Vetoed by Governor Gretchen Whitmer

Vote Smart's Synopsis:

Vote to pass a bill that authorizes flow-through entities, such as S corporations and partnerships, to maximize their state and local tax (SALT) deduction when they pay federal taxes.

Highlights:

• Defines “department” as the Department of Treasury (Sec. 753-4).

• Authorizes a flow-through entity to, in a form and manner as prescribed by the department, elect to file a return and pay the tax imposed by this part. An election made under this law is an irrevocable election that will continue for the next 2 subsequent tax years and the taxpayer will continue to file a return and pay the tax imposed under this part (Sec. 757).

• Establishes the business income tax base means a taxpayer’s business income subject to the following adjustments, before allocation or apportionment, including the elimination of all of the following (Sec. 759.h):

• Income from producing oil and gas to the extent included in federal taxable income;

• Expenses of producing oil and gas to the extent deducted in arriving at federal taxable income;

• Income derived from a mineral to the extent included in federal taxable income of a qualified taxpayer; and

• Expenses related to the income deductible to the extent deducted in arriving at federal taxable income.

• Prohibits a taxpayer allocated income as a member of a flow-through entity by the flow-through entity from claiming a credit against the tax imposed by this part for the taxpayer’s allocated share of the tax as reported by the other flow-through entity for the tax year ending on or within the taxpayer’s same tax year (Sec. 771).

• Requires a taxpayer that reasonably expects liability for the tax year to exceed $800.00 to file an estimated return and pay an estimated tax for each quarter of the taxpayer’s tax year in the same manner as provided (Sec. 781-1).

• Authorizes the department to extend the date for filing the annual return. Interest at the rate will be added to the amount of the tax unpaid for the period of the extension. The state treasurer shall require with the application payment of the estimated tax liability unpaid for the tax period covered by the extension (Sec. 785-2).

• Specifies an estate or trust that is either a member of a flow-through entity that elects to file a return and pay the tax imposed under this part or a direct or indirect member of another flow-through entity that elects to file a return and pay the tax imposed under this part to report to its beneficiaries their allocable share of the tax imposed under this part and reported to the estate or trust under (Sec. 789-2).

• Requires the tax levied under this part, that percentage of the gross collections before refunds that is equal to 1.012% divided by the tax rate levied under this part to be deposited in the state school aid fund created in the state constitution of 1963 and the balance of the revenue collected under this part after the distribution to the school aid fund shall be deposited into the general fund (Sec. 793).

Full Bill Text

Vote Smart's Synopsis:

Vote to pass a bill that authorizes flow-through entities, such as S corporations and partnerships, to maximize their state and local tax (SALT) deduction when they pay federal taxes.

Highlights:

• Defines “department” as the Department of Treasury (Sec. 753-4).

• Authorizes a flow-through entity to, in a form and manner as prescribed by the department, elect to file a return and pay the tax imposed by this part. An election made under this law is an irrevocable election that will continue for the next 2 subsequent tax years and the taxpayer will continue to file a return and pay the tax imposed under this part (Sec. 757).

• Establishes the business income tax base means a taxpayer’s business income subject to the following adjustments, before allocation or apportionment, including the elimination of all of the following (Sec. 759.h):

• Income from producing oil and gas to the extent included in federal taxable income;

• Expenses of producing oil and gas to the extent deducted in arriving at federal taxable income;

• Income derived from a mineral to the extent included in federal taxable income of a qualified taxpayer; and

• Expenses related to the income deductible to the extent deducted in arriving at federal taxable income.

• Prohibits a taxpayer allocated income as a member of a flow-through entity by the flow-through entity from claiming a credit against the tax imposed by this part for the taxpayer’s allocated share of the tax as reported by the other flow-through entity for the tax year ending on or within the taxpayer’s same tax year (Sec. 771).

• Requires a taxpayer that reasonably expects liability for the tax year to exceed $800.00 to file an estimated return and pay an estimated tax for each quarter of the taxpayer’s tax year in the same manner as provided (Sec. 781-1).

• Authorizes the department to extend the date for filing the annual return. Interest at the rate will be added to the amount of the tax unpaid for the period of the extension. The state treasurer shall require with the application payment of the estimated tax liability unpaid for the tax period covered by the extension (Sec. 785-2).

• Specifies an estate or trust that is either a member of a flow-through entity that elects to file a return and pay the tax imposed under this part or a direct or indirect member of another flow-through entity that elects to file a return and pay the tax imposed under this part to report to its beneficiaries their allocable share of the tax imposed under this part and reported to the estate or trust under (Sec. 789-2).

• Requires the tax levied under this part, that percentage of the gross collections before refunds that is equal to 1.012% divided by the tax rate levied under this part to be deposited in the state school aid fund created in the state constitution of 1963 and the balance of the revenue collected under this part after the distribution to the school aid fund shall be deposited into the general fund (Sec. 793).

Full Bill Text