REVISE “QUALIFIED RENAISSANCE ZONE”

FOR INCOME TAX DEDUCTION

Senate Bill 623 as passed by the Senate

Sponsor:  Sen. Ken Horn

House Committee:  Tax Policy

Senate Committee:  Finance

Complete to 2-20-18

SUMMARY:

Senate Bill 623 would amend the Income Tax Act to change the definition of “qualified renaissance zone” for purposes of allowing an income tax deduction for a resident of a renaissance zone.

Currently under the act, a taxpayer can deduct, to the extent included in adjust gross income, income earned or received while a resident of a qualified renaissance zone, including interest, dividends, capital gains, and online lottery winnings, with some restrictions. The taxpayer must be a resident of the zone for 183 consecutive days and have a gross income of less than $1.0 million for any tax year in which the deduction is made.

The act defines qualified renaissance zone as only those geographic areas in a renaissance zone that were designated as a renaissance zone under the Michigan Renaissance Zone Act before January 1, 2012, and does not include any portion of a renaissance zone for which an extension or renewal is approved after December 31, 2011.

SB 623 would add an extension or renewal granted under section 4(8) of the Michigan Renaissance Zone Act to the definition of “qualified renaissance zone.” That is, under the bill, a zone or portion of a zone whose renaissance zone status was extended or renewed under section 4(8) of the Michigan Renaissance Zone Act would be a qualified renaissance zone, and its taxpayers would be eligible for the income tax deduction.

Section 4(8) of the Michigan Renaissance Zone Act (MCL 125.2684) allows for a possible 8-year extension of renaissance zone status for a zone that meets certain criteria. Specifically, the zone is required to have an existing 7-year extension and be located in a county with a population of more than 190,000 and less than 240,000. This applies to Saginaw County.

MCL 206.31a

FISCAL IMPACT:

The provisions of the bill would reduce individual income tax revenues by an unknown, but likely negligible, amount. Any reduction in revenues would be entirely borne by the general fund because the Michigan Renaissance Zone Act requires the state to reimburse the School Aid Fund for all revenues lost as a result of the establishment of renaissance zones. The fiscal impact would depend upon the specific characteristics of the taxpayers affected. 

The bill would authorize continued eligibility for the renaissance zone income tax exemption consistent with changes made under 2014 PA 27. Under that act, a qualified local governmental unit in Saginaw County was authorized to seek an 8-year extension of the renaissance zone status in addition to the previously granted 7-year extension. This bill would ensure that the exemption would apply for the entire extension.

                                                                                        Legislative Analyst:   Patrick Morris

                                                                                                Fiscal Analyst:   Ben Gielczyk

■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.