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The Michigan Business Tax Enacted!
Eleven months after the Michigan Legislature approved the voters’ initiative to repeal the Single Business Tax (SBT), its replacement, the Michigan Business Tax (MBT), was signed into law on July 12, 2007 by Governor Jennifer Granholm. For taxpayers other than financial institutions and insurance companies, the MBT imposes two taxes - a modified gross receipts tax (GRT) at
0.8% and a business income tax (BIT) at 4.95%. Financial institutions and insurance companies are subject to industry-specific taxes.
In addition, significant personal property tax relief is granted for Michigan commercial and industrial personal property.
MBT is effective for years beginning on January 1, 2008. Taxpayers, other than financial institutions and insurance companies, with less than $350,000 of Michigan apportioned gross receipts, are exempt from the MBT.
Financial institutions and insurance companies are exempt from the GRT and BIT. Instead, financial institutions are subject to a tax on net capital at a rate of 0.235%. Insurance companies are subject to a 1.25% tax on gross direct premiums written on property or risk located or residing in Michigan.
With the repeal of the services tax, the lost revenue from the services tax will be replaced with an annual surcharge on the tax liability of MBT taxpayers. The surcharge is imposed
before the various credits available under the MBT. The surcharge is 21.99% for all but financial institutions. An alternate surcharge for financial institutions is 27.7% for 2008 tax year and 23.4% for 2009 and after.
The bill limits the amount of the surcharge imposed and levied on any one taxpayer so that it cannot exceed $6 million for any single tax year. The $6 million cap does not apply to the alternate surcharge on financial institutions and insurance agencies.
Many of the tax credit incentives provided under the SBT have been retained within the MBT. In addition MBT has created several new credits. The
Compensation Credit is equal to .296% for 2008 and .37% for 2009 and thereafter of compensation and benefits paid to Michigan workers. The
Investment Credit is similar to the investment credit under the SBT. Costs paid or incurred related to depreciable or amortizable tangible personal property placed in service in Michigan are eligible for a credit equal to 2.32% for 2008 and 2.9% for 2009 and thereafter of such costs. A
Research and Development Credit is available and equal to 1.52% for 2008 and 1.9% for 2009 and thereafter of Michigan research and development costs.
Please feel free to contact us if you have any questions.
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