 2        An act to meet deficiencies in state funds by providing for

 

 3  the imposition, levy, computation, collection, assessment,

 

 4  reporting, payment, and enforcement by lien and otherwise of

 

 5  taxes on or measured by net income and on certain commercial,

 

 6  business, and financial activities; to prescribe the manner and

 

 7  time of making reports and paying the taxes, and the functions of

 

 1  public officers and others as to the taxes; to permit the

 

 2  inspection of the records of taxpayers; to provide for interest

 

 3  and penalties on unpaid taxes; to provide exemptions, credits and

 

 4  refunds of the taxes; to prescribe penalties for the violation of

 

 5  this act; to provide an appropriation; and to repeal certain acts

 

 6  and parts of acts.

 

 7                             PART 1

 

 8        Sec. 2. (1) For the purposes of this act, part, the words,

 

 9  terms and phrases set forth in this chapter and their derivations

 

10  have the meaning given therein. When not inconsistent with the

 

11  context, words used in the present tense include the future,

 

12  words in the plural number include the singular number, and in

 

13  the singular number include the plural. "Shall" is always

 

14  mandatory and "may" is always discretionary.

 

15        (2) Any term used in this act part shall have the same

 

16  meaning as when used in comparable context in the laws of the

 

17  United States relating to federal income taxes unless a different

 

18  meaning is clearly required. Any reference in this act part to

 

19  the internal revenue code shall include other provisions of the

 

20  laws of the United States relating to federal income taxes.

 

21        (3) It is the intention of this act part that the income

 

22  subject to tax be the same as taxable income as defined and

 

23  applicable to the subject taxpayer in the internal revenue code,

 

24  except as otherwise provided in this act.

 

25        Sec. 4. (1) "Board" means the state board of tax appeals.

 

26        (2) "Business income" means all income arising from

 

27  transactions, activities, and sources in the regular course of

 

 1  the taxpayer's trade or business and includes the following:

 

 2        (a) All income from tangible and intangible property if the

 

 3  acquisition, rental, management, or disposition of the property

 

 4  constitutes integral parts of the taxpayer's regular trade or

 

 5  business operations.

 

 6        (b) Gains or losses from stock and securities of any foreign

 

 7  or domestic corporation and dividend and interest income.

 

 8        (c) Income derived from isolated sales, leases, assignment,

 

 9  licenses, divisions, or other infrequently occurring

 

10  dispositions, transfers, or transactions involving property if

 

11  the property is or was used in the taxpayer's trade or business

 

12  operation.

 

13        (d) Income derived from the sale of a business.

 

14        (3) Not later than 2 years after the effective date of the

 

15  amendatory act that added subsection (2)(b), the department shall

 

16  report the impact of the amendatory act that added subsection

 

17  (2)(b) on the tax liability under this act of resident and

 

18  nonresident taxpayers to the house tax policy committee and the

 

19  senate finance committee.

 

20        Sec. 6. (1) "Commercial domicile" means the principal place

 

21  from which the trade or business of the taxpayer is directed or

 

22  managed.

 

23        (2) "Commissioner" means the commissioner of the department.

 

24        (2) (3) "Compensation" means wages as defined in section

 

25  3401 and other payments as provided in section 3402 of the

 

26  internal revenue code.

 

27        (3) (4) "Corporation" means, in addition to an incorporated

 

 1  entity, an association, trust or any unincorporated organization

 

 2  which is defined as a corporation in the internal revenue code.

 

 3        Sec. 24. "Tax year" or "taxable year" means the calendar

 

 4  year, or the fiscal year ending during such calendar year, upon

 

 5  the basis of which taxable income is computed under this act

 

 6  part. In the case of a return made for a fractional part of a

 

 7  year, the term shall mean the period for which such return is

 

 8  made. Except for the first return required by this act, part, any

 

 9  taxpayer's tax year shall be for the same period as is covered by

 

10  his federal income tax return.

 

11        Sec. 26. "Taxpayer" means any person subject to the taxes

 

12  imposed by this act, part, any employer required to withhold

 

13  taxes on salaries and wages, or any flow-through entity required

 

14  to withhold taxes on a nonresident member's share of income

 

15  available for distribution.

 

16        Sec. 30. (1) "Taxable income" means, for a person other than

 

17  a corporation, estate, or trust, adjusted gross income as defined

 

18  in the internal revenue code subject to the following adjustments

 

19  under this section:

 

20        (a) Add gross interest income and dividends derived from

 

21  obligations or securities of states other than Michigan, in the

 

22  same amount that has been excluded from adjusted gross income

 

23  less related expenses not deducted in computing adjusted gross

 

24  income because of section 265(a)(1) of the internal revenue code.

 

25        (b) Add taxes on or measured by income to the extent the

 

26  taxes have been deducted in arriving at adjusted gross income.

 

27        (c) Add losses on the sale or exchange of obligations of the

 

 1  United States government, the income of which this state is

 

 2  prohibited from subjecting to a net income tax, to the extent

 

 3  that the loss has been deducted in arriving at adjusted gross

 

 4  income.

 

 5        (d) Deduct, to the extent included in adjusted gross income,

 

 6  income derived from obligations, or the sale or exchange of

 

 7  obligations, of the United States government that this state is

 

 8  prohibited by law from subjecting to a net income tax, reduced by

 

 9  any interest on indebtedness incurred in carrying the obligations

 

10  and by any expenses incurred in the production of that income to

 

11  the extent that the expenses, including amortizable bond

 

12  premiums, were deducted in arriving at adjusted gross income.

 

13        (e) Deduct, to the extent included in adjusted gross income,

 

14  compensation, the following:

 

15        (i) Compensation, including retirement benefits, received for

 

16  services in the armed forces of the United States.

 

17        (ii) Retirement or pension benefits under the railroad

 

18  retirement act of 1974, 45 USC 231 to 231v.

 

19        (f) Deduct the following to the extent included in adjusted

 

20  gross income subject to the limitations and restrictions set

 

21  forth in subsection (9):

 

22        (i) Retirement or pension benefits received from a federal

 

23  public retirement system or from a public retirement system of or

 

24  created by this state or a political subdivision of this state.

 

25        (ii) Retirement or pension benefits received from a public

 

26  retirement system of or created by another state or any of its

 

27  political subdivisions if the income tax laws of the other state

 

 1  permit a similar deduction or exemption or a reciprocal deduction

 

 2  or exemption of a retirement or pension benefit received from a

 

 3  public retirement system of or created by this state or any of

 

 4  the political subdivisions of this state.

 

 5        (iii) Social security benefits as defined in section 86 of the

 

 6  internal revenue code.

 

 7        (iv) Beginning on and after January 1, 2007, retirement or

 

 8  pension benefits not deductible under subparagraph (i) or

 

 9  subdivision (e) from any other retirement or pension system or

 

10  benefits from a retirement annuity policy in which payments are

 

11  made for life to a senior citizen, to a maximum of $42,240.00 for

 

12  a single return and $84,480.00 for a joint return. The maximum

 

13  amounts allowed under this subparagraph shall be reduced by the

 

14  amount of the deduction for retirement or pension benefits

 

15  claimed under subparagraph (i) or subdivision (e) and by the

 

16  amount of a deduction claimed under subdivision (r). (p). For the

 

17  2008 tax year and each tax year after 2008, the maximum amounts

 

18  allowed under this subparagraph shall be adjusted by the

 

19  percentage increase in the United States consumer price index for

 

20  the immediately preceding calendar year. The department shall

 

21  annualize the amounts provided in this subparagraph as necessary.

 

22  As used in this subparagraph, "senior citizen" means that term as

 

23  defined in section 514.

 

24        (v) The amount determined to be the section 22 amount

 

25  eligible for the elderly and the permanently and totally disabled

 

26  credit provided in section 22 of the internal revenue code.

 

27        (g) Adjustments resulting from the application of section

 

 1  271.

 

 2        (h) Adjustments with respect to estate and trust income as

 

 3  provided in section 36.

 

 4        (i) Adjustments resulting from the allocation and

 

 5  apportionment provisions of chapter 3.

 

 6        (j) Deduct political contributions as described in section 4

 

 7  of the Michigan campaign finance act, 1976 PA 388, MCL 169.204,

 

 8  or 2 USC 431, not in excess of $50.00 per annum, or $100.00 per

 

 9  annum for a joint return.

 

10        (k) Deduct, to the extent included in adjusted gross income,

 

11  wages not deductible under section 280C of the internal revenue

 

12  code.

 

13        (j) (l) Deduct the following payments made by the taxpayer in

 

14  the tax year:

 

15        (i) For the 2010 tax year and each tax year after 2010, the

 

16  amount of a charitable contribution made to the advance tuition

 

17  payment fund created under section 9 of the Michigan education

 

18  trust act, 1986 PA 316, MCL 390.1429.

 

19        (ii) The amount of payment made under an advance tuition

 

20  payment contract as provided in the Michigan education trust act,

 

21  1986 PA 316, MCL 390.1421 to 390.1442.

 

22        (iii) The amount of payment made under a contract with a

 

23  private sector investment manager that meets all of the following

 

24  criteria:

 

25        (A) The contract is certified and approved by the board of

 

26  directors of the Michigan education trust to provide equivalent

 

27  benefits and rights to purchasers and beneficiaries as an advance

 

 1  tuition payment contract as described in subparagraph (ii).

 

 2        (B) The contract applies only for a state institution of

 

 3  higher education as defined in the Michigan education trust act,

 

 4  1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior

 

 5  college in Michigan.

 

 6        (C) The contract provides for enrollment by the contract's

 

 7  qualified beneficiary in not less than 4 years after the date on

 

 8  which the contract is entered into.

 

 9        (D) The contract is entered into after either of the

 

10  following:

 

11        (I) The purchaser has had his or her offer to enter into an

 

12  advance tuition payment contract rejected by the board of

 

13  directors of the Michigan education trust, if the board

 

14  determines that the trust cannot accept an unlimited number of

 

15  enrollees upon an actuarially sound basis.

 

16        (II) The board of directors of the Michigan education trust

 

17  determines that the trust can accept an unlimited number of

 

18  enrollees upon an actuarially sound basis.

 

19        (k) (m) If an advance tuition payment contract under the

 

20  Michigan education trust act, 1986 PA 316, MCL 390.1421 to

 

21  390.1442, or another contract for which the payment was

 

22  deductible under subdivision (l) (j) is terminated and the

 

23  qualified beneficiary under that contract does not attend a

 

24  university, college, junior or community college, or other

 

25  institution of higher education, add the amount of a refund

 

26  received by the taxpayer as a result of that termination or the

 

27  amount of the deduction taken under subdivision (l) (j) for

 

 1  payment made under that contract, whichever is less.

 

 2        (l) (n) Deduct from the taxable income of a purchaser the

 

 3  amount included as income to the purchaser under the internal

 

 4  revenue code after the advance tuition payment contract entered

 

 5  into under the Michigan education trust act, 1986 PA 316, MCL

 

 6  390.1421 to 390.1442, is terminated because the qualified

 

 7  beneficiary attends an institution of postsecondary education

 

 8  other than either a state institution of higher education or an

 

 9  institution of postsecondary education located outside this state

 

10  with which a state institution of higher education has

 

11  reciprocity.

 

12        (m) (o) Add, to the extent deducted in determining adjusted

 

13  gross income, the net operating loss deduction under section 172

 

14  of the internal revenue code.

 

15        (n) (p) Deduct a net operating loss deduction for the

 

16  taxable year as determined under section 172 of the internal

 

17  revenue code subject to the modifications under section 172(b)(2)

 

18  of the internal revenue code and subject to the allocation and

 

19  apportionment provisions of chapter 3 of this act part for the

 

20  taxable year in which the loss was incurred.

 

21        (o) (q) Deduct, to the extent included in adjusted gross

 

22  income, benefits from a discriminatory self-insurance medical

 

23  expense reimbursement plan.

 

24        (p) (r) Beginning on and after January 1, 2007, subject to

 

25  any limitation provided in this subdivision, a taxpayer who is a

 

26  senior citizen may deduct to the extent included in adjusted

 

27  gross income, interest, dividends, and capital gains received in

 

 1  the tax year not to exceed $9,420.00 for a single return and

 

 2  $18,840.00 for a joint return. The maximum amounts allowed under

 

 3  this subdivision shall be reduced by the amount of a deduction

 

 4  claimed for retirement benefits under subdivision (e) or a

 

 5  deduction claimed under subdivision (f)(i), (ii), (iv), or (v). For

 

 6  the 2008 tax year and each tax year after 2008, the maximum

 

 7  amounts allowed under this subdivision shall be adjusted by the

 

 8  percentage increase in the United States consumer price index for

 

 9  the immediately preceding calendar year. The department shall

 

10  annualize the amounts provided in this subdivision as necessary.

 

11  Beginning January 1, 2012, the deduction under this subsection is

 

12  not available to a senior citizen born after 1945. As used in

 

13  this subdivision, "senior citizen" means that term as defined in

 

14  section 514.

 

15        (q) (s) Deduct, to the extent included in adjusted gross

 

16  income, all of the following:

 

17        (i) The amount of a refund received in the tax year based on

 

18  taxes paid under this act part.

 

19        (ii) The amount of a refund received in the tax year based on

 

20  taxes paid under the city income tax act, 1964 PA 284, MCL

 

21  141.501 to 141.787.

 

22        (iii) The amount of a credit received in the tax year based on

 

23  a claim filed under sections 520 and 522 to the extent that the

 

24  taxes used to calculate the credit were not used to reduce

 

25  adjusted gross income for a prior year.

 

26        (r) (t) Add the amount paid by the state on behalf of the

 

27  taxpayer in the tax year to repay the outstanding principal on a

 

 1  loan taken on which the taxpayer defaulted that was to fund an

 

 2  advance tuition payment contract entered into under the Michigan

 

 3  education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, if

 

 4  the cost of the advance tuition payment contract was deducted

 

 5  under subdivision (l) (j) and was financed with a Michigan

 

 6  education trust secured loan.

 

 7        (u) Deduct the amount calculated under section 30d.

 

 8        (s) (v) Deduct, to the extent included in adjusted gross

 

 9  income, any amount, and any interest earned on that amount,

 

10  received in the tax year by a taxpayer who is a Holocaust victim

 

11  as a result of a settlement of claims against any entity or

 

12  individual for any recovered asset pursuant to the German act

 

13  regulating unresolved property claims, also known as Gesetz zur

 

14  Regelung offener Vermogensfragen, as a result of the settlement

 

15  of the action entitled In re: Holocaust victim assets litigation,

 

16  CV-96-4849, CV-96-5161, and CV-97-0461 (E.D. NY), or as a result

 

17  of any similar action if the income and interest are not

 

18  commingled in any way with and are kept separate from all other

 

19  funds and assets of the taxpayer. As used in this subdivision:

 

20        (i) "Holocaust victim" means a person, or the heir or

 

21  beneficiary of that person, who was persecuted by Nazi Germany or

 

22  any Axis regime during any period from 1933 to 1945.

 

23        (ii) "Recovered asset" means any asset of any type and any

 

24  interest earned on that asset including, but not limited to, bank

 

25  deposits, insurance proceeds, or artwork owned by a Holocaust

 

26  victim during the period from 1920 to 1945, withheld from that

 

27  Holocaust victim from and after 1945, and not recovered,

 

 1  returned, or otherwise compensated to the Holocaust victim until

 

 2  after 1993.

 

 3        (t) (w) Deduct, to the extent not deducted in determining

 

 4  adjusted gross income, both of the following:

 

 5        (i) Contributions made by the taxpayer in the tax year less

 

 6  qualified withdrawals made in the tax year from education savings

 

 7  accounts, calculated on a per education savings account basis,

 

 8  pursuant to the Michigan education savings program act, 2000 PA

 

 9  161, MCL 390.1471 to 390.1486, not to exceed a total deduction of

 

10  $5,000.00 for a single return or $10,000.00 for a joint return

 

11  per tax year. The amount calculated under this subparagraph for

 

12  each education savings account shall not be less than zero.

 

13        (ii) The amount under section 30f.

 

14        (u) (x) Add, to the extent not included in adjusted gross

 

15  income, the amount of money withdrawn by the taxpayer in the tax

 

16  year from education savings accounts, not to exceed the total

 

17  amount deducted under subdivision (w) (t) in the tax year and all

 

18  previous tax years, if the withdrawal was not a qualified

 

19  withdrawal as provided in the Michigan education savings program

 

20  act, 2000 PA 161, MCL 390.1471 to 390.1486. This subdivision does

 

21  not apply to withdrawals that are less than the sum of all

 

22  contributions made to an education savings account in all

 

23  previous tax years for which no deduction was claimed under

 

24  subdivision (w), (t), less any contributions for which no

 

25  deduction was claimed under subdivision (w) (t) that were

 

26  withdrawn in all previous tax years.

 

27        (y) Deduct, to the extent included in adjusted gross income,

 

 1  the amount of a distribution from individual retirement accounts

 

 2  that qualify under section 408 of the internal revenue code if

 

 3  the distribution is used to pay qualified higher education

 

 4  expenses as that term is defined in the Michigan education

 

 5  savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.

 

 6        (z) Deduct, to the extent included in adjusted gross income,

 

 7  an amount equal to the qualified charitable distribution made in

 

 8  the tax year by a taxpayer to a charitable organization. The

 

 9  amount allowed under this subdivision shall be equal to the

 

10  amount deductible by the taxpayer under section 170 of the

 

11  internal revenue code with respect to the qualified charitable

 

12  distribution in the tax year in which the taxpayer makes the

 

13  distribution to the qualified charitable organization, reduced by

 

14  both the amount of the deduction for retirement or pension

 

15  benefits claimed by the taxpayer under subdivision (f)(i), (ii),

 

16  (iv), or (v) and by 2 times the total amount of credits claimed

 

17  under sections 260 and 261 for the tax year. As used in this

 

18  subdivision, "qualified charitable distribution" means a

 

19  distribution of assets to a qualified charitable organization by

 

20  a taxpayer not more than 60 days after the date on which the

 

21  taxpayer received the assets as a distribution from a retirement

 

22  or pension plan described in subsection (8)(a). A distribution is

 

23  to a qualified charitable organization if the distribution is

 

24  made in any of the following circumstances:

 

25        (i) To an organization described in section 501(c)(3) of the

 

26  internal revenue code except an organization that is controlled

 

27  by a political party, an elected official or a candidate for an

 

 1  elective office.

 

 2        (ii) To a charitable remainder annuity trust or a charitable

 

 3  remainder unitrust as defined in section 664(d) of the internal

 

 4  revenue code; to a pooled income fund as defined in section

 

 5  642(c)(5) of the internal revenue code; or for the issuance of a

 

 6  charitable gift annuity as defined in section 501(m)(5) of the

 

 7  internal revenue code. A trust, fund, or annuity described in

 

 8  this subparagraph is a qualified charitable organization only if

 

 9  no person holds any interest in the trust, fund, or annuity other

 

10  than 1 or more of the following:

 

11        (A) The taxpayer who received the distribution from the

 

12  retirement or pension plan.

 

13        (B) The spouse of an individual described in sub-

 

14  subparagraph (A).

 

15        (C) An organization described in section 501(c)(3) of the

 

16  internal revenue code.

 

17        (v) (aa) A taxpayer who is a resident tribal member may

 

18  deduct, to the extent included in adjusted gross income, all

 

19  nonbusiness income earned or received in the tax year and during

 

20  the period in which an agreement entered into between the

 

21  taxpayer's tribe and this state pursuant to section 30c of 1941

 

22  PA 122, MCL 205.30c, is in full force and effect. As used in this

 

23  subdivision:

 

24        (i) "Business income" means business income as defined in

 

25  section 4 and apportioned under chapter 3.

 

26        (ii) "Nonbusiness income" means nonbusiness income as defined

 

27  in section 14 and, to the extent not included in business income,

 

 1  all of the following:

 

 2        (A) All income derived from wages whether the wages are

 

 3  earned within the agreement area or outside of the agreement

 

 4  area.

 

 5        (B) All interest and passive dividends.

 

 6        (C) All rents and royalties derived from real property

 

 7  located within the agreement area.

 

 8        (D) All rents and royalties derived from tangible personal

 

 9  property, to the extent the personal property is utilized within

 

10  the agreement area.

 

11        (E) Capital gains from the sale or exchange of real property

 

12  located within the agreement area.

 

13        (F) Capital gains from the sale or exchange of tangible

 

14  personal property located within the agreement area at the time

 

15  of sale.

 

16        (G) Capital gains from the sale or exchange of intangible

 

17  personal property.

 

18        (H) All pension income and benefits including, but not

 

19  limited to, distributions from a 401(k) plan, individual

 

20  retirement accounts under section 408 of the internal revenue

 

21  code, or a defined contribution plan, or payments from a defined

 

22  benefit plan.

 

23        (I) All per capita payments by the tribe to resident tribal

 

24  members, without regard to the source of payment.

 

25        (J) All gaming winnings.

 

26        (iii) "Resident tribal member" means an individual who meets

 

27  all of the following criteria:

 

 1        (A) Is an enrolled member of a federally recognized tribe.

 

 2        (B) The individual's tribe has an agreement with this state

 

 3  pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in

 

 4  full force and effect.

 

 5        (C) The individual's principal place of residence is located

 

 6  within the agreement area as designated in the agreement under

 

 7  sub-subparagraph (B).

 

 8        (bb) For tax years that begin after December 31, 2006,

 

 9  deduct, to the extent included in adjusted gross income, all or a

 

10  portion of the gain, as determined under this section, realized

 

11  from an initial equity investment of not less than $100,000.00

 

12  made by the taxpayer before December 31, 2009, in a qualified

 

13  business, if an amount equal to the sum of the taxpayer's basis

 

14  in the investment as determined under the internal revenue code

 

15  plus the gain, or a portion of that amount, is reinvested in an

 

16  equity investment in a qualified business within 1 year after the

 

17  sale or disposition of the investment in the qualified business.

 

18  If the amount of the subsequent investment is less than the sum

 

19  of the taxpayer's basis from the prior equity investment plus the

 

20  gain from the prior equity investment, the amount of a deduction

 

21  under this section shall be reduced by the difference between the

 

22  sum of the taxpayer's basis from the prior equity investment plus

 

23  the gain from the prior equity investment and the subsequent

 

24  investment. As used in this subdivision:

 

25        (i) "Advanced automotive, manufacturing, and materials

 

26  technology" means any technology that involves 1 or more of the

 

27  following:

 

 1        (A) Materials with engineered properties created through the

 

 2  development of specialized process and synthesis technology.

 

 3        (B) Nanotechnology, including materials, devices, or systems

 

 4  at the atomic, molecular, or macromolecular level, with a scale

 

 5  measured in nanometers.

 

 6        (C) Microelectromechanical systems, including devices or

 

 7  systems integrating microelectronics with mechanical parts and a

 

 8  scale measured in micrometers.

 

 9        (D) Improvements to vehicle safety, vehicle performance,

 

10  vehicle production, or environmental impact, including, but not

 

11  limited to, vehicle equipment and component parts.

 

12        (E) Any technology that involves an alternative energy

 

13  vehicle or its components. "Alternative energy vehicle" means

 

14  that term as defined in section 2 of the Michigan next energy

 

15  authority act, 2002 PA 593, MCL 207.822.

 

16        (F) A new technology, device, or system that enhances or

 

17  improves the manufacturing process of wood, timber, or

 

18  agricultural-based products.

 

19        (G) Advanced computing or electronic device technology

 

20  related to technology described under this subparagraph.

 

21        (H) Design, engineering, testing, or diagnostics related to

 

22  technology described under this subparagraph.

 

23        (I) Product research and development related to technology

 

24  described under this subparagraph.

 

25        (ii) "Advanced computing" means any technology used in the

 

26  design and development of 1 or more of the following:

 

27        (A) Computer hardware and software.

 

 1        (B) Data communications.

 

 2        (C) Information technologies.

 

 3        (iii) "Alternative energy technology" means applied research

 

 4  or commercialization of new or next generation technology in 1 or

 

 5  more of the following:

 

 6        (A) Alternative energy technology as that term is defined in

 

 7  section 2 of the Michigan next energy authority act, 2002 PA 593,

 

 8  MCL 207.822.

 

 9        (B) Devices or systems designed and used solely for the

 

10  purpose of generating energy from agricultural crops, residue and

 

11  waste generated from the production and processing of

 

12  agricultural products, animal wastes, or food processing wastes,

 

13  not including a conventional gasoline or diesel fuel engine or a

 

14  retrofitted conventional gasoline or diesel fuel engine.

 

15        (C) A new technology, product, or system that permits the

 

16  utilization of biomass for the production of specialty,

 

17  commodity, or foundational chemicals or of novel or economical

 

18  commodity materials through the application of biotechnology that

 

19  minimizes, complements, or replaces reliance on petroleum for the

 

20  production.

 

21        (D) Advanced computing or electronic device technology

 

22  related to technology described under this subparagraph.

 

23        (E) Design, engineering, testing, or diagnostics related to

 

24  technology described under this subparagraph.

 

25        (F) Product research and development related to a technology

 

26  described under this subparagraph.

 

27        (iv) "Competitive edge technology" means 1 or more of the

 

 1  following:

 

 2        (A) Advanced automotive, manufacturing, and materials

 

 3  technology.

 

 4        (B) Alternative energy technology.

 

 5        (C) Homeland security and defense technology.

 

 6        (D) Life sciences technology.

 

 7        (v) "Electronic device technology" means any technology that

 

 8  involves microelectronics, semiconductors, electronic equipment,

 

 9  and instrumentation, radio frequency, microwave, and millimeter

 

10  electronics; optical and optic-electrical devices; or data and

 

11  digital communications and imaging devices.

 

12        (vi) "Homeland security and defense technology" means

 

13  technology that assists in the assessment of threats or damage to

 

14  the general population and critical infrastructure, protection

 

15  of, defense against, or mitigation of the effects of foreign or

 

16  domestic threats, disasters, or attacks, or support for crisis or

 

17  response management, including, but not limited to, 1 or more of

 

18  the following:

 

19        (A) Sensors, systems, processes, or equipment for

 

20  communications, identification and authentication, screening,

 

21  surveillance, tracking, and data analysis.

 

22        (B) Advanced computing or electronic device technology

 

23  related to technology described under this subparagraph.

 

24        (C) Aviation technology including, but not limited to,

 

25  avionics, airframe design, sensors, early warning systems, and

 

26  services related to the technology described in this

 

27  subparagraph.

 

 1        (D) Design, engineering, testing, or diagnostics related to

 

 2  technology described under this subparagraph.

 

 3        (E) Product research and development related to technology

 

 4  described under this subparagraph.

 

 5        (vii) "Life sciences technology" means any technology derived

 

 6  from life sciences intended to improve human health or the

 

 7  overall quality of human life, including, but not limited to,

 

 8  systems, processes, or equipment for drug or gene therapies,

 

 9  biosensors, testing, medical devices or instrumentation with a

 

10  therapeutic or diagnostic value, a pharmaceutical or other

 

11  product that requires United States food and drug administration

 

12  approval or registration prior to its introduction in the

 

13  marketplace and is a drug or medical device as defined by the

 

14  federal food, drug, and cosmetic act, 21 USC 301 to 399, or 1 or

 

15  more of the following:

 

16        (A) Advanced computing or electronic device technology

 

17  related to technology described under this subparagraph.

 

18        (B) Design, engineering, testing, or diagnostics related to

 

19  technology or the commercial manufacturing of technology

 

20  described under this subparagraph.

 

21        (C) Product research and development related to technology

 

22  described under this subparagraph.

 

23        (viii) "Life sciences" means science for the examination or

 

24  understanding of life or life processes, including, but not

 

25  limited to, all of the following:

 

26        (A) Bioengineering.

 

27        (B) Biomedical engineering.

 

 1        (C) Genomics.

 

 2        (D) Proteomics.

 

 3        (E) Molecular and chemical ecology.

 

 4        (F) Biotechnology, including any technology that uses living

 

 5  organisms, cells, macromolecules, microorganisms, or substances

 

 6  from living organisms to make or modify a product for useful

 

 7  purposes. Biotechnology or life sciences do not include any of

 

 8  the following:

 

 9        (I) Activities prohibited under section 2685 of the public

 

10  health code, 1978 PA 368, MCL 333.2685.

 

11        (II) Activities prohibited under section 2688 of the public

 

12  health code, 1978 PA 368, MCL 333.2688.

 

13        (III) Activities prohibited under section 2690 of the public

 

14  health code, 1978 PA 368, MCL 333.2690.

 

15        (IV) Activities prohibited under section 16274 of the public

 

16  health code, 1978 PA 368, MCL 333.16274.

 

17        (V) Stem cell research with human embryonic tissue.

 

18        (ix) "Qualified business" means a business that complies with

 

19  all of the following:

 

20        (A) The business is a seed or early stage business as

 

21  defined in section 3 of the Michigan early stage venture

 

22  investment act of 2003, 2003 PA 296, MCL 125.2233.

 

23        (B) The business has its headquarters in this state, is

 

24  domiciled in this state, or has a majority of its employees

 

25  working a majority of their time in this state.

 

26        (C) The business has a preinvestment valuation of less than

 

27  $10,000,000.00.

 

 1        (D) The business has been in existence less than 5 years.

 

 2  This sub-subparagraph does not apply to a business, the business

 

 3  activity of which is derived from research at an institution of

 

 4  higher education located within this state or an organization

 

 5  exempt from federal taxation under section 501c(3) of the

 

 6  internal revenue code and that is located within this state.

 

 7        (E) The business is engaged only in competitive edge

 

 8  technology.

 

 9        (F) The business is certified by the Michigan strategic fund

 

10  as meeting the requirements of sub-subparagraphs (A) to (E) at

 

11  the time of each proposed investment.

 

12        (w) For tax years beginning after December 31, 2011,

 

13  eliminate all of the following:

 

14        (i) Income from producing oil and gas to the extent included

 

15  in adjusted gross income.

 

16        (ii) Expenses of producing oil and gas to the extent deducted

 

17  in arriving at adjusted gross income.

 

18        (2) Except as otherwise provided in subsection (7), a

 

19  personal exemption of $2,500.00 $3,700.00 multiplied by the

 

20  number of personal or dependency exemptions allowable on the

 

21  taxpayer's federal income tax return pursuant to the internal

 

22  revenue code shall be subtracted in the calculation that

 

23  determines taxable income.

 

24        (3) Except as otherwise provided in subsection (7), a single

 

25  additional exemption determined as follows shall be subtracted in

 

26  the calculation that determines taxable income in each of the

 

27  following circumstances:

 

 1        (a) $1,800.00 for each taxpayer and every dependent of the

 

 2  taxpayer who is 65 years of age or older. When a dependent of a

 

 3  taxpayer files an annual return under this act, the taxpayer or

 

 4  dependent of the taxpayer, but not both, may claim the additional

 

 5  exemption allowed under this subdivision. As used in this

 

 6  subdivision and subdivision (c), "dependent" means that term as

 

 7  defined in section 30e.

 

 8        (a) (b) $1,800.00 for each taxpayer and every dependent of

 

 9  the taxpayer who is a deaf person as defined in section 2 of the

 

10  deaf persons' interpreters act, 1982 PA 204, MCL 393.502; a

 

11  paraplegic, a quadriplegic, or a hemiplegic; a person who is

 

12  blind as defined in section 504; or a person who is totally and

 

13  permanently disabled as defined in section 522. When a dependent

 

14  of a taxpayer files an annual return under this act, part, the

 

15  taxpayer or dependent of the taxpayer, but not both, may claim

 

16  the additional exemption allowed under this subdivision. As used

 

17  in this subdivision, "dependent" means that term as defined in

 

18  section 30e.

 

19        (c) $1,800.00 if the taxpayer's return includes unemployment

 

20  compensation that amounts to 50% or more of adjusted gross

 

21  income.

 

22        (b) (d) For tax years beginning after 2007, $250.00 for each

 

23  taxpayer and every dependent of the taxpayer who is a qualified

 

24  disabled veteran. When a dependent of a taxpayer files an annual

 

25  return under this act, part, the taxpayer or dependent of the

 

26  taxpayer, but not both, may claim the additional exemption

 

27  allowed under this subdivision. As used in this subdivision:

 

 1        (i) "Qualified disabled veteran" means a veteran with a

 

 2  service-connected disability.

 

 3        (ii) "Service-connected disability" means a disability

 

 4  incurred or aggravated in the line of duty in the active

 

 5  military, naval, or air service as described in 38 USC 101(16).

 

 6        (iii) "Veteran" means a person who served in the active

 

 7  military, naval, marine, coast guard, or air service and who was

 

 8  discharged or released from his or her service with an honorable

 

 9  or general discharge.

 

10        (4) An individual with respect to whom a deduction under

 

11  section 151 of the internal revenue code is allowable to another

 

12  federal taxpayer during the tax year is not considered to have an

 

13  allowable federal exemption for purposes of subsection (2), but

 

14  may subtract $1,500.00 in the calculation that determines taxable

 

15  income for a tax year.

 

16        (5) A nonresident or a part-year resident is allowed that

 

17  proportion of an exemption or deduction allowed under subsection

 

18  (2), (3), or (4) that the taxpayer's portion of adjusted gross

 

19  income from Michigan sources bears to the taxpayer's total

 

20  adjusted gross income.

 

21        (6) In calculating taxable income, a taxpayer shall not

 

22  subtract from adjusted gross income the amount of prizes won by

 

23  the taxpayer under the McCauley-Traxler-Law-Bowman-McNeely

 

24  lottery act, 1972 PA 239, MCL 432.1 to 432.47.

 

25        (7) For each tax year beginning on and after January 1,

 

26  2013, the personal exemption allowed under subsection (2) shall

 

27  be adjusted by multiplying the exemption for the tax year

 

 1  beginning in 1997 2012 by a fraction, the numerator of which is

 

 2  the United States consumer price index for the state fiscal year

 

 3  ending in the tax year prior to the tax year for which the

 

 4  adjustment is being made and the denominator of which is the

 

 5  United States consumer price index for the 1995-96 2010-2011

 

 6  state fiscal year. The resultant product shall be rounded to the

 

 7  nearest $100.00 increment. The personal exemption for the tax

 

 8  year shall be determined by adding $200.00 to that rounded

 

 9  amount. As used in this section, "United States consumer price

 

10  index" means the United States consumer price index for all urban

 

11  consumers as defined and reported by the United States department

 

12  of labor, bureau of labor statistics. For each tax year, the

 

13  exemptions allowed under subsection (3) shall be adjusted by

 

14  multiplying the exemption amount under subsection (3) for the tax

 

15  year by a fraction, the numerator of which is the United States

 

16  consumer price index for the state fiscal year ending the tax

 

17  year prior to the tax year for which the adjustment is being made

 

18  and the denominator of which is the United States consumer price

 

19  index for the 1998-1999 state fiscal year. The resultant product

 

20  shall be rounded to the nearest $100.00 increment. For a taxpayer

 

21  whose total household resources are $75,000.00 or more for a

 

22  single return or $150,000.00 or more for a joint return, the

 

23  personal exemption allowed under subsection (2) shall be adjusted

 

24  by multiplying the exemption for the tax year for a single return

 

25  by a fraction, the numerator of which is $100,000.00 minus the

 

26  taxpayer's total household resources, and the denominator of

 

27  which is $25,000.00, and for a joint return by a fraction, the

 

 1  numerator of which is $200,000.00 minus the taxpayer's total

 

 2  household resources, and the denominator of which is $50,000.00.

 

 3  The personal exemption allowed under subsection (2) shall not be

 

 4  allowed for a single taxpayer whose total household resources

 

 5  exceed $100,000.00 or for joint filers whose total household

 

 6  resources exceed $200,000.00.

 

 7        (8) As used in subsection (1)(f), "retirement or pension

 

 8  benefits" means distributions from all of the following:

 

 9        (a) Except as provided in subdivision (d), qualified pension

 

10  trusts and annuity plans that qualify under section 401(a) of the

 

11  internal revenue code, including all of the following:

 

12        (i) Plans for self-employed persons, commonly known as Keogh

 

13  or HR10 plans.

 

14        (ii) Individual retirement accounts that qualify under

 

15  section 408 of the internal revenue code if the distributions are

 

16  not made until the participant has reached 59-1/2 years of age,

 

17  except in the case of death, disability, or distributions

 

18  described by section 72(t)(2)(A)(iv) of the internal revenue code.

 

19        (iii) Employee annuities or tax-sheltered annuities purchased

 

20  under section 403(b) of the internal revenue code by

 

21  organizations exempt under section 501(c)(3) of the internal

 

22  revenue code, or by public school systems.

 

23        (iv) Distributions from a 401(k) plan attributable to

 

24  employee contributions mandated by the plan or attributable to

 

25  employer contributions.

 

26        (b) The following retirement and pension plans not qualified

 

27  under the internal revenue code:

 

 1        (i) Plans of the United States, state governments other than

 

 2  this state, and political subdivisions, agencies, or

 

 3  instrumentalities of this state.

 

 4        (ii) Plans maintained by a church or a convention or

 

 5  association of churches.

 

 6        (iii) All other unqualified pension plans that prescribe

 

 7  eligibility for retirement and predetermine contributions and

 

 8  benefits if the distributions are made from a pension trust.

 

 9        (c) Retirement or pension benefits received by a surviving

 

10  spouse if those benefits qualified for a deduction prior to the

 

11  decedent's death. Benefits received by a surviving child are not

 

12  deductible.

 

13        (d) Retirement and pension benefits do not include:

 

14        (i) Amounts received from a plan that allows the employee to

 

15  set the amount of compensation to be deferred and does not

 

16  prescribe retirement age or years of service. These plans

 

17  include, but are not limited to, all of the following:

 

18        (A) Deferred compensation plans under section 457 of the

 

19  internal revenue code.

 

20        (B) Distributions from plans under section 401(k) of the

 

21  internal revenue code other than plans described in subdivision

 

22  (a)(iv).

 

23        (C) Distributions from plans under section 403(b) of the

 

24  internal revenue code other than plans described in subdivision

 

25  (a)(iii).

 

26        (ii) Premature distributions paid on separation, withdrawal,

 

27  or discontinuance of a plan prior to the earliest date the

 

House Bill No. 4361 as amended May 12, 2011

 

 1  recipient could have retired under the provisions of the plan.

 

 2        (iii) Payments received as an incentive to retire early unless

 

 3  the distributions are from a pension trust.

 

 4        (9) In determining taxable income under this section, the

 

 5  following limitations and restrictions apply:

 

 6        (a) For a person born before 1946, this subsection provides

 

 7  no additional restrictions or limitations under subsection

 

 8  (1)(f).

 

 9        (b) For a person born in 1946 through 1952, the sum of the

 

10  deductions under subsection (1)(f)(i), (ii), and (iv) is limited to

 

11  $20,000.00 for a single return and $40,000.00 for a joint return.

 

12  After that person reaches the age of 67, the deductions under

 

13  subsection (1)(f)(i), (ii), and (iv) do not apply and that person is

 

14  eligible for a deduction of $20,000.00 for a single return and

 

15  $40,000.00 for a joint return, which deduction is available

 

16  against all types of income and is not restricted to income from

 

17  retirement or pension benefits. However if that person's total

 

18  household resources exceed $75,000.00 for a single return or

 

19  $150,000.00 for a joint return, that person is not eligible for a

 

20  deduction of $20,000.00 for a single return and $40,000.00 for a

 

21  joint return. A person that takes the deduction under subsection

 

22  (1)(e)<<    >> is not eligible for the unrestricted deduction of

 

23  $20,000.00 for a single return and $40,000.00 for a joint return

 

24  under this subdivision.

 

25        (c) For a person born after 1952, the deduction under

 

26  subsection (1)(f)(i), (ii), or (iv) does not apply. When that person

 

27  reaches the age of 67, that person is eligible for a deduction of

 

House Bill No. 4361 as amended May 12, 2011

 

 1  $20,000.00 for a single return and $40,000.00 for a joint return,

 

 2  which deduction is available against all types of income and is

 

 3  not restricted to income from retirement or pension benefits. If

 

 4  a person takes the deduction $20,000.00 for a single return and

 

 5  $40,000.00 for a joint return, that person shall not take the

 

 6  deduction under subsection (1)(f)(iii) and shall not take the

 

 7  personal exemption under subsection (2). That person may elect

 

 8  not to take the deduction of $20,000.00 for a single return and

 

 9  $40,000.00 for a joint return and elect to take the deduction

 

10  under subsection (1)(f)(iii) and the personal exemption under

 

11  subsection (2) if that election would reduce that person's tax

 

12  liability. However, if that person's total household resources

 

13  exceed $75,000.00 for a single return or $150,000.00 for a joint

 

14  return, that person is not eligible for a deduction of $20,000.00

 

15  for a single return and $40,000.00 for a joint return. A person

 

16  that takes the deduction under subsection (1)(e)<<   >> is not

 

17  eligible for the unrestricted deduction of $20,000.00 for a

 

18  single return and $40,000.00 for a joint return under this

 

19  subdivision.

 

20        (d) For a joint return, the limitations and restrictions in

 

21  this subsection shall be applied based on the age of the older

 

22  spouse filing the joint return.

 

23        (10) As used in this section:

 

24        (a) "Oil and gas" means oil and gas that is subject to

 

25  severance tax under 1929 PA 48, MCL 205.301 to 205.317.

 

26        (b) "Total household resources" means that term as defined

 

27  in chapter 9.

 

 1        Sec. 30f. For tax years that begin after December 31, 1999,

 

 2  taxable income for purposes of this act part equals taxable

 

 3  income as determined under section 30 with the following

 

 4  adjustments:

 

 5        (a) For tax years that begin after December 31, 1999,

 

 6  deduct, to the extent not deducted in determining adjusted gross

 

 7  income, interest earned in the tax year on the contributions to

 

 8  the taxpayer's education savings accounts if the contributions

 

 9  were deductible under section 30(1)(w)(i) 30(1)(t)(i).

 

10        (b) For tax years that begin after December 31, 1999,

 

11  deduct, to the extent included in adjusted gross income,

 

12  distributions that are qualified withdrawals from an education

 

13  savings account to the designated beneficiary of that education

 

14  savings account. As used in this subdivision, "qualified

 

15  withdrawal" means that term as defined in the Michigan education

 

16  savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.

 

17        Sec. 36. (1) "Taxable income" in the case of a resident

 

18  estate or trust means federal taxable income as defined in the

 

19  internal revenue code subject to the following adjustments:

 

20        (a) Add gross interest income and dividends derived from

 

21  obligations or securities of states other than Michigan, in the

 

22  same amount which has been excluded from federal taxable income

 

23  less related expenses not deducted in computing federal taxable

 

24  income because of section 265 of the internal revenue code.

 

25        (b) Add taxes on or measured by income to the extent the

 

26  taxes have been deducted in arriving at federal taxable income.

 

27        (c) Add losses on the sale or exchange of obligations of the

 

 1  United States government, the income of which this state is

 

 2  prohibited from subjecting to a net income tax, to the extent

 

 3  that the loss has been deducted in arriving at federal taxable

 

 4  income.

 

 5        (d) Deduct, to the extent included in federal taxable

 

 6  income, income derived from obligations, or the sale or exchange

 

 7  of obligations, of the United States government which this state

 

 8  is prohibited by law from subjecting to a net income tax, reduced

 

 9  by any interest on indebtedness incurred in carrying the

 

10  obligations, and by any expenses incurred in the production of

 

11  such income to the extent that the expenses, including

 

12  amortizable bond premiums, were deducted in arriving at federal

 

13  taxable income.

 

14        (e) Adjustments resulting from the application of section

 

15  271.

 

16        (f) Deduct an adjustment resulting from the allocation and

 

17  apportionment provisions of chapter 3.

 

18        (g) For tax years beginning after December 31, 2011,

 

19  eliminate all of the following:

 

20        (i) Income from producing oil and gas to the extent included

 

21  in federal taxable income.

 

22        (ii) Expenses of producing oil and gas to the extent deducted

 

23  in arriving at federal taxable income.

 

24        (2) The respective shares of an estate or trust and its

 

25  beneficiaries, including, solely for the purpose of this

 

26  allocation, nonresident beneficiaries, in the additions and

 

27  subtractions to taxable income shall be in proportion to their

 

 1  respective shares of distributable net income of the estate or

 

 2  trust as defined in the internal revenue code. If the estate or

 

 3  trust has no distributable net income for the taxable year, the

 

 4  share of each beneficiary in the additions and subtractions shall

 

 5  be in proportion to his or her share of the estate or trust

 

 6  income for the year, under local law or the terms of the

 

 7  instrument, which is required to be distributed currently and any

 

 8  other amounts of such income distributed in the year. Any balance

 

 9  of the additions and subtractions shall be allocated to the

 

10  estate or trust. If capital gains and losses are distributed or

 

11  distributable to a beneficiary or beneficiaries under the

 

12  internal revenue code, the fiduciary shall advise each

 

13  beneficiary of his or her share of the adjustment under section

 

14  271. The election or failure to elect under section 271 with

 

15  respect to capital gains and losses taxable to the estate or

 

16  trust shall not affect the beneficiary's right to elect or not to

 

17  elect under section 271.

 

18        (3) An addition or subtraction shall not be made under this

 

19  section which has the effect of duplicating an item of income or

 

20  deduction if the taxpayer establishes to the satisfaction of the

 

21  commissioner that the item is already reflected in federal

 

22  taxable income. If an addition or subtraction with respect to the

 

23  sale or exchange of obligations of the United States government

 

24  proper adjustment, in accordance with rules promulgated by the

 

25  commissioner department, of the deduction for excess of capital

 

26  gains over capital losses shall be made.

 

27        (4) As used in this section, "oil and gas" means oil and gas

 

 1  that is subject to severance tax under 1929 PA 48, MCL 205.301 to

 

 2  205.317.

 

 3        Sec. 51. (1) For receiving, earning, or otherwise acquiring

 

 4  income from any source whatsoever, there is levied and imposed

 

 5  under this part upon the taxable income of every person other

 

 6  than a corporation a tax at the following rates in the following

 

 7  circumstances:

 

 8        (a) Before May 1, 1994, 4.6%.

 

 9        (b) After April 30, 1994 and before January 1, 2000, 4.4%.

 

10        (c) For tax years that begin on and after January 1, 2000

 

11  and before January 1, 2002, 4.2%.

 

12        (d) For tax years that begin on and after January 1, 2002

 

13  and before January 1, 2003, 4.1%.

 

14        (e) On and after January 1, 2003 and before July 1, 2004,

 

15  4.0%.

 

16        (f) On and after July 1, 2004 and before October 1, 2007,

 

17  3.9%.

 

18        (g) On and after October 1, 2007 and before October 1, 2011,

 

19  January 1, 2013, 4.35%.

 

20        (h) Beginning on October 1, 2011 and each October 1 after

 

21  2011, the maximum rate under this subsection shall be reduced by

 

22  0.1 each year until the rate is 3.95%.and after January 1, 2013,

 

23  4.25%.

 

24        (i) On and after October 1, 2015, 3.9%.

 

25        (2) The following percentages of the net revenues collected

 

26  under this section shall be deposited in the state school aid

 

27  fund created in section 11 of article IX of the state

 

 1  constitution of 1963:

 

 2        (a) Beginning October 1, 1994 and before October 1, 1996,

 

 3  14.4% of the gross collections before refunds from the tax levied

 

 4  under this section.

 

 5        (b) After September 30, 1996 and before January 1, 2000,

 

 6  23.0% of the gross collections before refunds from the tax levied

 

 7  under this section.

 

 8        (c) Beginning January 1, 2000, that percentage of the gross

 

 9  collections before refunds from the tax levied under this section

 

10  that is equal to 1.012% divided by the income tax rate levied

 

11  under this section.

 

12        (3) The department shall annualize rates provided in

 

13  subsection (1) as necessary for tax years that end after April

 

14  30, 1994. The applicable annualized rate shall be imposed upon

 

15  the taxable income of every person other than a corporation for

 

16  those tax years.

 

17        (4) The taxable income of a nonresident shall be computed in

 

18  the same manner that the taxable income of a resident is

 

19  computed, subject to the allocation and apportionment provisions

 

20  of this act.part.

 

21        (5) A resident beneficiary of a trust whose taxable income

 

22  includes all or part of an accumulation distribution by a trust,

 

23  as defined in section 665 of the internal revenue code, shall be

 

24  allowed a credit against the tax otherwise due under this act

 

25  part. The credit shall be all or a proportionate part of any tax

 

26  paid by the trust under this act part for any preceding taxable

 

27  year that would not have been payable if the trust had in fact

 

 1  made distribution to its beneficiaries at the times and in the

 

 2  amounts specified in section 666 of the internal revenue code.

 

 3  The credit shall not reduce the tax otherwise due from the

 

 4  beneficiary to an amount less than would have been due if the

 

 5  accumulation distribution were excluded from taxable income.

 

 6        (6) The taxable income of a resident who is required to

 

 7  include income from a trust in his or her federal income tax

 

 8  return under the provisions of 26 USC 671 to 679, shall include

 

 9  items of income and deductions from the trust in taxable income

 

10  to the extent required by this act part with respect to property

 

11  owned outright.

 

12        (7) It is the intention of this section that the income

 

13  subject to tax of every person other than corporations shall be

 

14  computed in like manner and be the same as provided in the

 

15  internal revenue code subject to adjustments specifically

 

16  provided for in this act part.

 

17        (8) There is appropriated to the department of treasury for

 

18  the 2006-2007 state fiscal year the sum of $100,000.00 to begin

 

19  implementing the requirements of the amendatory act that added

 

20  this subsection. Any portion of this amount under this section

 

21  that is not expended in the 2006-2007 state fiscal year shall not

 

22  lapse to the general fund but shall be carried forward in a work

 

23  project account that is in compliance with section 451a of the

 

24  management and budget act, 1984 PA 431, MCL 18.1451a, for the

 

25  following state fiscal year.

 

26        (8) (9) As used in this section:

 

27        (a) "Person other than a corporation" means a resident or

 

 1  nonresident individual or any of the following:

 

 2        (i) A partner in a partnership as defined in the internal

 

 3  revenue code.

 

 4        (ii) A beneficiary of an estate or a trust as defined in the

 

 5  internal revenue code.

 

 6        (iii) An estate or trust as defined in the internal revenue

 

 7  code.

 

 8        (b) "Taxable income" means taxable income as defined in this

 

 9  act part subject to the applicable source and attribution rules

 

10  contained in this act part.

 

11        Sec. 52. For tax years beginning after 1986, a person with

 

12  respect to whom a deduction under section 151 of the internal

 

13  revenue code is allowable to another federal taxpayer during the

 

14  tax year is not considered to have an allowable federal exemption

 

15  for purposes of section 30(2) and, notwithstanding sections 51

 

16  and 315, if that person has an adjusted gross income for that tax

 

17  year of $1,500.00 or less, is exempt from the tax levied and

 

18  imposed in section 51 and is not required to file a return under

 

19  this act part.

 

20        Sec. 91. (1) A common trust fund meeting the requirements of

 

21  section 584 of the internal revenue code, shall not be subject to

 

22  tax under this act part.

 

23        (2) Each participant in the common trust fund shall, under

 

24  rules prescribed by the department, include its proportionate

 

25  share of the taxable income whether or not distributed and

 

26  whether or not distributable.

 

27        Sec. 102. In the case of taxable income of a taxpayer whose

 

 1  income-producing activities are confined solely to this state,

 

 2  the entire taxable income of such taxpayer shall be allocated to

 

 3  this state, except as otherwise expressly provided in this act

 

 4  part.

 

 5        Sec. 103. Any taxpayer having income from business activity

 

 6  which is taxable both within and without this state, other than

 

 7  the rendering of purely personal services by an individual, shall

 

 8  allocate and apportion his net income as provided in this act

 

 9  part.

 

10        Sec. 105. For purposes of allocation and apportionment of

 

11  income from business activity under this act part, a taxpayer is

 

12  taxable in another state if (a) in that state he is subject to a

 

13  net income tax, a franchise tax measured by net income, a

 

14  franchise tax for the privilege of doing business or a corporate

 

15  stock tax, or (b) that state has jurisdiction to subject the

 

16  taxpayer to a net income tax regardless of whether, in fact, the

 

17  state does or does not.

 

18        Sec. 110. (1) For a resident individual, estate, or trust,

 

19  all taxable income from any source whatsoever, except that

 

20  attributable to another state under sections 111 to 115 and

 

21  subject to section 255, is allocated to this state.

 

22        (2) For a nonresident individual, estate, or trust, all

 

23  taxable income is allocated to this state to the extent it is

 

24  earned, received, or acquired in 1 or more of the following ways:

 

25        (a) For the rendition of personal services performed in this

 

26  state.

 

27        (b) As a distributive share of the net profits of a

 

 1  business, profession, enterprise, undertaking, or other activity

 

 2  as the result of work done, services rendered, or other business

 

 3  activities conducted in this state, except as allocated to

 

 4  another state pursuant to sections 111 to 114 and subject to

 

 5  section 256.

 

 6        (c) For tax years beginning after 1996, as a prize won by

 

 7  the taxpayer under the McCauley-Traxler-Law-Bowman-McNeely

 

 8  lottery act, 1972 PA 239, MCL 432.1 to 432.47.

 

 9        (d) As winnings that are proceeds of a wagering transaction

 

10  paid on or after October 1, 2003 by a casino or as a payoff price

 

11  on a winning ticket that is the result of pari-mutuel wagering at

 

12  a licensed race meeting if the casino or licensed race meeting is

 

13  located in this state. As used in this section subdivision:

 

14        (i) "Casino" means a casino regulated by this state under the

 

15  Michigan gaming control and revenue act, the Initiated Law of

 

16  1996, 1996 IL 1, MCL 432.201 to 432.226, or a building on Native

 

17  American land or land held in trust by the United States for a

 

18  federally recognized Indian tribe on which gaming is conducted

 

19  under the Indian gaming regulatory act, Public Law 100-497, 102

 

20  Stat. Stat 2467.

 

21        (ii) "Pari-mutuel wagering" and "licensed race meeting" mean

 

22  those terms as used in the horse racing law of 1995, 1995 PA 279,

 

23  MCL 431.301 to 431.336.

 

24        (3) The respective shares of a nonresident estate or trust

 

25  and its beneficiaries, including, solely for purposes of

 

26  allocation, resident and nonresident beneficiaries, in the income

 

27  attributable to this state shall be in proportion to the

 

 1  respective shares of distributable net income of the

 

 2  beneficiaries under the internal revenue code. If the estate or

 

 3  trust has no distributable net income for the tax year, the share

 

 4  of each beneficiary in the income attributable to this state

 

 5  shall be in proportion to his or her share of the estate or trust

 

 6  income for that year, under local law or the terms of the

 

 7  instrument, that is required to be distributed currently and

 

 8  other amounts of the income distributed in the year. Any balance

 

 9  of the income attributable to this state shall be allocated to

 

10  the estate or trust.

 

11        (4) A nonresident estate or trust is allowed the credit

 

12  provided in section 256, except that the limitation shall be

 

13  computed by reference to the taxable income of the estate or

 

14  trust.

 

15        (4) (5) Rents and royalties from real or tangible personal

 

16  property, capital gains, interest, dividends, or patent or

 

17  copyright royalties, to the extent that they constitute a

 

18  nonbusiness income, shall be allocated as provided in sections

 

19  111 to 114.

 

20        Sec. 115. (1) All Before January 1, 2011, all business

 

21  income, other than income from transportation services, shall be

 

22  apportioned to this state by multiplying the income by a

 

23  fraction, the numerator of which is the property factor plus the

 

24  payroll factor plus the sales factor, and the denominator of

 

25  which is 3.

 

26        (2) After December 31, 2010, all business income, other than

 

27  income from transportation services, shall be apportioned to this

 

 1  state by multiplying the income by the sales factor calculated

 

 2  under section 121.

 

 3        Sec. 132. In the case of such taxable income other than that

 

 4  derived from the transportation of oil or gas by pipeline, that

 

 5  portion of the net income of the taxpayer derived from

 

 6  transportation services wherever performed that the revenue miles

 

 7  of the taxpayer in Michigan bear to the revenue miles of the

 

 8  taxpayer everywhere. A revenue mile means the transportation for

 

 9  a consideration or 1 net ton in weight or 1 passenger the

 

10  distance of 1 mile. The taxable income attributable to Michigan

 

11  sources in the case of a taxpayer engaged in the transportation

 

12  both of property and of individuals shall be that portion of the

 

13  entire net income of the taxpayer which is equal to the average

 

14  of his passenger miles and ton mile fractions, separately

 

15  computed and individually weighted by the ratio of gross receipts

 

16  from passenger transportation to total gross receipts from all

 

17  transportation, and by the ratio of gross receipts from freight

 

18  transportation to total gross receipts from all transportation,

 

19  respectively. If it is shown to the satisfaction of the

 

20  commissioner department that the foregoing information is not

 

21  available or cannot be obtained without unreasonable expense to

 

22  the taxpayer, the commissioner may use such other data which may

 

23  be available and which in the opinion of the commissioner

 

24  department will result in an equitable allocation of such

 

25  receipts to this state.

 

26        Sec. 195. (1) If the allocation and apportionment provisions

 

27  of this act part do not fairly represent the extent of the

 

 1  taxpayer's business activity in this state, the taxpayer may

 

 2  petition for or the commissioner department may require, in

 

 3  respect to all or any part of the taxpayer's business activity,

 

 4  if reasonable:

 

 5        (a) Separate accounting;

 

 6        (b) The exclusion of any one or more of the factors;

 

 7        (b) (c) The inclusion of 1 or more additional factors which

 

 8  will fairly represent the taxpayer's business activity in this

 

 9  state. ; or

 

10        (c) (d) The employment of any other method to effectuate an

 

11  equitable allocation and apportionment of the taxpayer's taxable

 

12  income.

 

13        (2) An alternative method will be effective only with

 

14  approval by the commissioner department.

 

15        Sec. 201. (1) A person who is exempt from federal income tax

 

16  pursuant to the provisions of the internal revenue code shall be

 

17  exempt from the tax imposed by this act part except the unrelated

 

18  taxable business income of an exempt person as determined under

 

19  the internal revenue code.

 

20        (2) Nothing in this section shall exempt a person from the

 

21  withholding and information return provisions of this act part.

 

22        Sec. 251. (1) The amount withheld under section 351 shall be

 

23  allowed to the recipient of the compensation as a credit against

 

24  the tax imposed on him or her by this act part.

 

25        (2) The amount so withheld during any calendar year shall be

 

26  allowed as a credit for the taxable year beginning in such

 

27  calendar year. If more than 1 taxable year begins in a calendar

 

 1  year, such amount shall be allowed as a credit for the last

 

 2  taxable year so beginning.

 

 3        Sec. 255. (1) A resident individual or resident estate or

 

 4  trust is allowed a credit against the tax due under this act part

 

 5  for the amount of an income tax imposed on the resident

 

 6  individual or resident estate or trust for the tax year by

 

 7  another state of the United States, a political subdivision of

 

 8  another state of the United States, the District of Columbia, or

 

 9  a Canadian province, on income derived from sources outside this

 

10  state that is also subject to tax under this act part or the

 

11  amount determined under subsection (3), whichever is less. For

 

12  purposes of the Canadian provincial credit, the credit is allowed

 

13  for only that portion of the provincial tax not claimed as a

 

14  credit for federal income tax purposes. It is presumed that the

 

15  Canadian federal income tax is claimed first. The provincial tax

 

16  claimed as a carryover deduction as provided in the internal

 

17  revenue code is not allowed as a credit under this section.

 

18        (2) The Canadian provincial credit shall be allowed for the

 

19  1978 tax year and for each tax year after 1978.

 

20        (3) The credit under this section shall not exceed an amount

 

21  determined by dividing income that is subject to taxation both in

 

22  this state and in another jurisdiction by taxable income and then

 

23  multiplying that result by the taxpayer's tax liability before

 

24  any credits are deducted.

 

25        Sec. 256. For a nonresident individual, estate, or trust, if

 

26  the laws of the state of residence exempt a resident of this

 

27  state from liability for the payment of income taxes on income

 

 1  earned for personal services performed in that state, the

 

 2  commissioner department may enter into a reciprocal agreement

 

 3  with that state to provide a similar tax exemption for that

 

 4  state's residents on income earned for personal services

 

 5  performed in this state.

 

 6        Sec. 265. (1) For the 1989 tax year and each tax year after

 

 7  1989, a taxpayer may credit against the tax imposed by this act

 

 8  part for the tax year an amount equal to the tax paid in any

 

 9  prior tax year attributable to income received by the taxpayer in

 

10  any prior tax year and repaid by the taxpayer during the tax year

 

11  if the taxpayer is eligible for a deduction or credit against his

 

12  or her federal tax liability pursuant to section 1341 of the

 

13  internal revenue code based on the repayment for the tax year. A

 

14  credit under this section for a tax year is allowed only if the

 

15  repayment for which a deduction or credit was taken pursuant to

 

16  section 1341 of the internal revenue code is not deducted in

 

17  calculating the taxpayer's adjusted gross income for the tax

 

18  year.

 

19        (2) If the credit allowed under this section exceeds the tax

 

20  liability of the taxpayer for the tax year, that portion of the

 

21  credit that exceeds the tax liability shall be refunded.

 

22        Sec. 266. (1) A qualified taxpayer with a rehabilitation

 

23  plan certified after December 31, 1998 and before January 1, 2012

 

24  may credit against the tax imposed by this act part the amount

 

25  determined pursuant to subsection (2) for the qualified

 

26  expenditures for the rehabilitation of a historic resource

 

27  pursuant to the rehabilitation plan in the year in which the

 

 1  certification of completed rehabilitation of the historic

 

 2  resource is issued. Only those expenditures that are paid or

 

 3  incurred during the time periods prescribed for the credit under

 

 4  section 47(a)(2) of the internal revenue code and any related

 

 5  treasury regulations shall be considered qualified expenditures.

 

 6        (2) The credit allowed under this section shall be 25% of

 

 7  the qualified expenditures that are eligible, or would have been

 

 8  eligible except that the taxpayer elected to transfer the credit

 

 9  under subsection (12), for the credit under section 47(a)(2) of

 

10  the internal revenue code if the taxpayer is eligible for the

 

11  credit under section 47(a)(2) of the internal revenue code or, if

 

12  the taxpayer is not eligible for the credit under section

 

13  47(a)(2) of the internal revenue code, 25% of the qualified

 

14  expenditures that would qualify under section 47(a)(2) of the

 

15  internal revenue code except that the expenditures are made to a

 

16  historic resource that is not eligible for the credit under

 

17  section 47(a)(2) of the internal revenue code, subject to both of

 

18  the following:

 

19        (a) A taxpayer with qualified expenditures that are eligible

 

20  for the credit under section 47(a)(2) of the internal revenue

 

21  code may not claim a credit under this section for those

 

22  qualified expenditures unless the taxpayer has claimed and

 

23  received a credit for those qualified expenditures under section

 

24  47(a)(2) of the internal revenue code or the taxpayer has elected

 

25  to transfer the credit under subsection (12).

 

26        (b) A credit under this section shall be reduced by the

 

27  amount of a credit received by the taxpayer for the same

 

 1  qualified expenditures under section 47(a)(2) of the internal

 

 2  revenue code.

 

 3        (3) To be eligible for the credit under this section, the

 

 4  taxpayer shall apply to and receive from the Michigan historical

 

 5  center certification state housing development authority that the

 

 6  historic significance, the rehabilitation plan, and the completed

 

 7  rehabilitation of the historic resource meet the criteria under

 

 8  subsection (6) and either of the following:

 

 9        (a) All of the following criteria:

 

10        (i) The historic resource contributes to the significance of

 

11  the historic district in which it is located.

 

12        (ii) Both the rehabilitation plan and completed

 

13  rehabilitation of the historic resource meet the federal

 

14  secretary of the interior's standards for rehabilitation and

 

15  guidelines for rehabilitating historic buildings, 36 CFR part 67.

 

16        (iii) All rehabilitation work has been done to or within the

 

17  walls, boundaries, or structures of the historic resource or to

 

18  historic resources located within the property boundaries of the

 

19  resource.

 

20        (b) The taxpayer has received certification from the

 

21  national park service that the historic resource's significance,

 

22  the rehabilitation plan, and the completed rehabilitation qualify

 

23  for the credit allowed under section 47(a)(2) of the internal

 

24  revenue code.

 

25        (4) If a qualified taxpayer is eligible for the credit

 

26  allowed under section 47(a)(2) of the internal revenue code, the

 

27  qualified taxpayer shall file for certification with the center

 

 1  authority to qualify for the credit allowed under section

 

 2  47(a)(2) of the internal revenue code. If the qualified taxpayer

 

 3  has previously filed for certification with the center authority

 

 4  to qualify for the credit allowed under section 47(a)(2) of the

 

 5  internal revenue code, additional filing for the credit allowed

 

 6  under this section is not required.

 

 7        (5) The center authority may inspect a historic resource at

 

 8  any time during the rehabilitation process and may revoke

 

 9  certification of completed rehabilitation if the rehabilitation

 

10  was not undertaken as represented in the rehabilitation plan or

 

11  if unapproved alterations to the completed rehabilitation are

 

12  made during the 5 years after the tax year in which the credit

 

13  was claimed. The center authority shall promptly notify the

 

14  department of a revocation.

 

15        (6) Qualified expenditures for the rehabilitation of a

 

16  historic resource may be used to calculate the credit under this

 

17  section if the historic resource meets 1 of the criteria listed

 

18  in subdivision (a) and 1 of the criteria listed in subdivision

 

19  (b):

 

20        (a) The resource is 1 of the following during the tax year

 

21  in which a credit under this section is claimed for those

 

22  qualified expenditures:

 

23        (i) Individually listed on the national register of historic

 

24  places or state register of historic sites.

 

25        (ii) A contributing resource located within a historic

 

26  district listed on the national register of historic places or

 

27  the state register of historic sites.

 

 1        (iii) A contributing resource located within a historic

 

 2  district designated by a local unit pursuant to an ordinance

 

 3  adopted under the local historic districts act, 1970 PA 169, MCL

 

 4  399.201 to 399.215.

 

 5        (b) The resource meets 1 of the following criteria during

 

 6  the tax year in which a credit under this section is claimed for

 

 7  those qualified expenditures:

 

 8        (i) The historic resource is located in a designated historic

 

 9  district in a local unit of government with an existing ordinance

 

10  under the local historic districts act, 1970 PA 169, MCL 399.201

 

11  to 399.215.

 

12        (ii) The historic resource is located in an incorporated

 

13  local unit of government that does not have an ordinance under

 

14  the local historic districts act, 1970 PA 169, MCL 399.201 to

 

15  399.215, and has a population of less than 5,000.

 

16        (iii) The historic resource is located in an unincorporated

 

17  local unit of government.

 

18        (iv) The historic resource is located in an incorporated

 

19  local unit of government that does not have an ordinance under

 

20  the local historic districts act, 1970 PA 169, MCL 399.201 to

 

21  399.215, and is located within the boundaries of an association

 

22  that has been chartered under 1889 PA 39, MCL 455.51 to 455.72.

 

23        (v) The historic resource is subject to a historic

 

24  preservation easement.

 

25        (7) A credit amount assigned under section 39c(7) of former

 

26  1975 PA 228 or section 435 of the Michigan business tax act, 2007

 

27  PA 36, MCL 208.1435, may be claimed against the partner's,

 

 1  member's, or shareholder's tax liability under this act part as

 

 2  provided in section 39c(7) of former 1975 PA 228 or section 435

 

 3  of the Michigan business tax act, 2007 PA 36, MCL 208.1435.

 

 4        (8) If the credit allowed under this section for the tax

 

 5  year and any unused carryforward of the credit allowed by this

 

 6  section exceed the taxpayer's tax liability for the tax year,

 

 7  that portion that exceeds the tax liability for the tax year

 

 8  shall not be refunded but may be carried forward to offset tax

 

 9  liability in subsequent tax years for 10 years or until used up,

 

10  whichever occurs first. For projects for which a certificate of

 

11  completed rehabilitation is issued for a tax year beginning after

 

12  December 31, 2008 and for which the credit amount allowed is less

 

13  than $250,000.00, a qualified taxpayer may elect to forgo the

 

14  carryover period and receive a refund of the amount of the credit

 

15  that exceeds the qualified taxpayer's tax liability. The amount

 

16  of the refund shall be equal to 90% of the amount of the credit

 

17  that exceeds the qualified taxpayer's tax liability. An election

 

18  under this subsection shall be made in the year that a

 

19  certificate of completed rehabilitation is issued and shall be

 

20  irrevocable.

 

21        (9) For tax years beginning before January 1, 2009, if a

 

22  taxpayer sells a historic resource for which a credit under this

 

23  section was claimed less than 5 years after the year in which the

 

24  credit was claimed, the following percentage of the credit amount

 

25  previously claimed relative to that historic resource shall be

 

26  added back to the tax liability of the taxpayer in the year of

 

27  the sale:

 

 1        (a) If the sale is less than 1 year after the year in which

 

 2  the credit was claimed, 100%.

 

 3        (b) If the sale is at least 1 year but less than 2 years

 

 4  after the year in which the credit was claimed, 80%.

 

 5        (c) If the sale is at least 2 years but less than 3 years

 

 6  after the year in which the credit was claimed, 60%.

 

 7        (d) If the sale is at least 3 years but less than 4 years

 

 8  after the year in which the credit was claimed, 40%.

 

 9        (e) If the sale is at least 4 years but less than 5 years

 

10  after the year in which the credit was claimed, 20%.

 

11        (f) If the sale is 5 years or more after the year in which

 

12  the credit was claimed, an addback to the taxpayer's tax

 

13  liability shall not be made.

 

14        (10) For tax years beginning before January 1, 2009, if a

 

15  certification of completed rehabilitation is revoked under

 

16  subsection (5) less than 5 years after the year in which a credit

 

17  was claimed, the following percentage of the credit amount

 

18  previously claimed relative to that historic resource shall be

 

19  added back to the tax liability of the taxpayer in the year of

 

20  the revocation:

 

21        (a) If the revocation is less than 1 year after the year in

 

22  which the credit was claimed, 100%.

 

23        (b) If the revocation is at least 1 year but less than 2

 

24  years after the year in which the credit was claimed, 80%.

 

25        (c) If the revocation is at least 2 years but less than 3

 

26  years after the year in which the credit was claimed, 60%.

 

27        (d) If the revocation is at least 3 years but less than 4

 

 1  years after the year in which the credit was claimed, 40%.

 

 2        (e) If the revocation is at least 4 years but less than 5

 

 3  years after the year in which the credit was claimed, 20%.

 

 4        (f) If the revocation is 5 years or more after the year in

 

 5  which the credit was claimed, an addback to the taxpayer's tax

 

 6  liability shall not be made.

 

 7        (11) For tax years beginning after December 31, 2008, if a

 

 8  certificate of completed rehabilitation is revoked under

 

 9  subsection (5) or if the historic resource is sold or disposed of

 

10  less than 5 years after being placed in service as defined in

 

11  section 47(b)(1) of the internal revenue code and related

 

12  treasury regulations, the following percentage of the credit

 

13  amount previously claimed relative to that historic resource

 

14  shall be added back to the tax liability of the qualified

 

15  taxpayer that received the certificate of completed

 

16  rehabilitation and not the assignee in the year of the

 

17  revocation:

 

18        (a) If the revocation is less than 1 year after the historic

 

19  resource is placed in service, 100%.

 

20        (b) If the revocation is at least 1 year but less than 2

 

21  years after the historic resource is placed in service, 80%.

 

22        (c) If the revocation is at least 2 years but less than 3

 

23  years after the historic resource is placed in service, 60%.

 

24        (d) If the revocation is at least 3 years but less than 4

 

25  years after the historic resource is placed in service, 40%.

 

26        (e) If the revocation is at least 4 years but less than 5

 

27  years after the historic resource is placed in service, 20%.

 

 1        (f) If the revocation is at least 5 years or more after the

 

 2  historic resource is placed in service, an addback to the

 

 3  qualified taxpayer tax liability shall not be required.

 

 4        (12) A qualified taxpayer who receives a certificate of

 

 5  completed rehabilitation after December 31, 2008 may elect to

 

 6  forgo claiming the credit and transfer the credit along with the

 

 7  ownership of the property for which the credit may be claimed to

 

 8  a new owner. The new owner shall be treated as the qualified

 

 9  taxpayer having incurred the rehabilitation costs and shall be

 

10  subject to the recapture provisions under subsection (11) if the

 

11  new owner sells or disposes of the property within 5 years after

 

12  the new owner acquired the property. For purposes of this

 

13  subsection and subsection (11), the placed in service date for a

 

14  new owner is the date the new owner acquired the property for

 

15  which the credit is claimed.

 

16        (13) The department of history, arts, and libraries through

 

17  the Michigan historical center authority may impose a fee to

 

18  cover the administrative cost of implementing the program under

 

19  this section.

 

20        (14) The qualified taxpayer shall attach all of the

 

21  following to the qualified taxpayer's annual return under this

 

22  act part:

 

23        (a) Certification of completed rehabilitation.

 

24        (b) Certification of historic significance related to the

 

25  historic resource and the qualified expenditures used to claim a

 

26  credit under this section.

 

27        (c) A completed assignment form if the qualified taxpayer is

 

 1  an assignee under section 39c of former 1975 PA 228 or section

 

 2  435 of the Michigan business tax act, 2007 PA 36, MCL 208.1435,

 

 3  of any portion of a credit allowed under that section.

 

 4        (15) The department of history, arts, and libraries shall

 

 5  authority may promulgate rules to implement this section pursuant

 

 6  to the administrative procedures act of 1969, 1969 PA 306, MCL

 

 7  24.201 to 24.328.

 

 8        (16) The total of the credits claimed under this section and

 

 9  section 39c of former 1975 PA 228 or section 435 of the Michigan

 

10  business tax act, 2007 PA 36, MCL 208.1435, for a rehabilitation

 

11  project shall not exceed 25% of the total qualified expenditures

 

12  eligible for the credit under this section for that

 

13  rehabilitation project.

 

14        (17) The department of history, arts, and libraries through

 

15  the Michigan historical center authority shall report all of the

 

16  following to the legislature annually for the immediately

 

17  preceding state fiscal year:

 

18        (a) The fee schedule used by the center and the total amount

 

19  of fees collected.

 

20        (b) A description of each rehabilitation project certified.

 

21        (c) The location of each new and ongoing rehabilitation

 

22  project.

 

23        (18) As used in this section:

 

24        (a) "Contributing resource" means a historic resource that

 

25  contributes to the significance of the historic district in which

 

26  it is located.

 

27        (b) "Historic district" means an area, or group of areas not

 

 1  necessarily having contiguous boundaries, that contains 1

 

 2  resource or a group of resources that are related by history,

 

 3  architecture, archaeology, engineering, or culture.

 

 4        (c) "Historic resource" means a publicly or privately owned

 

 5  historic building, structure, site, object, feature, or open

 

 6  space located within a historic district designated by the

 

 7  national register of historic places, the state register of

 

 8  historic sites, or a local unit acting under the local historic

 

 9  districts act, 1970 PA 169, MCL 399.201 to 399.215; or that is

 

10  individually listed on the state register of historic sites or

 

11  national register of historic places and includes all of the

 

12  following:

 

13        (i) An owner-occupied personal residence or a historic

 

14  resource located within the property boundaries of that personal

 

15  residence.

 

16        (ii) An income-producing commercial, industrial, or

 

17  residential resource or a historic resource located within the

 

18  property boundaries of that resource.

 

19        (iii) A resource owned by a governmental body, nonprofit

 

20  organization, or tax-exempt entity that is used primarily by a

 

21  taxpayer lessee in a trade or business unrelated to the

 

22  governmental body, nonprofit organization, or tax-exempt entity

 

23  and that is subject to tax under this act part.

 

24        (iv) A resource that is occupied or utilized by a

 

25  governmental body, nonprofit organization, or tax-exempt entity

 

26  pursuant to a long-term lease or lease with option to buy

 

27  agreement.

 

 1        (v) Any other resource that could benefit from

 

 2  rehabilitation.

 

 3        (d) "Local unit" means a county, city, village, or township.

 

 4        (e) "Long-term lease" means a lease term of at least 27.5

 

 5  years for a residential resource or at least 31.5 years for a

 

 6  nonresidential resource.

 

 7        (f) "Michigan historical center" or "center" means the state

 

 8  historic preservation office of the Michigan historical center of

 

 9  the department of history, arts, and libraries or its successor

 

10  agency. "Michigan state housing development authority" or

 

11  "authority" means the public body corporate and politic created

 

12  by section 21 of the state housing development authority act of

 

13  1966, MCL 1966 PA 346, MCL 125.1421.

 

14        (g) "Open space" means undeveloped land, a naturally

 

15  landscaped area, or a formal or man-made landscaped area that

 

16  provides a connective link or a buffer between other resources.

 

17        (h) "Person" means an individual, partnership, corporation,

 

18  association, governmental entity, or other legal entity.

 

19        (i) "Qualified expenditures" means capital expenditures that

 

20  qualify, or would qualify except that the taxpayer elected to

 

21  transfer the credit under subsection (12), for a rehabilitation

 

22  credit under section 47(a)(2) of the internal revenue code if the

 

23  taxpayer is eligible for the credit under section 47(a)(2) of the

 

24  internal revenue code or, if the taxpayer is not eligible for the

 

25  credit under section 47(a)(2) of the internal revenue code, the

 

26  qualified expenditures that would qualify under section 47(a)(2)

 

27  of the internal revenue code except that the expenditures are

 

 1  made to a historic resource that is not eligible for the credit

 

 2  under section 47(a)(2) of the internal revenue code, that were

 

 3  paid. Qualified expenditures do not include capital expenditures

 

 4  for nonhistoric additions to a historic resource except an

 

 5  addition that is required by state or federal regulations that

 

 6  relate to historic preservation, safety, or accessibility.

 

 7        (j) "Qualified taxpayer" means a person that is an assignee

 

 8  under section 39c of former 1975 PA 228 or section 435 of the

 

 9  Michigan business tax act, 2007 PA 36, MCL 208.1435, or either

 

10  owns the resource to be rehabilitated or has a long-term lease

 

11  agreement with the owner of the historic resource and that has

 

12  qualified expenditures for the rehabilitation of the historic

 

13  resource equal to or greater than 10% of the state equalized

 

14  valuation of the property. If the historic resource to be

 

15  rehabilitated is a portion of a historic or nonhistoric resource,

 

16  the state equalized valuation of only that portion of the

 

17  property shall be used for purposes of this subdivision. If the

 

18  assessor for the local tax collecting unit in which the historic

 

19  resource is located determines the state equalized valuation of

 

20  that portion, that assessor's determination shall be used for

 

21  purposes of this subdivision. If the assessor does not determine

 

22  that state equalized valuation of that portion, qualified

 

23  expenditures, for purposes of this subdivision, shall be equal to

 

24  or greater than 5% of the appraised value as determined by a

 

25  certified appraiser. If the historic resource to be rehabilitated

 

26  does not have a state equalized valuation, qualified expenditures

 

27  for purposes of this subdivision shall be equal to or greater

 

 1  than 5% of the appraised value of the resource as determined by a

 

 2  certified appraiser.

 

 3        (k) "Rehabilitation plan" means a plan for the

 

 4  rehabilitation of a historic resource that meets the federal

 

 5  secretary of the interior's standards for rehabilitation and

 

 6  guidelines for rehabilitation of historic buildings under 36 CFR

 

 7  part 67.

 

 8        Sec. 270. (1) For tax years that begin after December 31,

 

 9  2008, a taxpayer to whom a tax voucher certificate is issued

 

10  under an agreement entered into before January 1, 2012 or a

 

11  taxpayer that is the transferee of a tax voucher certificate that

 

12  is issued under an agreement entered into before January 1, 2012

 

13  may use the tax voucher certificate to pay any liability of the

 

14  taxpayer under section 51 or to pay any amount owed by the

 

15  taxpayer under section 351.

 

16        (2) A tax voucher certificate shall be used for the purposes

 

17  allowed under subsection (1) and only in a tax year that begins

 

18  after December 31, 2008.

 

19        (3) The amount of the tax voucher that may be used to pay a

 

20  liability due under this act part in any tax year shall not

 

21  exceed the lesser of the following:

 

22        (a) The amount of the tax voucher stated in the tax voucher

 

23  certificate held by the taxpayer.

 

24        (b) The amount authorized to be used in the tax year under

 

25  the terms of the tax voucher certificate.

 

26        (c) The taxpayer's liability under this act part for the tax

 

27  year for which the tax voucher is used.

 

 1        (4) If the amount of any tax voucher certificate held by a

 

 2  taxpayer or transferee exceeds the amount the taxpayer may use

 

 3  under subsection (3)(b) or (c) in a tax year, that excess may be

 

 4  used by the taxpayer or transferee to pay, subject to the

 

 5  limitations of subsection (3), any future liability of the

 

 6  taxpayer or transferee under this act part.

 

 7        (5) The tax voucher certificate, and any completed transfer

 

 8  form that was issued pursuant to the Michigan early stage venture

 

 9  investment act of 2003, 2003 PA 296, MCL 125.2231 to 125.2263,

 

10  shall be attached to the annual return under this act part. The

 

11  department may prescribe and implement alternative methods of

 

12  reporting and recording ownership, transfer, and utilization of

 

13  tax voucher certificates that are not inconsistent with the

 

14  provisions of this act. The department shall administer this

 

15  section to assure that any amount of a tax voucher certificate

 

16  used to pay any liability under this act part shall not also be

 

17  applied to pay any liability of the taxpayer or any other person

 

18  under the Michigan business tax act, 2007 PA 36, MCL 208.1101 to

 

19  208.1601. The department shall take any action necessary to

 

20  enforce and effectuate the permissible issuance and use of tax

 

21  voucher certificates in a manner authorized under this section

 

22  and the Michigan early stage venture investment act of 2003, 2003

 

23  PA 296, MCL 125.2231 to 125.2263.

 

24        (6) As used in this section:

 

25        (a) "Certificate" or "tax voucher certificate" means the tax

 

26  voucher certificate issued under section 23 of the Michigan early

 

27  stage venture capital investment act of 2003, 2003 PA 296, MCL