Advocacy News – February 17, 2022
Yesterday, Michigan Chamber of Commerce’s Director of Tax Policy and Legislative Affairs, Leah Robinson, testified before Michigan Senate Finance Committee in support of an important initiative to align Michigan with federal practice for business interest expense deduction limitation. Senate Bill 195, sponsored by Senator Aric Nesbitt, allows Michigan’s unitary business groups to calculate their business interest expense at the group, or taxpayer, level – rather than Michigan’s administratively required individual level, and ensures Michigan’s administration of the business interest expense matches the federal practice.
To read some of the testimony provided to committee in support of the bill, see below.
“The 2017 Tax Cuts and Jobs Act broadened many tax bases by limiting the deductibility of certain business interest expenses. This limitation generally applies to consolidated or unitary business groups. Taxpayers normally deduct interest expenses from their taxable income and business interest expenses are the interest on loans used for business operations or associated expenses often utilized for purchases of large assets or other major business investments that promote job growth.
Currently in Michigan, businesses have been administratively required to file their deductible business interest expense at the individual level, rather than the group level, which places Michigan in an outlier position, as this is not how the interest expense limitation is treated at the federal level or across various states. The result is that Michigan’s current approach creates a less competitive tax environment for current and future Michigan businesses. Senate Bill 195 confirms that Michigan’s approach aligns with the federal practice of allowing the deduction limitation to be calculated at the group – or the taxpayer – level and only attempts to clarify and streamline, as well as provide best practices, for how the business interest expense deduction limitation is administered in our state.”
The bill, which is retroactive to January 1, 2021, is currently awaiting a vote on the floor of the Michigan Senate. You can follow the progress of the bill here. For questions or more information, please contact Leah Robinson and lrobinson@michamber.com.