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 [1] 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.