S.B. 466: COMMITTEE SUMMARY SBT CREDIT: RESEARCH & DEVELOPMENT
Senate Bill 466
Sponsor: Senator Bill Schuette
Committee: Economic Development, International Affairs, and Regulatory Affairs Date Completed: 5-24-95
The bill would amend the Single Business Tax Act to specify that for tax years beginning after January 1, 1995, a taxpayer could claim a single business tax (SBT) credit for qualified research and development expenses.
Specifically, the SBT credit would be 5% of the amount determined by subtracting the credit year qualified research and development percentage from the base year qualified research and development percentage and then multiplying the resulting percentage by the base year qualified research and development expenses. (This calculation is referred to below as formula #1.)
For a taxpayer who had not claimed a research and development credit under the Internal Revenue Code for the five years immediately preceding the tax year in which the taxpayer first claimed an SBT credit, the SBT credit would be determined as follows:
-- For the first year, the credit would equal 10% of the taxpayer’s credit year qualified research and development expenses.
-- For the second year, the credit would be 11% of those expenses.
-- For the third year, the credit would be 12% of the expenses.
-- For the fourth year, the credit would have to be determined using formula #1 except that the base year qualified research and development percentage and the base year qualified research and development amount would have to be determined using the three years immediately preceding the credit year.
-- For the fifth year, the credit would have to be determined using formula #1 except that the base year qualified research and development percentage and the base year qualified research and development amount would have to be determined using the four years immediately preceding the credit year.
For a taxpayer who claimed a research and development credit under the Internal Revenue Code for one or more of the five years immediately preceding the first year in which the taxpayer claimed an SBT credit, the SBT credit would have to be determined as if the years for which the Federal credit was claimed were years for which an SBT credit was claimed.
If the SBT credit for the tax year and any unused carryforward of the credit exceeded the taxpayer’s tax liability for the tax year, the excess portion could not be refunded, but could be carried forward to offset tax liability in subsequent tax years for 10 years or until exhausted, whichever occurred first.
“Base year qualified research and development expenses” would mean the qualified research and development expenses of the taxpayer for the five years immediately preceding the credit year divided by five. “Base year qualified research and development percentage” would mean the qualified research and development expenses of the taxpayer for the five years immediately preceding the credit year divided by the gross receipts of the taxpayer for that same period. “Credit year” would mean a year in which a credit under the bill was claimed. “Credit year qualified research and development expenses” would mean qualified research and development expenses of the taxpayer for the year in which an SBT credit was claimed. “Credit year qualified research and development percentage” would mean qualified research and development expenses of the taxpayer for the year in which an SBT credit was claimed divided by the gross receipts of the taxpayer for the same year. “Qualified research and development” would mean qualified research, and “qualified research and development expenses” would mean qualified research expenses, as defined in the Internal Revenue Code.
Proposed MCL 208.37c Legislative Analyst: L. Burghardt
This bill would have a negative impact on SBT revenue; however, the magnitude of the loss in revenue is not known at this time. This proposed research and development credit is similar to a credit provided on the Federal corporate income tax. Data on the Federal credit, including the number of taxpayers claiming the credit, the average amount spent on research and development, and the average credit claimed, have been requested from the Internal Revenue Service and, once received, this information will be used to help estimate the fiscal impact of this proposed SBT research and development credit. For every $1 reduction in SBT revenue, General Fund/General Purpose revenue would be reduced by approximately $.86 and revenue sharing payments would be reduced by $.14.
Fiscal Analyst: J. Wortley
S9596\S466SA
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.