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 High Speed Fly-Over: Tax Changes Coming to Michigan By John Lindley, Senior Director, Government Relations & Regulatory Affairs, MACPA 40,000 Feet: Major Tax Reform Including Potential Service Tax As everyone is likely aware by now, a package of legislation was introduced in October 2009 by State Representative Mark Meadows (D-East Lansing) to expand the Michigan Sales Tax base to include services. These bills also repeal the Michigan Business Tax (MBT) surcharge and reduce the sales tax rate from 6% to 5%. After review, this legislation appears to exempt business-to-business services, educational services, services provided by a physician, and services provided by a nonprofit. This is a lengthy and complex legislative package - one that will require continued analysis. Members of the MACPA State & Local Tax Task Force Subcommittee on Business Tax Restructuring are in the process of finalizing technical observations on this particular proposal as a means to illustrate the factors that must be considered in such a substantial change in tax structure. It is important to note that while the leadership of the State House of Representatives, and the specific sponsor of this proposal, do not have intentions on moving it as-is, this legislative package generally is regarded as a viable vehicle for change. Tax reform is on the top of nearly all legislative agendas in Lansing for 2010. Influential groups like the Business Leaders for Michigan (formerly Detroit Renaissance), the Detroit Regional Chamber of Commerce, and others, are calling for significant tax reform. Essentially, all tax reform conversations in Lansing include two elements – an expanded service tax and an MBT surcharge repeal. 15,000 Feet: Revenue Administrative Bulletins on Unitary Business Groups Two Revenue Administrative Bulletins (RABs) were released in draft form by the Department of Treasury at the end of 2009. RABs on the Michigan Business Tax Act Unitary Business Group Relationship Tests and Unitary Business Group Control Tests were released to stakeholders for comment periods that have since expired. The MACPA State & Local Tax Task Force submitted considerable input from practitioners across the state on both draft RABs – representing the suggestions and concerns of MACPA members, truly the frontline for tax policy implementation. The MACPA fully expects these RABs to be issued in final format in the first few weeks of 2010 and will be communicating broadly and immediately to membership upon their publication. Meanwhile, you can continue to view the draft versions at Control Test and Relationship Test. 1,000 Feet: MBT Technical Changes; K-Mart decision The MACPA State & Local Tax Task Force, Business Tax Restructuring Subcommittee and the MACPA Legislative Advisory Group have discussed and are moving forward with initiatives to provide clarity in different aspects of the MBT and even the old SBT. Conversations will be moving towards action in 2010 in regards to multiple issues, including clarifying the meaning of "indirect" control as related to attribution; clarifying “Materials and Supplies;” MBT safe-harbor expansion, an unintended consequence related to Renaissance Zone Credit application and others. In addition to working with the Department of Treasury and the Michigan Legislature on these issues, MACPA will be discussing potential legislation to limit the application of the recent Court of Appeals Kmart decision. In the May 2009 decision, the Court upheld a Michigan Tax Tribunal ruling requiring a single member limited liability company (SMLLC) to file Michigan Single Business Tax (SBT) returns on a separate basis from its corporate owner, irrespective of a federal tax election to treat the SMLLC as a disregarded entity. For more information on any of the technical items on the MACPA’s agenda, contact the MACPA Government Relations Department at 248.267.3700 or legislation@michcpa.org.
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| PO Box 5068 Troy, MI 48007-5068 Phone: 248.267.3700 Fax: 248.267.3737 E-mail: macpa@michcpa.org | |
