Changes to the Michigan Business Tax (MBT) & personal income taxes
On April 28, 2011, the Michigan House of Representatives passed a bill that would, if enacted, implement many of the corporate and personal income tax changes that Gov. Rick Snyder proposed in his budget.
As the new corporate income tax will generate less revenue than MBT, changes to the personal income tax are being proposed to make up some of the shortfall.
Key points included in the bill are as follows:
1 a corporate income tax would be levied on C corporations at the rate of 6% (S corporations, partnerships, trusts and individuals would no longer pay this tax);
2 unitary business groups would be required to file a combined return;
3 the tax base would not include bonus depreciation or domestic production activities deduction;
4 apportionment would be based on a 100% sales factor;
5 the personal income tax rate would be 4.25% (down from 4.35%) beginning January 1, 2013;
6 the personal income tax deductions for interest and dividends for senior citizens would not be available for seniors born after 1945;
7 the personal income tax deduction for pension benefits for seniors would be curtailed based on household resources;
8 the personal exemption would not be available for single taxpayers with household income resources over $100,000 or for joint taxpayers with household resources over $200,000; and
9 many credits against the personal income tax would be eliminated.
There are some transition rules that relate to companies that have MBT credit carryovers. Basically the MBT will be replaced at the end of 2011. Generally the bill will be effective January 1, 2012.
As this bill now goes to the Michigan Senate, this bill may not be the one that the Governor signs. We will keep you updated and advise you of the final bill that the Governor will sign into law. Should you have any questions regarding the impact of any of the proposed changes might have on you specific situation, please do not hesitate to call us.