Proposed Reforms to Michigan’s Tax Structure

  • February 22, 2011
  • Steve Wisinski, CPA, MAFF

On February 17, 2011 the State issued an explanation of the proposed elimination of the Michigan Business Tax (MBT), replacing it with a streamlined Corporate Income Tax. Click here to read the entire State release.

Some of the proposed changes are:

  • The tax will be 6% of the “tax base” (basically federal taxable income with some modifications).
  • The Corporate Income Tax (CIT) will only apply to C corporations.  
  • Gross receipts would no longer be taxed as they are under the MBT.
  • Only the Small Business Credit available under MBT will be available under CIT.  
  • If your CIT tax is less than $100 you do not have to file a return or pay the tax.
  • The nexus and apportionment features of MBT carry over to CIT.  
  • Nexus will continue to tax non Michigan business based on their sales in Michigan.
  • Apportionment will continue to give Michigan businesses the ability to reduce the CIT for sales outside of Michigan.

There are also several proposed changes to the Michigan Individual Income Tax:

  • The tax rate would be reduced on October 1, 2011 from 4.35% to 4.25% with the 4.25% rate fixed.  
  • The personal exemption would be fixed at $3,700, but subject to a phase out at a certain level of income.
  • The property tax credit for seniors would be reduced from 100% to 80% and for all others increased from 60% to 80%.  
  • The phase out range for the property tax credit is lowered to $61,000 to $70,000 from $73,650 to $82,650.
  • Michigan is only one of three states that do not tax pensions.  To create equity between seniors and non-seniors, the State will now tax all pension income.  
  • Social security benefits will remain not taxed.

As you can see these are proposed changes.  It is a long, arduous journey to make this law.   We will continue to update you as changes are made.