Bill Summary – FastDemocracy

SENATE BILL NO. 874
     May 16, 2024, Introduced by Senator WEBBER and referred to the Committee on Finance,
       Insurance, and Consumer Protection.
          A bill to amend 1967 PA 281, entitled
    "Income tax act of 1967,"
    by amending section 51 (MCL 206.51), as amended by 2023 PA 4.
                    THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 51. (1) For receiving, earning, or otherwise acquiring
 income from any source whatsoever, there is levied and imposed
 under this part upon the taxable income of every person other than
 a corporation a tax at the following rates in the following
 circumstances:
       (a) On and after October 1, 2007 and before October 1, 2012,
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 4.35%.
       (b) Except as otherwise provided under subdivision (c), on and
 after October 1, 2012, 4.25%.
       (c) For each tax year beginning on and after January 1, 2023,
 if the percentage increase in the total general fund/general
 purpose revenue from the immediately preceding fiscal year is
 greater than the inflation rate for the same period and the
 inflation rate is positive, then the current rate shall be reduced
 by an amount determined by multiplying that rate by a fraction, the
 numerator of which is the difference between the total general
 fund/general purpose revenue from the immediately preceding state
 fiscal year and the capped general fund/general purpose revenue and
 the denominator of which is the total revenue collected from this
 part in the immediately preceding state fiscal year. For purposes
 of this subdivision only, the state treasurer, the director of the
 senate fiscal agency, and the director of the house fiscal agency
 shall determine whether the total revenue distributed to general
 fund/general purpose revenue has increased as required under this
 subdivision based on the comprehensive annual financial report
 prepared and published by the department of technology, management,
 and budget in accordance with section 23 of article IX of the state
 constitution of 1963. The state treasurer, the director of the
 senate fiscal agency, and the director of the house fiscal agency
 shall make the determination under this subdivision no later than
 the date of the January 2023 revenue estimating conference
 conducted pursuant to sections 367a through 367f of the management
 and budget act, 1984 PA 431, MCL 18.1367a to 18.1367f, and the date
 of each January revenue estimating conference conducted each year
 thereafter. As used in this subdivision:
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        (i) "Capped general fund/general purpose revenue" means the
 total general fund/general purpose revenue from the 2020-2021 state
 fiscal year multiplied by the sum of 1 plus the product of 1.425
 times the difference between a fraction, the numerator of which is
 the Consumer Price Index for the state fiscal year ending in the
 tax year prior to the tax year for which the adjustment is being
 made and the denominator of which is the Consumer Price Index for
 the 2020-2021 state fiscal year, and 1.
        (ii) "Total general fund/general purpose revenue" means the
 total general fund/general purpose revenue and other financing
 sources as published in the comprehensive annual financial report
 schedule of revenue and other financing sources – general fund for
 that fiscal year plus any distribution made pursuant to section
 51d.
        (2) Except as otherwise provided for December 1, 2018 through
 September 30, 2019, beginning January 1, 2000 through September 30,
 2023, that percentage of the gross collections before refunds from
 the tax levied under this section that is equal to 1.012% divided
 by the income tax rate levied under this section shall be deposited
 in the state school aid fund created in section 11 of article IX of
 the state constitution of 1963. For December 1, 2018 through
 September 30, 2019 only, that percentage of the gross collections
 before refunds from the tax levied under this section that is equal
 to 0.954% divided by the income tax rate levied under this section
 shall be deposited in the state school aid fund created in section
 11 of article IX of the state constitution of 1963. For October 1,
 2023 through September 30, 2024 only, that percentage of the gross
 collections before refunds from the tax levied under this section
 that is equal to 1.015% divided by the income tax rate levied under
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 this section shall be deposited in the state school aid fund
 created in section 11 of article IX of the state constitution of
 1963. For October 1, 2024 through September 30, 2025 only, that
 percentage of the gross collections before refunds from the tax
 levied under this section that is equal to 1.023% divided by the
 income tax rate levied under this section shall be deposited in the
 state school aid fund created in section 11 of article IX of the
 state constitution of 1963. For October 1, 2025 through September
 30, 2026 only, that percentage of the gross collections before
 refunds from the tax levied under this section that is equal to
 1.033% divided by the income tax rate levied under this section
 shall be deposited in the state school aid fund created in section
 11 of article IX of the state constitution of 1963. Beginning
 October 1, 2026, that percentage of the gross collections before
 refunds from the tax levied under this section that is equal to
 1.040% divided by the income tax rate levied under this section
 shall be deposited in the state school aid fund created in section
 11 of article IX of the state constitution of 1963.
       (3) In addition to the distributions under subsections (2),
 and (4), and (5) and sections 51d, 51e, and 51f, beginning October
 1, 2016, from the revenue collected under this section an amount
 equal to 3.5% of the average amount of farmland tax credits claimed
 under section 36109 of the natural resources and environmental
 protection act, 1994 PA 451, MCL 324.36109, for the immediately
 preceding 3 state fiscal years shall be deposited into the
 agricultural preservation fund created in section 36202 of the
 natural resources and environmental protection act, 1994 PA 451,
 MCL 324.36202.
       (4) In addition to the distributions under subsections (2),
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 and (3), and (5) and sections 51d, 51e, and 51f, and subject to the
 limitation under this subsection, beginning with the 2018-2019
 state fiscal year and each fiscal year thereafter, from the revenue
 collected under this section $69,000,000.00 shall be deposited into
 the renew Michigan fund created in section 51g. However, if, in any
 1 of the 2018-2019 through the 2021-2022 state fiscal years, the
 minimum foundation allowance falls below the 2017-2018 minimum
 foundation allowance established under section 20 of the state
 school aid act of 1979, 1979 PA 94, MCL 388.1620, as amended by
 2017 PA 108, then no money shall be deposited into the renew
 Michigan fund pursuant to this subsection for that fiscal year.
       (5) Except as otherwise provided under this subsection, in
 addition to the distribution under subsections (2), (3), and (4)
 and sections 51d, 51e, and 51f, beginning October 1, 2024, each
 fiscal year, from the revenue collected from the tax levied under
 this section an amount equal to the sum of the total maintenance
 fees and asset-based fees charged for that fiscal year or
 $300,000.00, whichever is greater, must be deposited in the MiABLE
 fund created in section 3a of the Michigan achieving a better life
 experience (ABLE) program act, 2015 PA 160, MCL 206.983a. For each
 fiscal year that begins after September 30, 2025, the state
 treasurer shall adjust the amount in this subsection by an amount
 determined by the state treasurer at the end of each calendar year
 to reflect the cumulative annual percentage change in the Consumer
 Price Index. For each fiscal year, if the cumulative annual
 percentage change in the Consumer Price Index is negative, then the
 adjustment for that fiscal year is zero. As used in this
 subsection:
       (a) "Asset-based fees" means the administrative and service
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 fees charged under section 3(7)(e) of the Michigan achieving a
 better life experience (ABLE) program act, 2015 PA 160, MCL
 206.983.
       (b) "Maintenance fees" means the fees charged for opening or
 maintaining an account under section 3(6)(f) of the Michigan
 achieving a better life experience (ABLE) program act, 2015 PA 160,
 MCL 206.983.
       (6) (5) The department shall annualize rates provided in
 subsection (1) as necessary. The applicable annualized rate shall
 be imposed upon the taxable income of every person other than a
 corporation for those tax years.
       (7) (6) The taxable income of a nonresident shall be computed
 in the same manner that the taxable income of a resident is
 computed, subject to the allocation and apportionment provisions of
 this part.
       (8) (7) A resident beneficiary of a trust whose taxable income
 includes all or part of an accumulation distribution by a trust, as
 defined in section 665 of the internal revenue code, shall be
 allowed a credit against the tax otherwise due under this part. The
 credit shall be all or a proportionate part of any tax paid by the
 trust under this part for any preceding taxable year that would not
 have been payable if the trust had in fact made distribution to its
 beneficiaries at the times and in the amounts specified in section
 666 of the internal revenue code. The credit shall not reduce the
 tax otherwise due from the beneficiary to an amount less than would
 have been due if the accumulation distribution were excluded from
 taxable income.
       (9) (8) The taxable income of a resident who is required to
 include income from a trust in the resident's federal income tax
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 return under the provisions of 26 USC 671 to 679, shall include
 items of income and deductions from the trust in taxable income to
 the extent required by this part with respect to property owned
 outright.
         (10) (9) It is the intention of this section that the income
 subject to tax of every person other than corporations shall be
 computed in like manner and be the same as provided in the internal
 revenue code subject to adjustments specifically provided for in
 this part.
         (11) (10) As used in this section:
         (a) "Consumer Price Index" means the United States Consumer
 Price Index for all urban consumers as defined and reported by the
 United States Department of Labor, Bureau of Labor Statistics.
         (b) "Inflation rate" means the annual percentage change in the
 Consumer Price Index, as determined by the department, comparing
 the 2 most recent completed state fiscal years.
         (c) "Person other than a corporation" means a resident or
 nonresident individual or any of the following:
         (i) A partner in a partnership as defined in the internal
 revenue code.
         (ii) A beneficiary of an estate or a trust as defined in the
 internal revenue code.
         (iii) An estate or trust as defined in the internal revenue
 code.
         (d) "Taxable income" means taxable income as defined in this
 part subject to the applicable source and attribution rules
 contained in this part.
         Enacting section 1. This amendatory act does not take effect
 unless Senate Bill No. 873 of the 102nd Legislature is enacted into
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 law.
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Statutes affected: 
Senate Introduced Bill: 206.51