HOUSE BILL No. 5394 February 17, 2000, Introduced by Reps. Garcia, Cassis, Richardville, Faunce, Gosselin, Voorhees, Mortimer, Vander Roest, Bisbee, Gilbert, Van Woerkom, Bradstreet, Kowall, Hager, Toy, Koetje, Raczkowski, Patterson, Vear, Shackleton, Woronchak, Caul, Howell, Cameron Brown, Rocca, Geiger, Allen and Julian and referred to the Committee on Tax Policy. A bill to amend 1975 PA 228, entitled "Single business tax act," by amending section 35a (MCL 208.35a), as added by 1999 PA 115. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 35a. (1) For a tax year beginning after December 31, 2 1999, a taxpayer may claim a credit against the tax imposed by 3 this act of equal to the percentage determined under subsection 4 (2) multiplied by the result of subtracting the sum of the 5 amounts calculated under subdivisions (d), (e), and (f) from the 6 sum of the amounts calculated under subdivisions (a), (b), and 7 (c): 8 (a) Calculate the cost, including fabrication and installa- 9 tion, paid or accrued in the taxable year of tangible assets of a 10 type that are, or under the internal revenue code will become, 11 eligible for depreciation, amortization, or accelerated capital 05829'00 RJA 2 1 cost recovery for federal income tax purposes, provided that the 2 assets are physically located in this state for use in a business 3 activity in this state and are not mobile tangible assets. 4 (b) Calculate the cost, including fabrication and installa- 5 tion, paid or accrued in the taxable year of mobile tangible 6 assets of a type that are, or under the internal revenue code 7 will become, eligible for depreciation, amortization, or acceler- 8 ated capital cost recovery for federal income tax purposes. This 9 amount shall be multiplied by the apportionment factor for the 10 tax year as prescribed in chapter 3. 11 (c) For tangible assets, other than mobile tangible assets, 12 purchased or acquired for use outside of this state in a tax year 13 beginning after December 31, 1996 and physically located in this 14 state in a tax year beginning after December 31, 1999 and after 15 the assets are purchased or acquired for use in a business activ- 16 ity, calculate the federal basis used for determining gain or 17 loss as of the date the tangible assets were physically located 18 in this state for use in a business activity plus the cost of 19 fabrication and installation of the tangible assets in this 20 state. 21 (d) If the cost of tangible assets described in subdivision 22 (a) was paid or accrued in a tax year beginning after December 23 31, 1999, calculate the gross proceeds or benefit derived from 24 the sale or other disposition of the tangible assets minus the 25 gain, multiplied by the apportionment factor for the taxable year 26 as prescribed in chapter 3, and plus the loss, multiplied by the 27 apportionment factor for the taxable year as prescribed in 05829'00 3 1 chapter 3 from the sale or other disposition reflected in federal 2 taxable income and minus the gain from the sale or other disposi- 3 tion added to the tax base in section 9(6). 4 (e) If the cost of tangible assets described in subdivision 5 (b) was paid or accrued in a tax year beginning after December 6 31, 1999, calculate the gross proceeds or benefit derived from 7 the sale or other disposition of the tangible assets minus the 8 gain and plus the loss from the sale or other disposition 9 reflected in federal taxable income and minus the gain from the 10 sale or other disposition added to the tax base in section 9(6). 11 This amount shall be multiplied by the apportionment factor for 12 the tax year as prescribed in chapter 3. 13 (f) For assets purchased or acquired in a tax year beginning 14 after December 31, 1996 that were eligible for a deduction under 15 subdivision (a) or (c) and that were transferred out of this 16 state, calculate the federal basis used for determining gain or 17 loss as of the date of the transfer. 18 (2) The amount calculated under subsection (1) shall be 19 multiplied by a percentage determined by dividing the tax rate 20 for the tax year in which the credit is claimed by 2.3% and 21 multiplying that result by0.85%.THE FOLLOWING PERCENTAGE AS 22 APPLICABLE: 23 (A) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX 24 YEAR OF $1,000,000.00 OR LESS, 2.3%. 25 (B) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX 26 YEAR OF MORE THAN $1,000,000.00 BUT $2,500,000.00 OR LESS, 1.5%. 05829'00 4 1 (C) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX 2 YEAR OF MORE THAN $2,500,000.00 BUT $5,000,000.00 OR LESS, 1.5%. 3 (D) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX 4 YEAR OF MORE THAN $5,000,000.00, 0.85%. 5 (3) For a tax year in which the amount calculated under sub- 6 section (1) and multiplied by the percentage determined under 7 subsection (2) is negative, the absolute value of that amount is 8 added to the taxpayer's tax liability for the tax year. 9 (4) If the credit allowed under this section for the tax 10 year and any unused carryforward of the credit allowed under this 11 section exceed the tax liability of the taxpayer for the tax 12 year, the excess shall not be refunded, but may be carried for- 13 ward as an offset to the tax liability in subsequent tax years 14 for 9 taxable years or until the excess credit is used up, which- 15 ever occurs first. 16 (5) Notwithstanding any other provision of this act, the 17 credit provided in this section shall be taken before any other 18 credit under this act and the credits under other sections of 19 this act shall be calculated using the tax liability after the 20 calculation of the credit under this section and, to the extent 21 provided by law, after the calculation of credits under other 22 sections of this act. 23 (6) A taxpayer that reduces the adjusted tax base under sec- 24 tion 31(2) shall not claim a credit under this section. 25 (7) A taxpayer that reduces the adjusted tax base under sec- 26 tion 31(4) shall reduce the credit under this section by a 27 percentage not to exceed 100% determined by dividing the 05829'00 5 1 applicable tax rate under section 31(1) by the percentage 2 determined under subsection (2) and multiplying the result by the 3 percentage reduction to the adjusted tax base claimed by the tax- 4 payer for the tax year under section 31(4). 5 (8) A MEMBER OF AN AFFILIATED GROUP AS DEFINED IN THIS ACT, 6 A CONTROLLED GROUP OF CORPORATIONS AS DEFINED IN SECTION 1563 OF 7 THE INTERNAL REVENUE CODE AND FURTHER DESCRIBED IN 26 8 C.F.R. 1.414(b)-1 AND 1.414(c)-1 TO 1.414(c)-5, OR AN ENTITY 9 UNDER COMMON CONTROL AS DEFINED BY THE INTERNAL REVENUE CODE 10 SHALL DETERMINE ADJUSTED GROSS RECEIPTS FOR PURPOSES OF SUBSEC- 11 TION (2) ON A CONSOLIDATED BASIS. 12 (9) AS USED IN SUBSECTION (2), "ADJUSTED GROSS RECEIPTS" 13 MEANS THE SUM OF THE FOLLOWING: 14 (A) GROSS RECEIPTS APPORTIONED OR ALLOCATED TO MICHIGAN WITH 15 THE APPORTIONMENT FRACTION CALCULATED PURSUANT TO CHAPTER 3. 16 (B) ADJUSTMENTS PROVIDED IN SECTION 23B(A) TO (G). 17 (C) ADJUSTMENTS PROVIDED IN SUBSECTION (1)(D) TO (F). 05829'00 Final page. 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