SB 248 will allow for a streamlined, predictable method for reporting changes in federal tax liability to state tax authorities where one does not currently exist. This promotes tax compliance and efficiency.
The legislation is a part of a national effort to codify the Multistate Tax Commission’s (MTC) model statute (Model Uniform Statute and Regulation for Reporting Adjustments to Federal Taxable Income and Federal Partnership Audit Adjustments) in response to the federal centralized partnership audit regime enacted by Congress in 2015.
SB 195: This legislation is in reaction to the Michigan Department of Treasury notice that limits a taxpayer’s ability to fully take advantage of the Internal Revenue Codes (IRC) section on interest expense deductibility. To allow taxpayers to take full advantage of this federal tax provision for state purposes, the Michigan Chamber is looking to codify a more favorable interpretation of the law.
HB 4324: This legislation would allow a business making a capital investment to expense the purchase in the year of acquisition. By expensing 100% of an asset in one-year, taxable income will be reduced more favorably as opposed to having to expense the asset over a number of years. The legislation also reduced compliance burdens for taxpayers because it aligns Michigan with federal depreciation methodologies.
HB 4224 and HB 4225: This legislation exempts from sales and use tax the sale of personal protective equipment (PPE) and supplies to a person engaged in a business enterprise that has implemented a COVID-19 safety protocol plan. The exemptions would be retroactive and apply beginning March 10, 2020, through December 31, 2021.
HB 4288: This legislation is expected to save businesses organized as s-corporations, partnerships, limited partnerships, limited liability partnerships and limited liability companies almost $200 million in taxes per year.
Business types listed above, commonly referred to as “passthrough” businesses, will be able to fully deduct their state and local taxes (SALT) from their federal income under changes made in HB 4288 thereby, significantly reducing their federal tax liability. Because the legislation shifts the tax away from an individual and to the business entity, taxpayers can get out from underneath the federal $10,000 cap on SALT deductions.
SJR C (Irwin): This joint resolution would eliminate Michigan’s longstanding, fair, flat income tax and replace it with one with a graduated one. A flat rate income tax is when with one tax rate applying to all incomes. A graduated income tax rate, also called a progressive tax, is a tax structure that levies increasingly higher tax rates on higher-earning individuals or businesses. Essentially, under this kind of system: the more you make, the more you pay.
SB 20 (Zorn): The legislation would expand the allowable use of “Sinking Funds” to be used for the purchase of school busses. Sinking Funds are a special pots of resources a school district can request from taxpayers to use for very limited, capital improvements to real property. Sinking funds are funded by local property tax millages.