Surcharge

On December 4, 2007, Governor Jennifer M. Granholm signed Public Act 145 of 2007 ("PA 145") amending the MBT, Public Act 36 of 2007. Although the primary purpose of PA 145 was to institute a surcharge to replace the revenue from the repeal Section 3d of the Use tax Act, PA 145 makes additional changes. PA 145 is summarized below.

MBT Surcharge:

  • For a taxpayer other than an insurance company or a financial institution, the MBT Surcharge is equal to 21.99% of the taxpayer's MBT liability after allocation and apportionment but before credits.
  • The MBT Surcharge for taxpayers, other than financial institutions, is capped at $6 million for any single tax year.
  • The MBT Surcharge is eliminated on January 1, 2017 if Michigan personal income growth exceeds 0% in 2014, 2015, or 2016.
  • For a financial institution, the MBT Surcharge is 27.7% for tax years ending in 2008 and 23.4% for tax years ending in 2009 and later. There is no cap on the surcharge for a financial institution.
  • Financial institutions authorized to exercise only trust powers are not subject to the MBT Surcharge.
  • Insurance companies are not subject to the MBT Surcharge.
  • Taxpayers who qualify for the Small Business Alternative Credit will not have their tax liability changed by the MBT Surcharge.
  • Estimated tax payments must be calculated and remitted including the MBT Surcharge.

Rebates To Taxpayers:

  • The provision requiring a refund to taxpayers if certain revenue thresholds are exceeded is now permanent, it previously sunset after 3 years.
  • If the MBT revenue exceed the formula base, 60% is refunded to taxpayers and 40% deposited into the budget stabilization fund.
  • For the 2009 fiscal year and beyond, refunds are limited to those taxpayers that claimed the Compensation, Investment Tax, or Research and Development Credits.

Business Income:

  • For individuals, estates, and trusts and partnerships organized exclusively for estate and gift planning purposes, business income includes only that portion of federal taxable income derived from the taxpayer's trade or business.

Gross Receipts:

  • For individuals, estates, and trusts and partnerships organized exclusively for estate and gift planning purposes, gross receipts excludes amounts received other than in the course of the taxpayer's trade or business.

Purchases From Other Firms:

  • Theater owners may deduct from gross receipts 50% of film rental or royalty payments paid to a film distributor and/or film producer for the 2009 tax year.
  • Theater owners may deduct from gross receipts 100% of film rental or royalty payments paid to a film distributor and/or film producer for the 2010 tax year and beyond.

Insurance Companies:

  • An insurance company may claim the Compensation Credit regardless of whether it has taken any credits for payments made to Michigan associations.

Financial Institutions:

  • A financial institution may deduct goodwill from its tax base.
  • The deduction for U.S and Michigan obligations will be based on average daily book value rather than simply book value.
  • A financial institution may take the Compensation Credit.

Credits:

  • The cap on the combined Compensation and Investment Tax Credits for taxpayers other than insurance companies is reduced from 65% of the taxpayer's liability to 50% of the taxpayer's liability before the MBT Surcharge for the 2008 tax year and 52% for the 2009 tax year and beyond. For insurance companies, the Compensation Credit is capped at 65% of the taxpayer's liability for all tax years.
  • The Compensation Credit is reduced from 0.370% to 0.296% for the 2008 tax year. The rate returns to 0.370% for the 2009 tax year and beyond.
  • The Investment Tax Credit is reduced from 2.9% to 2.32% for the 2008 tax year. The rate returns to 2.9% for the 2009 tax year and beyond.
  • The Research and Development Credit is reduced from 1.90% to 1.52% for the 2008 tax year. The rate returns to 1.90% for the 2009 tax year and beyond.
  • The cap on the combined Compensation, Investment Tax, and Research and Development Credits is reduced from 75% of the taxpayer's liability to 65% of the taxpayer's liability before the MBT Surcharge.
  • NASCAR Speedway and Large Food Retailer Credits are expanded.
  • A new credit is added for distributors or manufacturers that originate a bottle deposit on beverage containers.
  • The New Motor Vehicle Dealer Inventory Credit is reduced from 2% of the amount paid to acquire new motor vehicle inventory to 0.25%, but the $10,000 cap on the credit is eliminated.

Administration:

  • For fiscal year 2007-2008, the amount distributed to the School Aid Fund is increased to $341,000,000. For fiscal year 2008-2009 and beyond, the amount distributed to the School Aid Fund is increased to $729,000,000.