Act No. 500

Public Acts of 1998

Approved by the Governor

January 5, 1999

Filed with the Secretary of State

January 5, 1999

EFFECTIVE DATE: January 12, 1999

STATE OF MICHIGAN

89TH LEGISLATURE

REGULAR SESSION OF 1998

Introduced by Rep. Profit

ENROLLED HOUSE BILL No. 5391

AN ACT to amend 1964 PA 284, entitled "An act to permit the imposition and collection by cities of an excise tax levied on or measured by income; to permit the collection and administration of the tax by the state; to provide the procedure including referendums for, and to require the adoption of a prescribed uniform city income tax ordinance by cities desiring to impose and collect such a tax; to limit the imposition and collection by cities and villages of excise taxes levied on or measured by income; to prescribe the powers and duties of certain state and municipal agencies, departments, and officials; to establish the city income tax trust fund; to provide for appeals; and to prescribe penalties and provide remedies," by amending sections 3 and 3c of chapter 1 (MCL 141.503 and 141.503c), section 3 of chapter 1 as amended and section 3c of chapter 1 as added by 1988 PA 520.

The People of the State of Michigan enact:

CHAPTER 1

Sec. 3. (1) The governing body of a city, by a lawfully adopted ordinance that incorporates by reference the uniform city income tax ordinance set forth in chapter 2, may levy, assess, and collect an excise tax on income as provided in the ordinance. The ordinance shall state the rate of the tax which shall be the rate authorized by 1 of the following:

(a) The uniform city income tax ordinance under section 11 of chapter 2.

(b) Subsection (2).

(c) Section 3a, 3b, or 3c of this chapter.

(2) Except as otherwise provided in subsections (3), (4), and (5), in a city with a population of more than 750,000, the governing body may levy and collect a tax at a rate to be determined from time to time, that rate to be not more than 2% on corporations and the following maximum tax rates on resident individuals and nonresident individuals for the following years:

(a) Before July 1, 1999, 3.00% on resident individuals and 1.50% on nonresident individuals.

(b) Beginning July 1, 1999 and each July 1 after 1999, the maximum tax rate under this subsection on resident individuals shall be reduced by 0.1 until the rate on resident individuals is 2.0%. The tax rate imposed on nonresident individuals shall be 50% of the tax rate imposed on resident individuals each year.

(3) If any 3 of the following conditions exist in a city with a population of 750,000 or more, the city may apply to the state administrative board for certification that those conditions exist and the maximum tax rate under subsection (2)(b) shall not be further reduced as provided in subsections (4) and (5):

(a) Funds have been withdrawn from the city's budget stabilization fund for 2 or more consecutive city fiscal years or there is a balance of zero in the city's budget stabilization fund.

(b) The city's income tax revenue growth rate is 0.95 or less.

(c) The local tax base growth rate is 80% or less of the statewide tax base growth rate.

(d) The city's unemployment rate is 10% or higher according to the most recent statistics available from the Michigan jobs commission.

(4) If the state administrative board certifies within 60 days of application that any 3 of the conditions set forth under subsection (3) are met, the maximum tax rate under subsection (2) shall not be further reduced from the date of the state administrative board's certification until the July 1 following the expiration of 1 year after the state administrative board's certification unless the city applies for certification that the conditions continue to exist. Before the expiration of the certification, the city may apply to the state administrative board to certify that the conditions continue to exist and if the state administrative board so certifies, the certification may continue until the July 1 following the expiration of 1 year after the state administrative board's certification that the conditions continue to exist. The city may continue to apply for certification until the conditions under subsection (3) no longer exist.

(5) Notwithstanding any other provision of this section, if on July 1 the maximum tax rate on resident individuals is reduced under subsection (2) after a year or years in which the maximum tax rate was not reduced because of subsections (3) and (4), the maximum tax rate on resident individuals shall be the maximum tax rate in effect on June 30 of that year reduced by 0.1 and the rate on nonresident individuals shall be 50% of the rate imposed on resident individuals. On each subsequent July 1, subsection (2) applies to the maximum tax rates, subject to subsections (3) and(4).

(6) The governing body of a city may adopt the uniform city income tax ordinance with the alternative sections as set forth in chapter 3 instead of the similarly numbered sections as set forth in chapter 2. The uniform city income tax ordinance may be lawfully adopted or rescinded by the governing body at any time. The adoption of an ordinance is effective on and after January 1 or July 1 following adoption of the ordinance, as specified in the ordinance, but an ordinance shall not become effective earlier than 45 days after adoption or until approved by the electors if a referendum petition is filed as authorized in this act or a referendum is otherwise required. The rescission of an ordinance shall become effective on the following December 31. The ordinance may be rescinded at any time by the governing body in the same manner in which it was adopted and with appropriate enforcement, collection, and refund provisions with respect to liabilities incurred prior to the effective date of the rescission of the ordinance. The ordinance shall not be amended except as provided by the legislature. A city may amend the ordinance to change the tax rate to a rate authorized by this act.

(7) Petitions for a referendum election on the question of adopting an ordinance adopted by the governing body may be filed with the city clerk not later than the sixth Monday following the adoption of the ordinance. The petitions shall be signed by a number of registered electors of the city equal to at least 10%, but not more than 20%, of the registered electors of the city voting in the last general municipal election prior to the adoption of the ordinance by the governing body. If proper petitions are filed, the question of adopting the ordinance shall be submitted by the governing body to the city electors at the next primary or general election or at a special election called for the purpose, in any case held not less than 45 days nor more than 90 days after the clerk has reported the filing of the referendum petition to the city's governing body. The checking of names on the petitions, the counting, canvassing, and return of the votes on the question, and other procedures for the election shall be as provided by law or charter. Upon a favorable vote of the city electors, the ordinance shall be effective as specified in the ordinance which may be amended by the governing body of the city following the election to specify July 1 or January 1 as the effective date of the ordinance, if the effective date originally specified in the ordinance is considered impractical or inconvenient for any reason. The provisions in this section for a referendum election, and for delaying the effective date of the ordinance if petitions for a referendum are filed, are not applicable to a city that on January 1, 1964 had in effect a valid ordinance levying and imposing an excise tax levied on or measured by income. Notwithstanding any other provision of this act, if an ordinance becomes effective on any date other than January 1, each tax year shall end on December 31, and the provisions of the ordinance based on a full tax year are modified accordingly to be applicable to the partial tax year.

(8) The city shall annualize the rates under this section as necessary.

(9) As used in this section:

(a) "Consumer price index" means the Detroit consumer price index for all urban consumers as defined and reported by the United States department of labor, bureau of labor statistics, and as certified by the state treasurer.

(b) "Income tax revenue growth rate" means a number the numerator of which is the income tax collections of the city for the city fiscal year immediately preceding the city's application under subsection (3) and the denominator of which is the product of the income tax collections of the city for the city fiscal year immediately preceding the city fiscal year used to determine the numerator multiplied by 1 plus the corresponding percentage change in the average consumer price index for the calendar year ending in the city fiscal year used to determine the numerator.

(c) "Local tax base growth rate" means the total taxable value of real property and personal property in the city for the most recent year for which data is available divided by the total taxable value of real property and personal property in the city for the second year immediately preceding the most recent year for which the data is available.

(d) "Statewide tax base growth rate" means the total taxable value of real property and personal property in the state for the most recent year for which the data is available divided by the total taxable value of real property and personal property in the state for the second year immediately preceding the most recent year for which the data is available.

Sec. 3c. A city that levied the tax authorized by this act before March 30, 1989 may amend the ordinance to increase the rate to an annual tax of not more than 1-1/2% on corporations and resident individuals and not more than 3/4% on nonresident individuals, but not more than 1/2 of the tax rate imposed on resident individuals. An amendment to the city income tax ordinance under this section is not effective unless the amendment is approved by a majority of the qualified electors voting on the question. Before November 10, 1989, an amendment under this section shall not be placed before the voters for approval more than once in any 12-month period. This section applies only to a city with a population of more than 140,000 and less than 750,000 or a city with a population of more than 65,000 and less than 100,000 in a county with a population less than 300,000.

Enacting section 1. This amendatory act does not take effect unless House Bill No. 5989 of the 89th Legislature is enacted into law.

This act is ordered to take immediate effect.

Clerk of the House of Representatives.

Secretary of the Senate.

Approved

Governor.