• No results found

General Business Tax Changes

N/A
N/A
Protected

Academic year: 2021

Share "General Business Tax Changes"

Copied!
9
0
0

Loading.... (view fulltext now)

Full text

(1)

General Business Tax Changes

• Michigan is replacing the Michigan Business Tax (MBT) in 2012 with a new, simpler

and more competitive corporate income tax.

o Low tax rates will be established in Michigan. The new structure will tax C-Corporations at 6% on federal taxable income apportioned to Michigan. Other entities – individuals, partnerships, LLCs, etc. – would have income flow to their personal income tax. The personal income tax rate remains 4.35% and is scheduled to decline to 4.25%in 2013.

o The change will reduce business taxes by an estimated 86%. All industries are in line for significant tax cuts, thus reducing operational costs and encouraging new investment in the state.

o Michigan’s overall business tax climate ranking is now 13th in the U.S.,

according to the Tax Foundation. In isolating the corporate tax rankings, the

Foundation’s Michigan ranking jumps to 22nd from the previous level of 48th. • The new, simplified tax system provides a significant broad- based reduction in

business taxes and eliminates a laundry list of credits and deductions currently included in the MBT. Furthermore, the alternative business income tax for small

business remains intact and other economic development tools are still available. • Michigan’s tax structure will not change until January 1, 2012.

• The MEDC can work with firms to provide them with more tax information about their

(2)

Pure Michigan: Asset-Based Economic Development

The MEDC and State of Michigan provides significant value to businesses looking to expand or locate their business here, including:

o $175 Million annually in business attraction and economic gardening programs

and business assistance through MEDC;

 $100 million available for attraction and economic gardening  $25 million available for business acceleration

 $25 million available to support the film and digital media industry  $25 million available to support the Pure Michigan promotion program o A Simplified and Competitive Business Tax Structure. With a new and improved

tax system, Michigan is a better place to do business.

o Talent Enhancement. A suite of services are available to firms that need to find the right people for their business. The MEDC’s Talent Enhancement team works closely with businesses to identify and screen talent, provide HR consulting and training services.

o Cost-Cutting & Ombudsman Services. The MEDC helps companies save money through our Workers’ Compensation Cost Control Service. We also assist companies in finding property for expansions. Our Business Ombudsman Office provides impartial, independent and confidential assistance in resolving disputes and investigating business complaints against state government agencies.

o Pure Michigan Business Connect – an economic gardening tool. The MEDC is working closely with major businesses, state agencies, financial institutions and sources of funding to encourage them to source work within Michigan and to invest in Michigan-based businesses. This opportunity will provide Michigan firms with over $1.5 billion in supplier contracts, capital access and business resources.

o Federal Contract Assistance. With the growing need for qualified defense contractors, the Michigan Defense Center strategically connects defense industry buyers and prime contractors with Michigan based-companies. In addition, our network of Procurement Technical Assistance Centers assists

(3)

companies throughout the entire government procurement process from pre-award to post-pre-award. MEDC also tracks federal grant programs and makes companies aware of opportunities and offer letters of support where applicable. o Strengthening Michigan Companies. In partnership with our strategic service

providers, we assist companies in the development of business and marketing plans, in matchmaking with Michigan suppliers, and in connecting companies to the best manufacturing practices and technologies available.

o Financing Assistance. The MEDC works to match company needs with available financing programs. The MEDC can assist companies with a full complement of financing programs – from angel investors and venture capital funds, to

accessing SBA financing programs, to credit enhancement and collateral support. o Patent/Trademark Work. In conjunction with Michigan law firms and our Small

Business Technology Development Center network, the MEDC is launching an initiative to make available pro bono services in the IP sectors of patents, trademark and copyright laws.

o Local Incentives. An array of property tax abatement programs is available at the local government level, including PA198 and PA328. Obsolete property redevelopment projects may garner incentives under PA146, PA210, and PA255, as well as PA198.

(4)

What Will Stay the Same with the New Tax Structure?

• Michigan’s property tax system retains all exemptions and abatement programs. The automatic 24-mill reduction on industrial personal property and automatic 12-mill reduction on commercial personal property will continue. In addition, firms may still apply for property tax abatements under the Plant Rehabilitation and Industrial Development Districts Act (PA198) and the New Personal Property Tax Exemption(PA 328) through their local unit of government.

• Commercial and industrial property rehabilitation incentives are still available for

community redevelopment projects. Obsolete property may garner property tax

incentives under Obsolete Property Redevelopment Act (OPRA), Commercial Rehabilitation Act (PA 210), Commercial Redevelopment Act (PA 255), or Plant Rehabilitation and Industrial Development Districts Act (PA198), depending on the details of the project.

• Property tax exemptions for inventory, special tooling and pollution control

equipment will remain in place under standard operating procedures.

• Sales tax exemptions for industrial machinery & equipment, pollution control equipment, and energy used in manufacturing are still available.

• Renaissance Zones remain in effect. Geographic zones are available throughout the state, as well as specialized zones for agriculture processing, forest products processing, renewable energy, and tool & die. The property tax reductions under the Renaissance Zone program will continue. However,Renaissance Zones credits under the new corporate income tax will not be available. Only specific companies in Renaissance Zones with development agreements with the Michigan Strategic Fund in place prior to January 1, 2012, will be allowed to continue the business tax credit.

(5)

What will happen to credits approved in the past?

All credit agreements executed before January 1, 2012 will be honored under the new tax system. These credits, called “Certificated Credits,” include the following:

• MEGA (including standard, high-tech and retention) • Brownfield Credit

• Renaissance Zones Credits designated for the following: Agriculture Processing, Forest Products, Renewable Energy, Next Michigan, Tool & Die, and Border Crossing.

• Historic Preservation Credit

• Michigan Film Credits, including infrastructure and production company credits • Michigan Early Stage Venture Investment Credit

• Photovoltaic MBT Credit • Anchor Jobs Credit

• Defense Contracting MBT Credit • Anchor District Credit

• Polycrystalline Energy Credit • Battery Production Credit • Hybrid R&D Technology Credit

The new tax reform will allow taxpayers to receive the benefits of their certificated credits by electing to continue to file the MBT. Companies will calculate and apply the value of their other credits to the higher of either the MBT liability or the calculated Corporate Income Tax (CIT) liability as if they were subject to the CIT. Companies may also opt-out of this option and simply file under the CIT.

(6)

Is the MEDC still providing incentives to projects?

• The MEDC remains committed to businesses looking to expand, locate, or stay in

Michigan. MEDC, along with its local partners, will continue to provide services, support

and incentives to business clients. Going forward, MEDC will have an annual incentive budget from which to work and will develop programs that are simple to explain and simple to execute and track.

• Please contact your Business Development Manager or Community Assistance Team

Member to discuss specific projects and needs. The MEDC’s project intake process

remains unchanged and the MEGA and MSF Boards will continue to make final decisions regarding incentives.

• Property tax abatements and exemptions will remain in place. Firms may still apply for PA 198, PA 328, commercial rehabilitation, OPRA, Neighborhood Enterprise Zones, and others are still available through local governmental units.

• The MEDC will continue to utilize existing tools within the framework and intent of

the new budget. The MEDC will have an annual incentive budget from which to work

and we will develop new programs that are simple to explain and simple to execute and track. The MEDC’s annual allocation could be up to $50 million, which would be used to incent all business growth and retention projects, including community and economic development projects.

(7)

Renaissance Zones

The Renaissance Zone Program will continue to be available for projects even with the changes to the business tax laws going into effect on January 1, 2012. Projects considered and approved for

Renaissance Zone benefits after January 1, 2012 will have to qualify for one of the targeted zones listed below. Businesses approved for Renaissance Zone status will not be eligible to receive an exemption from the new Corporate Income Tax (CIT) but will receive all other renaissance zone benefits, including all property tax exemptions.

Existing Renaissance Zone projects will continue to receive their benefits if they are defined as “Certificated Credits” under the new tax reform law. A “Certificated Credit” is generally defined as a project approved prior to January 1, 2012 and that also has a development agreement between the taxpayer and the Michigan Strategic Fund. Firms with projects that meet this definition may continue to file the Michigan Business Tax (MBT) which will allow them to apply the credit value to the higher of the MBT liability of the new CIT. All other Renaissance Zone benefits will continue to apply to projects without change until the duration of the zone expires.

AVAILABLE RENAISSANCE ZONES

• Agricultural Processing Renaissance Zones (APRZ) Five APRZs are available for designation.

• Forest Products Processing Renaissance Zones (FPPRZ) Nine FPPRZs are available for designation.

• Renewable Energy Renaissance Zones (RERZs)

Six RERZs are available for designation, with two required for cellulosic biofuels projects.

• Tool & Die Recovery Zones

Six Tool & Die Recovery Zones are available for designation.

• Michigan Strategic Fund (MSF) Designated Renaissance Zones (MSF RZs)

Twelve MSFRZs are available for designation, with two being site-specific. Of the remaining available zones, a minimum of three designations must be

located in rural areas.

• Next Michigan Renaissance Zones

Specified Next Michigan Development Corporations (NMDCs) may designate Renaissance Zones within a geographic plan approved by the MSF. Under this program, there are limits on the number of NMDCs, zones, and participating companies. Interested local governments should work closely with the MEDC in reviewing the scope of the program parameters.

• Border Crossing Renaissance Zones (BCRZ)

BCRZs designations are available and limited to Port Huron and two of its contiguous townships.

(8)

Michigan Corporate Income Tax Impact on Existing Tax Credits Recipients

The new Michigan Corporate Income Tax (CIT) eliminates almost all tax credits; however, any taxpayer that has an existing credit (or a “certificated credit”) approved and executed before January 1, 2012 will be able to realize the full benefits of their credit. The certificated credits include all of the following:

• MEGA Credits (including standard, high-tech, rural and retention) • Brownfield Credits

• Renaissance Zones Credits* • Historic Preservation Credits

• Michigan Film Credits, including infrastructure and production company credits • Michigan Early Stage Venture Investment Credits

• Photovoltaic MBT Credits • Anchor Jobs Credits

• Defense Contracting MBT Credits • Anchor District Credits

• Polycrystalline Energy Credits • Battery Production Credits

• Hybrid R&D Technology Credits

*Renaissance Zone Credits are limited to taxpayers with a development agreement executed between the taxpayer and Michigan Strategic Fund or that are part of a qualified collaborative agreement.

The tax reform will allow taxpayers to receive the benefits of their certificated credits by electing to continue to file the MBT for the duration of their credits. Companies electing to claim their credits and file the MBT will apply the value of the certificated credit to the higher of either the MBT liability, including non-certificated credits, or the calculated CIT liability as if they were subject to the CIT. Companies may also opt-out of this option and simply file under the CIT if they would have a lower CIT liability compared to the value of their certificated credit under the MBT formula, but they would forego any remaining credits.

Companies must determine if they want to continue to file the MBT in their first tax year ending after December 31, 2011, except for Brownfield and Historic Tax Credits. Once a company elects to continue to file the MBT they must remain in the MBT until all their credits and any carryforwards are used up. Taxpayers are encouraged to consult a CPA or tax attorney for professional assistance. Taxpayers with Brownfield and Historic Tax Credits do not have to elect to remain in the MBT in their first tax year after December 31, 2011, and may elect to file the MBT in the specific year in which they want to claim their tax credits. Brownfield and Historic certificated tax credits may also elect to take a refund at 90% of credit value.

(9)

   

Certificated Credit Illustration 

FIRST STEP:  For the 2012 tax  year,  a taxpayer with a certificated credit makes a one‐time election to file MBT with credits or file the CIT and forego the  credits.  Treatment will vary for Brownfield and Historic Preservation credits as described on page one of this summary.   Company A        Company B      Company C    MBT Calculation:  Gross Receipts Liability       $ 6 mil  + Business Income Liability    $ 3 mil      Liability before credits      $ 9 mil    ‐ Non‐Certificated Credits      $ 2 mil   ‐ Certificated Credits       $ 5 mil  MBT Liability      $2 mil    CIT Calculation   (no credits):          Liability         $3 mil  MBT Calculation: Gross Receipts Liability       $ 8 mil    + Business Income Liability    $ 2 mil     Liability before credits      $10  mil   ‐ Non‐Certificated Credits     $ 8  mil  ‐ Certificated Credits       $  3 mil  MBT Liability      ($1  mil)    CIT Calculation  (no credits):          Liability       $3 mil  MBT Calculation: Gross Receipts Liability         $ 5 mil    + Business Income Liability  $ 2 mil     Total Base Liability       $ 7 mil   ‐ Non‐Certificated Credits     $ 1 mil  ‐ Certificated Credits      $ 2 mil  MBT Liability      $ 4 mil    CIT Calculation   (no credits):            Liability     $2 mil  SECOND STEP:  For Company A and Company B,  the MBT scenario is more favorable and both companies would elect  to keep the certificated credits.   Hencefore it applies the certificated credits to higher MBT liability or CIT Liability for  the life of the certificated credit.  In Company C’s situation, going with the CIT is more  favorable.  Thus, Company C foregos their  credits  and  henceforth files taxes under the new CIT (see final step  below).  Company A    Company B MBT Calculation:  Gross Receipts Liability       $ 6 mil     + Business Income Liability      $ 3 mil             Liability Before Credits       $ 9 mil   ‐ Non‐Certificated Credits     $ 2  mil   Liability Before Cert Credits  $ 7 mil         Liability Before Cert Credits   $7 mil   ‐ Certificated Credits       $  5  mil  MBT Liability      $  2 mil CIT Calculation   (no credits):                Liability      $3 mil  No Credits     $0          Liability      $3 mil      N/A  Liability      $3 mil  ‐ CertCredit ($ 5 mil)  Liability      ($  2 mil)   MBT Calculation: Gross Receipts Liability       $ 8 mil    + Business Income Liability $2 mil           Liability Before Credits      $ 10 mil  ‐ Non‐Certificated Credits  $8 mil   Liability Before CertCredits  $2 mil       N/A  Liability Before CertCredits  $2 mil  ‐ Certificated Credits      $ 3  mil  MBT Liability      ($  1 mil)  CIT Calculation  (no credits):          Liability      $3 mil  No Credits     $0          Liability       $3 mil            Liability       $ 3 mil  ‐CertCredit $ 3mil  Liability      $ 0 mil    FINAL STEP: FILE TAX RETURNS 

COMPANY A LIABILITY = $2 MIL       COMPANY B LIABILITY = $0      COMPANY C = $2 MIL 

Use Higher Liability 

Use Higher Liability 

References

Related documents

Community Services: Our role going  forward Partnership and Collaboration with VA and other healthcare organizations

The Company classifies its financial assets under the following categories: financial assets at amortised cost, investments at fair value through profit or loss (FVTPL) and

are sometimes used to demonstrate the efficacy of a drug that may have large placebo effects. Active controls are also used to determine how experimental treatments compare

La filosofía debe buscar la parte de la verdad que se manifiesta en cada tiempo histórico, más que pretender adquirir de una vez por todas, la ver- dad absoluta que se expresa en

when the Hysime denoising method is applied may be due in part to the strategy of the estimator used to obtain the information measures. The estimator in both cases is a local

• Configure FORCED PARAMETERIZATION for the database, if there are a small number of different. query plans in

For Type III skiers move down two Skier Codes (see page 75). If the skier is age 50 or older or under 10 move up the chart one Skier Code toward the top. For skiers 13 kg/ 29 lbs

Additional subunit COI/COII homology models of hummingbird cytochrome c oxidase [both wild-type (S153) and mutant (A153) model systems] were constructed using bovine structure and