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Bulletins, News, and Press: Legislative Bulletins

MITA Action Brings Delay and Changes to MBT Legislation

Friday, June 22, 2007   (0 Comments)
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The following is a news story about the proposed Michigan Business Tax published June 21 by Gongwer News, a legislative news service in Lansing.  Quick action this week by MITA helped bring problems with the proposed Michigan Business Tax to the forefront.

A concern that contractors raised about the structure of the new Michigan Business Tax proposal is being studied carefully because while it could cost contractors substantially, fixing it potentially also means a hit in the total revenues the new tax would raise for the state.

The issue is also theoretically complicated enough that it could force a delay in drafting legislation that lawmakers could vote on.

The issue was brought to light Wednesday by the Michigan Infrastructure and Transportation Association that said that its members could pay as much as four-times what they currently pay in state taxes if the proposal for the MBT becomes law.

MITA became the first major business group to raise strong objections to the tax proposal that was unveiled last week.

Under the tax proposal, two-thirds of the tax revenue comes from a gross receipts tax that businesses can offset with credits for tangible property purchases and executive compensation. But the contractors say their use of sub-contractors cannot be counted as purchases of tangible property.

The issue could be worth several hundred million dollars to the amount the tax nets once it is resolved, several sources said.

If lawmakers were looking to cut the tax, then a fix to address the contractor's problem could be fairly simple, officials said.  But with the goal to ensure the new tax is revenue neutral, solutions are more complex.

Wednesday Rep. Steve Bieda (D-Warren), chair of the House Tax Policy Committee, said the legislative workgroup developing the draft were working on some solutions.

Sen. Jud Gilbert (R-Algonac), also a member of the workgroup, said the members were trying to see if the revenue loss by addressing the issue could be dealt with through other provisions, such as the unitary filing with firms headquartered in other states.

The issue, and some others that have come up in the drafting process, show there is some tension between the needs to both keep the new tax revenue neutral to replace the Single Business Tax, which ends on December 31, and the need to move quickly to enact the tax.

Legislative leaders are still hoping to have drafts of the tax bills ready early next week and to vote on the tax later in the week.

MITA will keep you posted on further developments.  If you have questions, please contact Mike Nystrom, MITA’s Vice President of Government and Public Relations, at mikenystrom@mi-ita.com or Keith Ledbetter, MITA’s Director of Legislative Affairs, at keithledbetter@mi-ita.com or call them at 517-347-8336.

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