Rumors of changes to Michigan’s business tax structure became a reality in late January with the release of Gov. Jennifer Granholm’s proposal to alter the Single Business Tax (SBT). Interest groups are lining up to communicate their positions, attempting to ensure their respective constituencies are properly protected, while policy-makers struggle with conflicting messages.

Essentially, Granholm‘s proposal
cuts the existing SBT rate by 37 percent. She hopes to make Michigan more attractive for job providers by increasing the profit component of the tax base
for corporations, and bringing taxes on insurance companies in line with the national average.

Other key elements of the plan include:

• Simplification by eliminating the excess compensation reduction, the gross receipts reduction and the unincorporated credit.
• A 35 percent refundable personal property tax credit for manufacturing and R&D property.
• Tax credit to encourage R&D companies to grow.

As rumors of changes to the SBT circulated, the MACPA State and Local Tax Task Force created a subcommittee on tax restructuring in order to offer an objective voice and independent perspective.

“The proposed changes reflect a tax shift,” explained Sam Hodges, senior manager, KPMG, and chair of MACPA’s Tax Restructuring Task Force (the new subcommittee of the State and Local Tax Task Force). “There will be winners and losers. Certain interest groups have a lot at stake and are making their voices heard. As CPAs, we can look at the impact of proposed legislation and present an opinion without bias.”

“Our Tax Restructuring Task Force has created a numerical model to evaluate the Governor’s proposal; and we’ve let Lansing lawmakers know we can help by providing an objective review,” Hodges said.

In fact, representatives of the Tax Restructuring Task Force were invited to meet with senior Department of Treasury officials, including State Treasurer Jay Rising, on March 8, 2005. Since the official draft legislation – called the Michigan Jobs and Investment Act – was released that same day, the group discussed details of the legislation and a summary prepared by the Department of Treasury.

“Our meeting with Treasury was significant in that it gave us a chance to discuss the newly proposed legislation and to let them know CPA’s are available to assist them. This connection with Treasury will afford us the opportunity to compare our model with theirs, and potentially identify some legislative problems ahead of time,” Hodges said. Emphasizing that the Task Force’s role was not to pick winners and losers, Hodges said his subcommittee may be tapped to testify in hearings on the ramifications of the proposed law change.

If approved by the Legislature, the Michigan Jobs and Investment Act would go into effect for the tax year starting on or after January 1, 2006. Adoption will require changes to two Michigan laws – the General Property Tax Act and the Single Business Tax Act. Review the proposed legislation for the Michigan Jobs and Investment Act and the General Property Tax Act and the Single Business Tax Act, as well as a Department of Treasury summary.

For more information, download the Governor’s FAQ, summary and white paper, or contact the MACPA Government Relations Department.

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