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MITA, Treasury at Odds over M.B.T. Deduction

Tuesday, March 04, 2008   (0 Comments)
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The following article was written in Gongwer Michigan Report No. 41, dated February 29, 2008.

The Michigan Infrastructure and Transportation Association, along with officials for general contractors, homebuilders and builders and contractors, are lobbying lawmakers over an effort to include certain materials in a deduction to the Michigan Business Tax after the Department of Treasury ruled those materials didn't apply.

MITA contends the Legislature agreed to include concrete, steel, aggregate and other building materials in the MBT's materials deduction, but Treasury has decided that most construction materials shouldn't get the deduction.

But Scott Schrager, legislative liaison for the department, told Gongwer News Service Friday that they believe their interpretation of the law is correct. Whether the law embraces an understanding people had on the issue is another thing, he argues.

Senate Finance Committee Chair Sen. Nancy Cassis (R-Novi) said she has made a request for a bill to deal with the issue. 

Treasury is currently looking over a legislative proposal to address the materials deduction and officials haven't ruled out possibility of changing the MBT, Mr. Schrager said.

Asked what the fiscal impact would be to the state, Mr. Schrager said that too was under review.

MITA has also asked that because of quarterly MBT filings, that a legislative change include a grandfather clause to let businesses off "the hook for major tax increases on work that was bid prior to the new MBT being put in place."

But Mr. Schrager contends the grandfather clause is a separate issue and that it would essentially create a large tax exemption for MITA members.

Tax Policy Chair Rep. Steve Bieda (D-Warren) could not be reached for comment.

Ms. Cassis said the issue showed how some companies are discovering problems with the newly implemented MBT. Those companies that benefit from the new tax are not likely to come to the Legislature to complain, she said, and it will take anywhere from one year to 18 months to determine the full effect of the tax.

She also said the situation is an example where subcontractors were able to "pull out all the stops" to win an agreement to allow them to deduct the cost of supplies from their gross receipts.

"What is happening here is really the effects of unintended consequences," she said.

Please contact Mike Nystrom at mikenystrom@mi-ita.com or Keith Ledbetter at keithledbetter@mi-ita.com or call the MITA office at 517-347-8336 with any questions or comments.

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