Economic Presence Nexus Standard RAB Released; Senate and House Committees MBT Technical Corrections
The Michigan Department of Treasury released a draft Revenue Administrative Bulletin that defines "actively solicits" to determine whether a taxpayer, other than an insurance company under MCL 208.1235 et seq., is subject to tax under the Michigan Business Tax ("MBT"). The Department intends to adopt an "economic presence" nexus standard for the MBT modified gross receipts tax. Under this standard many out-of-state businesses will be subject to the MBT modified gross receipts tax. The Department of Treasury has requested written comments from the business community by the close of business on December 18, 2007. The Department will issue a final RAB defining "actively solicits" prior to January 1, 2008.
The House Tax Policy Committee heard testimony from financial firms in support of HB 5413, which would amend the definition of 'a security' so as to exclude money received as investments from gross receipts, similar to the way certain manufacturers are allowed exclusions from gross receipts. Morgan Stanley representatives testified that their tax liability would be 1500 times higher under the new MBT than under the SBT if the changes are not passed. The Department of Treasury stated that it supports revisiting the issue. The committee is also considering three bills, HB 5460, HB 5461, and HB 5462 which would make changes to the MBT for the motion picture industry. The Senate Finance Committee considered SB 944, a bill to restore a credit that had been granted under the SBT, but was left out of the MBT, to a Troy plant which is a hybrid partnership between GM, Chrysler and BMW.