The bill amends the Income Tax Act of 1967 to enhance the allocation and apportionment of taxable income for individuals, estates, and trusts. It clarifies that taxpayers whose income-generating activities are solely within Michigan must allocate their taxable income to the state, while those with income from both in-state and out-of-state activities must apportion their net income accordingly. The bill introduces provisions for capital gains and losses from the sale of real and tangible personal property, specifying conditions under which these are allocable to Michigan. Additionally, it outlines new criteria for determining the location of sales and income from services, particularly for nonresident taxpayers, aiming to streamline the tax allocation process.

Furthermore, the bill modifies the method for apportioning business income, stating that all business income, except for transportation services, must be apportioned based on a sales factor. It establishes detailed guidelines for determining the location of sales of tangible personal property and services, effective January 1, 2026, focusing on the physical location of property and the benefits derived from services. The bill also clarifies that receipts from credit card receivables and loan servicing fees are considered in-state if the billing address is located in Michigan, and it sets criteria for the location of receipts from various services, emphasizing customer location and the merchant's commercial domicile. Certain sections of existing law are repealed to streamline the legal framework, ultimately providing clearer guidelines for tax compliance and revenue allocation.

Statutes affected:
House Introduced Bill: 206.102, 206.111