Michigan Business Tax Passed
Yesterday SB 94 containing the new Michigan Business Tax was voted out of Conference Committee. The Senate approved the bill 32-2 and the House approved the bill 75-34. The bill now goes to Governor Granholm and she is expected to sign the bill either today or Monday.
The new tax is a combination of the following two taxes, both of which must be paid: 1) a modified gross receipts tax imposed upon gross receipts less purchases of inventory and assets subject to amortization, depreciation or accelerated cost recovery at a rate of .8% and 2) a business income tax based on federal taxable income imposed at a rate of 4.95%. Nexus is defined as physical presence of more than one day or active solicitation of sales with gross receipts of $350,000. Active solicitation of sales must be defined by the Department of Treasury through written guidance that must apply prospectively. Apportionment is based on a single sales factor with destination sourcing for sales of tangible property and sourcing to where the benefit is received for services and intangibles. Filing is based on mandatory unitary combined filing for a unitary business with 50% or more common ownership and a flow of value or contribution and dependency between the entities. New credits include a .37% credit for compensation paid to employees in Michigan, a 2.9% investment tax credit for assets in Michigan and a 1.9% credit for research and development in Michigan. MEGA, Brownfield and Renaissance Zone credits have been maintained and will carryover to the new tax.