June 29, 2005, Introduced by Senators TOY, BISHOP, SANBORN, CROPSEY, KUIPERS, GILBERT, ALLEN, VAN WOERKOM, HARDIMAN, JELINEK, STAMAS, SIKKEMA, HAMMERSTROM, McMANUS, GARCIA, BIRKHOLZ, BROWN and GOSCHKA and referred to the Committee on Economic Development, Small Business and Regulatory Reform.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending section 37f (MCL 208.37f), as added by 2004 PA 319.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 37f. (1) For tax years that begin after December 31, 2004
and
before January 1, 2006 2008, a taxpayer with gross receipts
of $10,000,000.00 or less for a tax year may claim a credit against
the tax imposed by this act equal to the following percentages of
compensation paid by the taxpayer to employees who perform created
jobs, as determined under subsection (2), for that tax year in the
following circumstances:
(a) If the taxpayer makes capital investment in this state of
less than $150,000.00 in the tax year, 0.50% for tax years that
begin before January 1, 2006 and 1.00% for tax years that begin
after December 31, 2005.
(b) If the taxpayer makes capital investment in this state of
$150,000.00 or more but less than $750,000.00 for tax years that
begin before January 1, 2006 and $500,000.00 for tax years that
begin after December 31, 2005, 1.5%.
(c) If the taxpayer makes capital investment in this state of
$750,000.00 for tax years that begin before January 1, 2006 and
$500,000.00 for tax years that begin after December 31, 2005 or
more in the tax year, 2.0%.
(2) Compensation paid to employees who perform created jobs
for purposes of subsection (1) is determined as follows:
(a)
For tax years that begin in 2004 and 2005 each tax year,
determine
for each that
tax year the full-time equivalent job
for
each employee, which shall be the lesser of the following:
(i) An employment period ratio, which is equal to the
employee's weeks worked in the tax year divided by 52.
(ii) An hours worked ratio, which is equal to the employee's
hours worked during the tax year divided by the full-time
equivalent annual hours of work set by the taxpayer. Each taxpayer
shall set a full-time equivalent annual hours of work standard
which shall be not less than 1,750 hours and not more than 2,080
hours.
(b)
For the tax year that begins in 2005 years that begin
after 2004, determine the average compensation for full-time
equivalent new jobs that perform high-technology activity or
manufacturing jobs as follows:
(i) For the tax year that begins in 2005, calculate Calculate
the sum of full-time equivalent jobs calculated in subdivision (a)
for the tax year for employees who perform high-technology activity
or manufacturing jobs and who were hired in the tax year.
(ii) Determine the total compensation, not to exceed $85,000.00
per employee, paid for all jobs under subparagraph (i).
(iii) Divide the amount determined under subparagraph (ii) by the
number determined under subparagraph (i).
(c) Determine the number of created jobs, which shall be
determined as follows:
(i) For the tax year that begins in and after 2004, calculate
the sum of the number of full-time equivalent jobs calculated under
subdivision (a) for the immediately preceding tax year for all
employees.
(ii) For the each
tax year that begins in
2005 after 2004,
calculate the sum of the number of full-time equivalent jobs
calculated under subdivision (a) for all employees.
(iii) Subtract the number under subparagraph (i) from the number
under subparagraph (ii).
(iv) Determine the lesser of (b)(i) and (c)(iii).
(d) Multiply the number under subdivision (c)(iv) by the 2005
average compensation under subdivision (b)(iii).
(3) If the credit allowed under this section for the tax year
and any unused carryforward of the credit allowed under this
section exceed the tax liability of the taxpayer for the tax year,
the excess shall not be refunded, but may be carried forward as an
offset to the tax liability in subsequent tax years for 10 tax
years or until the excess credit is used up, whichever occurs
first.
(4) A member of an affiliated group as defined in this act, a
controlled group of corporations as defined in section 1563 of the
internal revenue code and further described in 26 CFR 1.414(b)-1
and 1.414(c)-1 to 1.414(c)-5, or an entity under common control as
defined by the internal revenue code shall determine gross receipts
for purposes of this section on a consolidated basis.
(5) For purposes of determining compensation paid to
employees, the taxpayer shall not include compensation paid to a
spouse, parent, sibling, child, stepchild, adopted child, or
stepparent of an active shareholder or officer, a shareholder of an
S corporation, a partner of a partnership, a member of a limited
liability company, or an individual who is a sole proprietor.
(6) The capital investment threshold for purposes of
subsection (1) must be met at the principal place of employment of
any employee of the taxpayer who performs a created job.
(7) For purposes of the credit under this section, leased
employees are considered employees of the entity whose employment
operations are managed by a professional employer organization.
(8) As used in this section:
(a) "Active shareholder" and "officer" mean those terms as
defined in section 36.
(b) "Capital investment" means investment that can be used to
calculate a credit under section 35a.
(c) "Created jobs" means jobs that meet all of the following
criteria:
(i) Are jobs that perform high-technology activity or
manufacturing jobs.
(ii) Did not exist in this state in the immediately preceding
tax year.
(iii) Represent an overall increase in full-time equivalent jobs
of the taxpayer in this state for the tax year above the total
number of full-time equivalent jobs of the taxpayer in the
immediately preceding tax year.
(iv) Is not a job into which an employee transfers if the
employee worked in this state for the taxpayer, a related entity of
the taxpayer, or an entity with which the taxpayer files a
consolidated return under section 77 in another job prior to
beginning the created job.
(v) The benefits for the employee in the created job include
coverage under health and welfare and noninsured benefit plans,
including, but not limited to, prescription coverage, primary
health care coverage, and hospitalization that is not limited to
emergency room services or subject to dollar limits, deductibles,
and coinsurance provisions that are not less favorable than those
for physical illness generally.
(vi) Is not a qualified new job used to calculate a credit
under section 37c or 37d.
(d) "High-technology activity" means that term as defined in
section 3 of the Michigan economic growth authority act, 1995 PA
24, MCL 207.803.
(e) "Manufacturing jobs" are jobs for a company that has a
classification under sector 33, subsector 321, or subsector 322 of
the North American industrial classification system (NAICS).
(f) "Related entity" means an entity that meets any of the
following criteria:
(i) More than 1% is owned by 1 of the following:
(A) Another entity.
(B) An entity that owns more than 1% of another entity.
(ii) It owns more than 1% of another entity.
(iii) It markets itself under a common name or trademark with
any other entity or receives payroll, human resources,
administrative, or other similar services from a company that
provides those services to another entity.