Michigan Corporate and Individual Income Tax Clean-up Bills - Part I

The governor's pen was busy in December. Several bills from Michigan's House of Representatives and Senate were signed within the last week affecting Michigan's Corporate Income Tax, Individual Income Tax, Single Business Tax, and Michigan Business Tax. I will cover the amendments over the next few blogs. Senate bills 368 and 369, concerning the Single Business tax, and "Disregarded Entities" under the Michigan Business tax will be covered separately. Click on the bill's name to access that specific bill on www.legislature.mi.gov.

Bills Affecting the Michigan Income Tax:

HB 4940 of 2011 (PA 311 of 2011) - (Amends Part 2 - Corporate Income Tax)

1. The definition of a partnership does not include an entity disregarded under Section 699 of the act. 
2. Defines a "Partnership" as a taxpayer that is required or has elected to file as a partnership for federal income tax purposes.
3. Defines a publicly traded partnership as the term defined under Section 7704 of the Internal Revenue Code.

Amends sec. 701 of 1967 PA 281 (MCL 206.701).

HB 4949 of 2011 (PA 312 of 2011) - (Amends Part 2 - Corporate Income Tax)

1. The bill amends the Income Tax Act and deletes language that limits the carry-forward of a business loss to 10 taxable years after the loss year, but retains language that limits the carry-forward to the year following the loss year and the next nine taxable years.

Amends sec. 623 of 1967 PA 281 (MCL 206.623).

HB 4950 of 2011 (PA 313 of 2011) - (Amends Part 2 - Corporate Income Tax)

Amends a perceived loop-hole by adding "Unitary Business Group" to the act. A corporation is disqualified from the small business credit if compensation and director fees of a shareholder or officer are in excess of $180,000. 

1. The act states, "If the taxpayer is a unitary business group, the amount of all items paid or allocable by all persons included in the unitary business group to any 1 individual who is a shareholder or officer of a single person included in the unitary business group shall be combined."
2. The act also deletes a requirement that the Department of Treasury allow a taxpayer eligible for the small business credit to file and pay the tax without calculating the Corporate Income Tax.

Amends sec. 671 of 1967 PA 281 (MCL 206.671).

HB 4990 of 2011 (PA 273 of 2011) (Amends Part 1 - Individual Income Tax)

1. The bill amends the income tax act to exclude agricultural property from the calculation of a homestead's taxable value for purposes of eligibility for the homestead property tax credit.

Amends sec. 520 of 1967 PA 281 (MCL 206.520).

I will cover the remaining bills, excluding SB 368 & 369, in the next blog. SB 368 & 369 will each receive their own blog posts. As always, should you have any questions, do not hesitate to e-mail me at ronk@ehtc.com.