HB-5118, As Passed Senate, December 19, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5118

     A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending section 265 (MCL 208.1265), as amended by 2007 PA 145.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 265. (1) For a financial institution, tax base means the

financial institution's net capital. Net capital means equity

capital as computed in accordance with generally accepted

accounting principles less goodwill and the average daily book

value of United States obligations and Michigan obligations. If the

financial institution does not maintain its books and records in

accordance with generally accepted accounting principles, net

capital shall be computed in accordance with the books and records

used by the financial institution, so long as the method fairly

reflects the financial institution's net capital for purposes of

the tax levied by this chapter. Net capital does not include up to

125% of the minimum regulatory capitalization requirements of a

person subject to the tax imposed under chapter 2A.

     (2) Net capital shall be determined by adding the financial

institution's net capital as of the close of the current tax year

and preceding 4 tax years and dividing the resulting sum by 5. If a

financial institution has not been in existence for a period of 5

tax years, net capital shall be determined by adding together the

financial institution's net capital for the number of tax years the

financial institution has been in existence and dividing the

resulting sum by the number of years the financial institution has

been in existence. For purposes of this section, a partial year

shall be treated as a full year.

     (3) For a unitary business group of financial institutions,

net capital calculated under this section does not include the

investment of 1 member of the unitary business group in another

member of that unitary business group.

(4) (3) For purposes of this section, each of the following

applies:

     (a) A change in identity, form, or place of organization of 1

financial institution shall be treated as if a single financial

institution had been in existence for the entire tax year in which

the change occurred and each tax year after the change.

     (b) The combination of 2 or more financial institutions into 1

shall be treated as if the constituent financial institutions had

been a single financial institution in existence for the entire tax

year in which the combination occurred and each tax year after the

combination, and the book values and deductions for United States

obligations and Michigan obligations of the constituent

institutions shall be combined. A combination shall include any

acquisition required to be accounted for by the surviving financial

institution in accordance with generally accepted accounting

principles or a statutory merger or consolidation.

     Enacting section 1. This amendatory act takes effect January

1, 2008.