SENATE BILL NO. 1294 September 16, 1998, Introduced by Senators SHUGARS and YOUNG and referred to the Committee on Finance. A bill to amend 1967 PA 281, entitled "Income tax act of 1967," by amending section 527a (MCL 206.527a), as amended by 1996 PA 484. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 527a. (1) For tax years 1985 through 1994, a claimant 2 may claim a credit against the state income tax for heating fuel 3 costs for the claimant's homestead in this state. For the 1995 4 tax year and subject to subsection (18), a claimant may claim a 5 credit for heating fuel costs for the claimant's homestead in 6 this state. For tax years 1996 through 2000 and subject to 7 subsections (19) and (20), a claimant may claim a credit for 8 heating fuel costs for the claimant's homestead in this state. 9 An adult foster care home, nursing home, home for the aged, or 10 substance abuse center is not a homestead for purposes of this 05205'97 RJA 2 1 section. The credit shall be determined in the following 2 manner: 3 (a) For the 1988 tax year through the 1994 tax year; subject 4 to subsection (18), for the 1995 tax year; and subject to 5 subsections (19) and (20) for the 1996 tax year through the 2000 6 tax year, the following table shall be used for the computation 7 of a credit as computed under subdivision (c): 8 Exemptions 0 or 1 2 3 4 5 6 or more 9 Credit $272 $326 $379 $450 $525 $601 + $76 10 for each 11 exemption 12 over 6 13 (b) For tax years after the 1988 tax year, the amounts in 14 the table in subdivision (a) shall be adjusted each year as nec- 15 essary by the department so that a claimant with a household 16 income less than 110% of the federal poverty income standards as 17 defined and determined annually by the United States office of 18 management and budget is not denied a credit. 19 (c) A claimant shall receive the greater of the credit 20 amount as determined in subparagraph (i) or (ii): 21 (i) Subtract 3.5% of the claimant's household income from 22 the amount specified in subdivision (a) that corresponds with the 23 number of exemptions claimed in the return filed under this act, 24 except that the number of exemptions for purposes of this subdi- 25 vision shall not exceed the actual number of persons living in 26 the household plus the additional personal exemptions allowed 05205'97 3 1 under section 30, and any dependency exemptions for a person or 2 persons living in the household under a custodial arrangement, 3 even if the exemptions may not be claimed for other income tax 4 purposes. For TAX YEARS BEFORE THE 1998 TAX YEAR, a claimant 5 whose heating costs are included in his or her rent,SHALL 6 multiply the result of the preceding calculation by 50%. 7 (ii) Subject to subsection (2), for a claimant whose house- 8 hold income does not exceed the maximum specified in the follow- 9 ing table, as adjusted, that corresponds with the number of 10 exemptions claimed in the return filed under this act, subtract 11 11% of claimant's household income from the total cost incurred 12 by a claimant for heating fuel from a heating fuel provider 13 during the 12 consecutive monthly billing periods ending in 14 October of the tax year, and multiply the resulting amount by 15 70%: 16 Exemptions 0 or 1 2 3 4 5 For each 17 exemption 18 over 5, 19 add 20 $2,441.00 21 to the 22 maximum 23 income 24 Maximum 25 Income $7,060 $9,501 $11,943 $14,382 $16,824 05205'97 4 1 (d) For the 1988 tax year for the purposes of subdivision 2 (c), the total cost incurred by a claimant for heating fuel from 3 a heating fuel provider shall not exceed $1,190.00. For tax 4 years after the 1988 tax year, the maximum cost incurred by a 5 claimant for heating fuel during a tax year shall be adjusted by 6 multiplying the maximum cost for the immediately preceding tax 7 year by the percentage by which the average all urban Detroit 8 consumer price index for fuels and other utilities for the 12 9 months ending August 31 of the tax year for which the credit is 10 claimed exceeds that index's average for the 12 months ending on 11 August 31 of the previous tax year, but not more than 10%. That 12 product shall be added to the maximum cost of the immediately 13 preceding tax year and then rounded to the nearest whole dollar. 14 That dollar amount is the new maximum cost for the current tax 15 year. If the claimant received any credits to his or her heating 16 bill during the tax year, as provided for in subsection (6), the 17 credits shall be treated as costs incurred by the claimant. 18 (e) For tax years after the 1988 tax year, the maximum 19 income amounts specified in subdivision (c)(ii) shall be adjusted 20 by multiplying the respective maximum income amounts for the 21 immediately preceding tax year by the percentage by which the 22 average all urban Detroit consumer price index for all items for 23 the 12 months ending August 31 of the tax year for which the 24 credit is claimed exceeds that index's average for the 12 months 25 ending on August 31 of the immediately preceding tax year, but 26 not more than 10%. That product shall be added to the 27 immediately preceding tax year's respective maximum income level 05205'97 5 1 and then rounded to the nearest whole dollar. That dollar amount 2 is the new maximum income level for the then current tax year. 3 (2) An enrolled heating fuel provider shall notify each of 4 its customers, not later than December 15 of each year or, for 5 1995 only, not later than14 days after the effective date of6subsection (18)JANUARY 10, 1996 or for 1996 only, not later 7 than14 days after the effective date of subsection (19)8 JANUARY 15, 1996, whichever is later, of the availability, upon 9 request, of the information necessary for determining the credit 10 under this section. For a claimant for whom, at the time of 11 filing, thedepartment of social servicesFAMILY INDEPENDENCE 12 AGENCY is making direct vendor payments to an enrolled heating 13 fuel provider, the enrolled heating fuel provider that accepts 14 the direct payments shall mail the information necessary to 15 determine the credit before February 1 of each year. If an 16 enrolled heating fuel provider refuses or fails to provide to a 17 customer the information required to determine the credit, or if 18 the claimant is not a customer of an enrolled heating fuel pro- 19 vider, a claimant may determine the credit provided in subsection 20 (1)(c)(ii) based on his or her own records. 21 (3) A credit claimed on a return that covers a period of 22 less than 12 months shall be calculated based on subsection 23 (1)(c)(i) and shall be reduced proportionately. 24 (4) If the allowable amount of the credit under this section 25 exceeds the state income tax otherwise due for the tax year, the 26 amount of credit not used as an offset against the state income 27 tax that is due shall be remitted to the claimant, other than a 05205'97 6 1 claimant whose heating costs are included in his or her rent, in 2 the form of an energy draft that states the name of the claimant 3 and is issued by the department. For a claimant for whom, at the 4 time of filing, the department of social services is making 5 direct vendor payments to an enrolled heating fuel provider, the 6 department shall send the energy draft directly to the claimant's 7 enrolled heating fuel provider, as identified by the claimant. 8 After July 31, a refundable credit for a prior tax year may be 9 paid in the form of a negotiable warrant. The energy draft shall 10 be negotiable only through the claimant's enrolled heating fuel 11 provider upon remittance by the claimant. 12 (5) If, when a claimant remits an energy draft to the 13 claimant's enrolled heating fuel provider, the amount of the 14 energy draft is greater than the total of outstanding bills 15 incurred by the claimant with the enrolled heating fuel provider, 16 the claimant, by checking the appropriate box to be included on 17 the energy draft, may request from the enrolled heating fuel pro- 18 vider a payment equal to the amount of the energy draft less the 19 amount of the outstanding bills. The enrolled heating fuel pro- 20 vider shall issue the payment within 14 days after the claimant's 21 request. 22 (6) If a claimant whose energy draft exceeds his or her out- 23 standing bills does not request a payment from an enrolled heat- 24 ing fuel provider under subsection (5), an energy draft remitted 25 to an enrolled heating fuel provider shall be applied upon 26 receipt to the claimant's designated account. The energy draft 27 may be used to cover outstanding bills that the claimant has 05205'97 7 1 incurred with the enrolled heating fuel provider and to cover 2 subsequent heating costs until the full amount of the energy 3 draft is used or until 1 year after the date on which the energy 4 draft is first applied to the claimant's designated account. If 5 a credit amount remains from this energy draft after the 1-year 6 period, or if prior to the end of the 1-year period a claimant is 7 no longer a customer of the heating fuel provider, the heating 8 fuel provider shall remit the remaining unused portion to the 9 claimant in the form of a fully negotiable check within 14 days 10 after the end of the 1-year period or within 14 days after termi- 11 nation of service, whichever is sooner. 12 (7) A claimant who is no longer a resident of this state, 13 who is not a customer of an enrolled heating fuel provider, or 14 whose heating fuel provider refuses to accept an energy draft 15 shall return the energy draft to the department and request the 16 issuance of a negotiable warrant. A claimant may return an 17 energy draft to the department and request issuance of a negotia- 18 ble warrant if the energy draft is impractical because the claim- 19 ant has already purchased his or her energy supply for the year 20 and does not have an outstanding obligation to an enrolled heat- 21 ing fuel provider. The department may honor that request if it 22 agrees that the use of the energy draft is impractical. The 23 department shall issue the warrant within 14 days after receiving 24 the energy draft from the claimant. 25 (8) The enrolled heating fuel provider shall bill the 26 department for credit amounts that have been applied to claimant 27 accounts pursuant to subsection (6), and the department shall pay 05205'97 8 1 the bills within 14 days of receipt. The billing shall be 2 accompanied by the energy drafts for which reimbursement is 3 claimed. 4 (9) A claimant whose heating fuel is provided by a utility 5 regulated by the Michigan public service commission is protected 6 against the discontinuance of his or her heating fuel service 7 from the date of filing a claim for the credit under this section 8 through the date of issuance of an energy draft and during a 9 period beginning December 1 of the tax year for which the credit 10 is claimed and ending March 31 of the following year if the 11 claimant participates in the winter protection program set forth 12 in R 460.2162(2) to (6) of the Michigan administrative code or if 13 the utility accepts the claimant's energy draft. The acceptance 14 of an energy draft by a utility is considered a request by the 15 claimant for the winter protection program. The energy draft 16 shall be coded by the department to denote claimants who are 65 17 years of age or older. If the claimant is a claimant whose heat- 18 ing cost is included in his or her rent payments, the amount of 19 the claim not used as an offset against the state income tax, 20 after examination and review, shall be approved for payment, 21 without interest, to the claimant. 22 (10) If an enrolled heating fuel provider does not issue a 23 payment or a negotiable check within 14 days as provided in sub- 24 section (5) or (6), beginning on the fifteenth day, the amount 25 due to the claimant is increased by adding interest computed on 26 the basis of the rate of interest prescribed for delayed refunds 27 of excess tax payments in section 30(3) ofAct No. 122 of the05205'97 9 1Public Acts of 1941, being section 205.30 of the Michigan2Compiled Laws1941 PA 122, MCL 205.30. The enrolled heating 3 fuel provider shall pay the interest and shall not bill the 4 interest to or be reimbursed for the interest by the department. 5 (11) Only the renter or lessee shall claim a credit on prop- 6 erty that is rented or leased as a homestead. Only 1 credit may 7 be claimed for a household. The credit under this section is in 8 addition to other credits to which the claimant is entitled under 9 this act. A person who is a full-time student at a school, com- 10 munity college, or college or university and who is claimed as a 11 dependent by another person is not eligible for the credit pro- 12 vided by this section. A claimant who shares a homestead with 13 other eligible claimants shall prorate the credit by the number 14 of claimants sharing the homestead. 15 (12) A claimant who is eligible for the credit provided by 16 this section shall be referred by the department to the appropri- 17 ate state agency for determination of eligibility for home weath- 18 erization assistance and shall accept weatherization assistance 19 if eligible and if assistance is available. A heating fuel pro- 20 vider that is required by the Michigan public service commission 21 to participate in the residential conservation services home 22 energy analysis program shall annually contact each claimant to 23 whom it provides heating fuel, and whose usage exceeds 200,000 24 cubic feet of natural gas or 18,000 kilowatt hours of electricity 25 annually, and shall offer to provide a home energy analysis at no 26 cost to the claimant. A heating fuel provider that is not 27 required to participate in the residential conservation services 05205'97 10 1 program shall not be required to conduct a home energy analysis 2 for its customers. 3 (13) If an enrolled heating fuel provider is regulated by 4 the Michigan public service commission, the Michigan public serv- 5 ice commission may use an enforcement method authorized by law or 6 rule to enforce the requirements prescribed by this section on 7 the enrolled heating fuel provider. If an enrolled heating fuel 8 provider is not regulated by the Michigan public service commis- 9 sion, thedepartment of social servicesFAMILY INDEPENDENCE 10 AGENCY may use an enforcement method authorized by law or rule to 11 enforce the requirements prescribed by this section on the 12 enrolled heating fuel provider. 13 (14) The department shall mail a home heating credit return 14 to every person who receivedaid to families with dependent15children, state family assistance,FAMILY INDEPENDENCE 16 ASSISTANCE or state disability assistance pursuant to the social 17 welfare act,Act No. 280 of the Public Acts of 1939, being sec-18tions 400.1 to 400.119b of the Michigan Compiled Laws1939 PA 19 280, MCL 400.1 TO 400.119B, during the tax year. 20 (15) The department shall complete a study by August 1 of 21 1985, and of each subsequent year, of the actual heating costs of 22 each claimant who received a credit from the department under 23 this section for the immediately preceding tax year. 24 (16) The department may promulgate rules necessary to admin- 25 ister this section pursuant to the administrative procedures act 26 of 1969,Act No. 306 of the Public Acts of 1969, being sections05205'97 11 124.201 to 24.328 of the Michigan Compiled Laws1969 PA 306, MCL 2 24.201 TO 24.328. 3 (17) The department shall provide a simplified procedure for 4 claiming the credit under this section for claimants for whom, at 5 the time of filing, thedepartment of social servicesFAMILY 6 INDEPENDENCE AGENCY is making direct vendor payments to an 7 enrolled heating fuel provider. 8 (18) For the 1995 tax year, the credit under this section is 9 allowed only if there has been a federal appropriation for fed- 10 eral fiscal year 1995-96 of the total amount of federal low 11 income home heating energy assistance block grant funds and if 12 the federal low income home heating energy assistance block grant 13 allotment for this state is at least $25,400,000.00. If the fed- 14 eral low income home heating energy assistance block grant allot- 15 ment for this state is less than $75,400,000.00, each individual 16 credit claimed under this section shall be reduced by multiplying 17 the credit amount by a fraction the numerator of which is 18 Michigan's 1995-96 fiscal year federal low income home heating 19 energy assistance block grant allotment minus $400,000.00 and the 20 denominator of which is $75,000,000.00. 21 (19) For the 1996 tax year through the 2000 tax year, the 22 credit under this section is allowed only if there has been a 23 federal appropriation for the federal fiscal year beginning in 24 the tax year of the total amount of federal low income home 25 energy assistance program block grant funds and if the amount 26 available for the home heating credit is not less than 27 $20,000,000.00. If the amount available for the home heating 05205'97 12 1 credit is less than the full home heating credit amount, each 2 individual credit claimed under this section shall be reduced by 3 multiplying the credit amount by a fraction, the numerator of 4 which is the amount available for the home heating credit and the 5 denominator of which is the full home heating credit amount. As 6 used in this subsection, "amount available for the home heating 7 credit" means the sum of the federal low income home energy 8 assistance program block grant allotment for this state for the 9 federal fiscal year beginning in the tax year and the amount as 10 certified by the director of the family independence agency car- 11 ried forward from the immediately preceding fiscal year for the 12 low income home energy assistance program block grant minus the 13 sum of the amount certified by the director of the family inde- 14 pendence agency for administration of the low income home energy 15 assistance program block grant and the amount certified by the 16 director of the family independence agency for crisis assistance 17 programs. The amounts under this subsection that require certi- 18 fication by the director of the family independence agency or by 19 the state treasurer and the director of the department of manage- 20 ment and budget shall be certified on or before December 30 of 21 the tax year for the 1996 tax year, and on or before November 1 22 of the tax year for the 1997 through 2000 tax years. As used in 23 this subsection, "full home heating credit amount" means 24 $62,000,000.00 for the 1996 tax year and for the 1997 through 25 2000 tax years the amount certified by the state treasurer and 26 the director of the department of management and budget to be the 27 estimated amount of the credits that would have been provided 05205'97 13 1 under this section for the tax year if no reduction as provided 2 in this subsection were made for that tax year. 3 (20) For tax years after the 1994 tax year, a claimant who 4 claims a credit under this section shall not report the credit 5 amount on the claimant's income tax return filed under this act 6 as an offset against the tax imposed by this act, but shall claim 7 the credit on a separate form prescribed by the department. For 8 tax years after the 1995 tax year, a credit claimed under this 9 section shall not be allowed unless the claim for the credit is 10 filed with the department on or before the September 30 immedi- 11 ately following the tax year for which the credit is claimed. 12 (21) As used in this section: 13 (a) "Claimant whose heating costs are included in his or her 14 rent" means a claimant whose rent includes the cost of heat at 15 the time the claim for the credit under this section is filed. 16 (b) "Enrolled heating fuel provider" means a heating fuel 17 provider that is enrolled with thedepartment of social18servicesFAMILY INDEPENDENCE AGENCY as a heating fuel provider. 19 (c) "Heating fuel provider" means an individual or entity 20 that provides a claimant with heating fuel or electricity for 21 heating purposes. 05205'97 Final page. RJA