HOUSE BILL No. 5287 October 15, 1997, Introduced by Reps. Quarles, Wallace, DeHart, Griffin, Thomas, Hale, Price, Scott, Palamara, Profit, Goschka, Kilpatrick, Schermesser, Basham and Parks and referred to the Committee on Tax Policy. A bill to amend 1967 PA 281, entitled "Income tax act of 1967," by amending section 30 (MCL 206.30), as amended by 1997 PA 86. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 30. (1) "Taxable income" means, for a person other 2 than a corporation, estate, or trust, adjusted gross income as 3 defined in the internal revenue code subject to the following 4 adjustments and the adjustments provided in subsections (2) to 5 (4): 6 (a) Add gross interest income and dividends derived from 7 obligations or securities of states other than Michigan, in the 8 same amount that has been excluded from adjusted gross income 9 less related expenses not deducted in computing adjusted gross 10 income because of section 265(a)(1) of the internal revenue 11 code. 04353'97 RJA 2 1 (b) Add taxes on or measured by income to the extent the 2 taxes have been deducted in arriving at adjusted gross income. 3 (c) Add losses on the sale or exchange of obligations of the 4 United States government, the income of which this state is pro- 5 hibited from subjecting to a net income tax, to the extent that 6 the loss has been deducted in arriving at adjusted gross income. 7 (d) Deduct, to the extent included in adjusted gross income, 8 income derived from obligations, or the sale or exchange of obli- 9 gations, of the United States government that this state is pro- 10 hibited by law from subjecting to a net income tax, reduced by 11 any interest on indebtedness incurred in carrying the obligations 12 and by any expenses incurred in the production of that income to 13 the extent that the expenses, including amortizable bond premi- 14 ums, were deducted in arriving at adjusted gross income. 15 (e) Deduct, to the extent included in adjusted gross income, 16 compensation, including retirement benefits, received for serv- 17 ices in the armed forces of the United States. 18 (f) Deduct the following to the extent included in adjusted 19 gross income: 20 (i) Retirement or pension benefits received from a federal 21 public retirement system or from a public retirement system of or 22 created by this state or a political subdivision of this state. 23 (ii) Retirement or pension benefits received from a public 24 retirement system of or created by another state or any of its 25 political subdivisions if the income tax laws of the other state 26 permit a similar deduction or exemption or a reciprocal deduction 27 or exemption of a retirement or pension benefit received from a 04353'97 3 1 public retirement system of or created by this state or any of 2 the political subdivisions of this state. 3 (iii) Social security benefits as defined in section 86 of 4 the internal revenue code. 5 (iv) Before October 1, 1994, retirement or pension benefits 6 from any other retirement or pension system as follows: 7 (A) For a single return, the sum of not more than 8 $7,500.00. 9 (B) For a joint return, the sum of not more than 10 $10,000.00. 11 (v) After September 30, 1994, retirement or pension benefits 12 not deductible under subparagraph (i) or subdivision (e) from any 13 other retirement or pension system or benefits from a retirement 14 annuity policy in which payments are made for life to a senior 15 citizen, to a maximum of $30,000.00 for a single return and 16 $60,000.00 for a joint return. The maximum amounts allowed under 17 this subparagraph shall be reduced by the amount of the deduction 18 for retirement or pension benefits claimed under subparagraph (i) 19 or subdivision (e) and for tax years after the 1996 tax year by 20 the amount of a deduction claimed under subdivision (r). For the 21 1995 tax year and each tax year after 1995, the maximum amounts 22 allowed under this subparagraph shall be adjusted by the percen- 23 tage increase in the United States consumer price index for the 24 immediately preceding calendar year. The department shall annu- 25 alize the amounts provided in this subparagraph and subparagraph 26 (iv) as necessary for tax years that end after September 30, 04353'97 4 1 1994. As used in this subparagraph, "senior citizen" means that 2 term as defined in section 514. 3 (vi) The amount determined to be the section 22 amount eli- 4 gible for the elderly and THE permanently and totally disabled 5 credit provided in section 22 of the internal revenue code. 6 (g) Adjustments resulting from the application of section 7 271. 8 (h) Adjustments with respect to estate and trust income as 9 provided in section 36. 10 (i) Adjustments resulting from the allocation and apportion- 11 ment provisions of chapter 3. 12 (j) Deduct political contributions as described in section 4 13 of the Michigan campaign finance act, 1976 PA 388, MCL 169.204, 14 or section 301 of title III of the federal election campaign act 15 of 1971, Public Law 92-225, 2 U.S.C. 431, not in excess of $50.00 16 per annum, or $100.00 per annum for a joint return. 17 (k) Deduct, to the extent included in adjusted gross income, 18 wages not deductible under section 280C of the internal revenue 19 code. 20 (l) Deduct the following payments made by the taxpayer in 21 the tax year: 22 (i) The amount of payment made under an advance tuition pay- 23 ment contract as provided in the Michigan education trust act, 24 1986 PA 316, MCL 390.1421 to 390.1444. 25 (ii) The amount of payment made under a contract with a pri- 26 vate sector investment manager that meets all of the following 27 criteria: 04353'97 5 1 (A) The contract is certified and approved by the board of 2 directors of the Michigan education trust to provide equivalent 3 benefits and rights to purchasers and beneficiaries as an advance 4 tuition payment contract as described in subparagraph (i). 5 (B) The contract applies only for a state institution of 6 higher education as defined in the Michigan education trust act, 7 1986 PA 316, MCL 390.1421 to 390.1444, or a community or junior 8 college in Michigan. 9 (C) The contract provides for enrollment by the contract's 10