July 21, 2003

State Treasurer Jay B. Rising announced today that Advance Child Tax Credit checks sent to qualified taxpayers by the Internal Revenue Service this summer are not subject to the Michigan income tax. The Jobs and Growth Tax Relief Reconciliation Act of 2003 provides for an increase in the child tax credit allowed on the federal income tax return. The act also instructs the IRS to send an advance payment on the credit for tax year 2003.

Qualified taxpayers will receive a notice of eligibility from the IRS, followed by a check from the federal government. Generally, taxpayers who claimed the Child Tax Credit on their 2002 federal tax return will be eligible to receive up to $400 for each qualifying child. To qualify, a child must be under age 17, be a citizen or resident of the United States, be claimed as the taxpayer’s dependent, and be the taxpayer’s (a) child, stepchild, adopted child, or grandchild; (b) sibling, stepsibling, or a descendant of any of them, whom the taxpayer cared for as his or her own child, or (c) eligible foster child. The Advance Child Tax Credit may be less than $400 per child for taxpayers who had a modified adjusted gross income above $110,000 for married joint filers, above $55,000 for married couples who file separately, and $75,000 for all others. For more information on income limitations, eligibility requirements and mailing schedules visit the Internal Revenue Service web site at www.irs.gov.

Treasurer Rising says it is important to note these advance credits are not taxable in Michigan, should not be added into a taxpayer’s adjusted gross income for the 2003 tax year, and therefore will not impact calculations of 2003 Michigan income taxes. Taxpayers receiving an advance payment should keep the IRS notice of advance payment in order to properly complete their 2003 tax return.

In conjunction with the IRS, the Michigan Department of Treasury is also warning taxpayers about a potential scam targeting recipients of the Advance Child Tax Credit. Isolated incidents have been reported in which taxpayers receive a telephone call from someone promising to speed up payment of the Child Tax Credit, if the taxpayer agrees to pay a fee by credit card. It is important to note that no person or private organization can "speed up" payments of tax benefits. In fact, qualifying taxpayers do not have to take any action to receive the Advance Child Tax Credit. The IRS will perform all necessary calculations and automatically mail a check to those who qualify.