HOUSE BILL NO. 4862
June 28, 2023, Introduced by Reps. Aragona, Kunse, Fox, Slagh, Johnsen, DeBoyer, Bollin, Rigas,
Schmaltz, Beson, St. Germaine, Cavitt, Markkanen, Outman and Hoadley and referred to the
Committee on Tax Policy.
A bill to amend 1964 PA 284, entitled
"City income tax act,"
by amending sections 2a, 3, 3a, 3b, and 3c of chapter 1 and
sections 11, 13, 15, 16, and 51 of chapter 2 (MCL 141.502a,
141.503, 141.503a, 141.503b, 141.503c, 141.611, 141.613, 141.615,
141.616, and 141.651), section 2a of chapter 1 as added by 1995 PA
234, section 3 of chapter 1 as amended by 2012 PA 394, section 3a
of chapter 1 as amended and section 3b of chapter 1 as added by
1987 PA 223, section 3c of chapter 1 as amended by 2011 PA 56,
section 11 of chapter 2 as amended by 1995 PA 233, section 13 of
chapter 2 as amended by 1988 PA 216, and section 51 of chapter 2 as
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amended by 2018 PA 456.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 CHAPTER 1
2 Sec. 2a. (1) Beginning January 1, 1995, a city shall not
3 impose an excise tax on income under this act unless at least 1 of
4 the following applies:
5 (a) The city had in effect on January 1, 1995 an excise tax on
6 income under this act.
7 (b) The imposition of an excise tax on income under this act
8 is approved by the qualified and registered electors of the city.
9 (2) Beginning January 1, 2024, a city shall not impose an
10 excise tax on income under this act on nonresident individuals.
11 Sec. 3. (1) The governing body of a city, by a lawfully
12 adopted ordinance that incorporates by reference the uniform city
13 income tax ordinance set forth in chapter 2, may levy, assess, and
14 collect an excise tax on income as provided in the ordinance. The
15 ordinance shall must state the rate of the tax which shall be and
16 the rate must be authorized by 1 of the following:
17 (a) The uniform city income tax ordinance under section 11 of
18 chapter 2.
19 (b) Subsection (2).
20 (c) Section 3a, 3b, or 3c of this chapter.
21 (2) In a city with a population of more than 600,000, the
22 governing body may levy and collect a tax at a rate to be
23 determined from time to time, that rate to be must not be more than
24 2% on corporations and the following maximum tax rates on resident
25 individuals and, through December 31, 2023, on nonresident
26 individuals for the following years:
27 (a) Before July 1, 1999, 3.00% on resident individuals and
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1 1.50% on nonresident individuals.
2 (b) Beginning July 1, 1999 and each July 1 after 1999 through
3 July 1, 2012, except for 2008 and 2009, the maximum tax rate under
4 this subsection on resident individuals shall must be reduced by
5 0.1 until the rate on resident individuals is 2.0%. The tax rate
6 imposed on nonresident individuals shall be 50% of the tax rate
7 imposed on resident individuals each year.
8 (c) Notwithstanding any other provision of this section, for
9 the 2008 and 2009 calendar years, the city shall impose the same
10 tax rate on resident individuals and nonresident individuals as the
11 city had imposed for the 2007 calendar year.
12 (d) Except as otherwise provided under subdivision (e),
13 beginning January 1, 2013 and each year after 2013, a rate of not
14 more than 2.40% on resident individuals and 1.20% on nonresident
15 individuals.
16 (e) Beginning January 1 of the year immediately succeeding the
17 year that all bonds, obligations, and other evidence of
18 indebtedness issued by a lighting authority have been fully paid
19 and each year thereafter, a rate of not more than 2.20% on resident
20 individuals and 1.10% on nonresident individuals.
21 (3) Notwithstanding any other provision of law or any
22 ordinance of the city to the contrary, a city that forms a lighting
23 authority shall deposit an amount equal to the sum of the revenue
24 collected from 0.2% of the rate levied on resident individuals
25 pursuant to subsection (2)(d) and 0.1% of the rate levied on
26 nonresident individuals pursuant to subsection (2)(d) directly into
27 the budget of the city's police department and use it exclusively
28 to retain or hire police officers. The transfer and use of the
29 revenue as provided under this subsection shall continue until all
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1 bonds, obligations, or other evidence of indebtedness issued by a
2 lighting authority have been fully paid and revenue is no longer
3 being pledged from taxes levied under the city utility users tax
4 act, 1990 PA 100, MCL 141.1151 to 141.1177, to the lighting
5 authority. As used in this subsection, "lighting authority" means a
6 lighting authority incorporated under the municipal lighting
7 authority act, 2012 PA 392, MCL 123.1261 to 123.1295.
8 (4) The governing body of a city may adopt the uniform city
9 income tax ordinance with the alternative sections as set forth in
10 chapter 3 instead of the similarly numbered sections as set forth
11 in chapter 2. The uniform city income tax ordinance may be lawfully
12 adopted or rescinded by the governing body at any time. The
13 adoption of an ordinance is effective on and after January 1 or
14 July 1 following adoption of the ordinance, as specified in the
15 ordinance, but an ordinance shall must not become effective earlier
16 than 45 days after adoption or until approved by the electors if a
17 referendum petition is filed as authorized in this act or a
18 referendum is otherwise required. The rescission of an ordinance
19 shall become is effective on the following December 31. The
20 ordinance may be rescinded at any time by the governing body in the
21 same manner in which it was adopted and with appropriate
22 enforcement, collection, and refund provisions with respect to
23 liabilities incurred prior to the effective date of the rescission
24 of the ordinance. The ordinance shall must not be amended except as
25 provided by the legislature. A city may amend the ordinance to
26 change the tax rate to a rate authorized by this act.
27 (5) Petitions for a referendum election on the question of
28 adopting an ordinance adopted by the governing body may be filed
29 with the city clerk not later than the sixth Monday following the
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1 adoption of the ordinance. The petitions shall be signed by a
2 number of registered electors of the city equal to at least 10%,
3 but not more than 20%, of the registered electors of the city
4 voting in the last general municipal election prior to the adoption
5 of the ordinance by the governing body. If proper petitions are
6 filed, the question of adopting the ordinance shall must be
7 submitted by the governing body to the city electors at the next
8 primary or general election or at a special election called for the
9 purpose, in any case held not less than 45 days nor more than 90
10 days after the clerk has reported the filing of the referendum
11 petition to the city's governing body. The checking of names on the
12 petitions, the counting, canvassing, and return of the votes on the
13 question, and other procedures for the election shall must be as
14 provided by law or charter. Upon a favorable vote of the city
15 electors, the ordinance shall be is effective as specified in the
16 ordinance which may be amended by the governing body of the city
17 following the election to specify July 1 or January 1 as the
18 effective date of the ordinance, if the effective date originally
19 specified in the ordinance is considered impractical or
20 inconvenient for any reason. The provisions in this section for a
21 referendum election, and for delaying the effective date of the
22 ordinance if petitions for a referendum are filed, are not
23 applicable to a city that on January 1, 1964 had in effect a valid
24 ordinance levying and imposing an excise tax levied on or measured
25 by income. Notwithstanding any other provision of this act, if an
26 ordinance becomes effective on any date other than January 1, each
27 tax year shall end on December 31, and the provisions of the
28 ordinance based on a full tax year are modified accordingly to be
29 applicable to the partial tax year.
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1 Sec. 3a. (1) The specific rates to be levied by a city on
2 corporations, resident individuals, and, through December 31, 2023,
3 nonresident individuals shall be established within the applicable
4 limitations allowed under this section and section 3 of this
5 chapter in the ordinance which otherwise incorporates by reference
6 the uniform city income tax ordinance set forth in chapter 2.
7 (2) The governing body of a city with a population of less
8 than 1,000,000 persons may levy, assess, and collect an excise tax
9 on income earned and received at a rate of not more than 2% on
10 corporations, not more than 2% on resident individuals, and,
11 through December 31, 2023, not more than 50% of the rate imposed on
12 resident individuals on nonresident individuals if approved by a
13 majority of the qualified electors of the city voting thereon
14 before November 15, 1988, and if all of the following occurred in
15 the calendar year immediately preceding the calendar year in which
16 the increased rates allowed by this subsection initially would
17 apply:
18 (a) The city levied more than 22 mills for city purposes and
19 for payment of judgments ordered by a court of competent
20 jurisdiction.
21 (b) More than 65 mills were levied in the city for all
22 purposes.
23 (c) The city levied a tax pursuant to this act.
24 (3) Any increase in the tax rate permitted by this section
25 shall not become is not effective until the governing body of the
26 city, by resolution, provides for securing the services of a
27 financial management consultant. The financial management
28 consultant shall be selected by the mayor, with the approval of the
29 local emergency financial assistance loan board created under Act
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1 No. 243 of the Public Acts of 1980, as amended, being sections
2 141.931 to 141.942 of the Michigan Compiled Laws. the emergency
3 municipal loan act, 1980 PA 243, MCL 141.931 to 141.942, shall
4 select the financial management consultant. The resolution shall
5 further provide that the financial management consultant shall must
6 be paid from city funds. The duties of the financial management
7 consultant shall be to monitor the fiscal condition of the city, to
8 report the findings of this monitoring to the local governing body,
9 the mayor, and the local emergency financial assistance loan board,
10 and to provide financial management technical assistance to the
11 city. The local emergency financial assistance loan board shall
12 determine the form of monitoring and the frequency of reporting.
13 The financial management consultant shall have full access to all
14 fiscal and other records of the city. The services of a financial
15 management consultant may be terminated subject to the approval of
16 the local emergency financial assistance loan board at such time as
17 improvement in the financial condition of the city warrants this
18 action. The local emergency financial assistance loan board may
19 make recommendations to the legislature that will assist in the
20 attainment of further fiscal improvement for the city.
21 Sec. 3b. A city that levied the tax authorized by this act
22 before the effective date of this section December 28, 1987 may
23 amend the ordinance to increase the rate to an annual tax of not
24 more than 1.4% on corporations and resident individuals and,
25 through December 31, 2023, not more than 0.7% on nonresident
26 individuals. The increase in the tax authorized by this section
27 shall not be levied for not longer more than 13 years as provided
28 in the ballot proposal submitted to the electors. An amendment to
29 the city income tax ordinance under this section is not effective
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1 unless the amendment is approved before July 1, 1988 by a majority
2 vote of the registered and qualified electors of that city voting
3 on the proposition. This section applies only to a city that has a
4 population of more than 50,000 and that, within 6 years before the
5 approval of the amendment authorized by this section, annexes to
6 the city an area containing more than 20 square miles.
7 Sec. 3c. A city that levied the tax authorized by this act
8 before March 30, 1989 may amend the ordinance to increase the rate
9 to an annual tax of not more than 1-1/2% on corporations and
10 resident individuals and, through December 31, 2023, not more than
11 3/4% on nonresident individuals, but not more than 1/2 of the tax
12 rate imposed on resident individuals. An amendment to the city
13 income tax ordinance under this section is not effective unless the
14 amendment is approved by a majority of the qualified electors
15 voting on the question. Before November 10, 1989, an amendment
16 under this section shall must not be placed before the voters for
17 approval more than once in any 12-month period. This section
18 applies only to a city with a population of more than 140,000 and
19 less than 600,000 or a city with a population of more than 65,000
20 and less than 100,000 in a county with a population less than
21 300,000.
22 CHAPTER 2
23 Sec. 11. Subject to the exclusions, adjustments, exemptions,
24 and deductions herein provided in this chapter, an annual tax of 1%
25 on corporations and resident individuals and, through December 31,
26 2023, of 1/2% on nonresident individuals for general revenue
27 purposes and the purposes provided for in sections 11a and 11b is
28 hereby imposed as an excise on income earned and received on and
29 after the effective date of this ordinance. However, if the
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1 governing body of the city adopts a resolution to impose the tax at
2 a lower rate, the tax is hereby imposed at that lower rate. If the
3 tax is imposed at a lower rate, the rate on nonresident individuals
4 through December 31, 2023 shall not exceed 1/2 of the rate on
5 corporations and resident individuals.
6 Sec. 13. The Through December 31, 2023, the tax shall apply on
7 the following types of income of a nonresident individual to the
8 same extent and on the same basis that the income is subject to
9 taxation under the federal internal revenue code:
10 (a) On a salary, bonus, wage, commission, and other
11 compensation for services rendered as an employee for work done or
12 services performed in the city. Income that the nonresident
13 taxpayer receives as the result of disability and after exhausting
14 all vacation pay, holiday pay, and sick pay is not compensation for
15 services rendered as an employee for work done or services
16 performed in the city. Vacation pay, holiday pay, sick pay and a
17 bonus paid by the employer are considered to have the same tax
18 situs as the work assignment or work location and are taxable on
19 the same ratio as the normal earnings of the employee for work
20 actually done or services actually performed.
21 (b) On a distributive share of the net profits of a
22 nonresident owner of an unincorporated business, profession,
23 enterprise, undertaking, or other activity, as a result of work
24 done, services rendered, and other business activities conducted in
25 the city.
26 (c) On capital gains less capital losses from sales of, and on
27 the net profits from rentals of, real and tangible personal
28 property, if the capital gains arise from property located in the
29 city.
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1 Sec. 15. An unincorporated business, profession or other
2 activity conducted by 1 or more persons subject to the tax as
3 either a sole proprietorship or partnership shall not be taxable as
4 such. The persons carrying on the unincorporated business,
5 profession or other activity are liable for income tax only in
6 their separate and individual capacities and on the following
7 bases:
8 (a) A resident proprietor or partner is taxable upon his that
9 individual's entire distributive share of the net profits of the
10 activity regardless of where the activity is conducted.
11 (b) A Through December 31, 2023, a nonresident proprietor or
12 partner is taxable only upon his that individual's distributive
13 share of the portion of the net profits of the activity which is
14 attributable to the city under the allocation methods provided in
15 this ordinance.
16 (c) In the hands of a proprietor or partner of an
17 unincorporated activity, the character of any item of income
18 taxable under this ordinance is de