May 18, 2005, Introduced by Reps. Lemmons, III, Lemmons, Jr., Cushingberry, Waters, McConico and Virgil Smith and referred to the Committee on Tax Policy.
A bill to amend 1964 PA 284, entitled
"City income tax act,"
by amending section 3 of chapter 1 (MCL 141.503), as amended by
1998 PA 500, and by adding section 3e to chapter 1.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
CHAPTER 1
Sec. 3. (1) The governing body of a city, by a lawfully
adopted ordinance that incorporates by reference the uniform city
income tax ordinance set forth in chapter 2, may levy, assess, and
collect an excise tax on income as provided in the ordinance. The
ordinance shall state the rate of the tax which shall be the rate
authorized by 1 of the following:
(a) The uniform city income tax ordinance under section 11 of
chapter 2.
(b) Subsection (2).
(c)
Section 3a, 3b, or 3c,
or 3e of this chapter.
(2) Except as otherwise provided in subsections (3), (4), and
(5), in a city with a population of more than 750,000, the
governing body may levy and collect a tax at a rate to be
determined from time to time, that rate to be not more than 2% on
corporations and the following maximum tax rates on resident
individuals and nonresident individuals for the following years:
(a) Before July 1, 1999, 3.00% on resident individuals and
1.50% on nonresident individuals.
(b) Beginning July 1, 1999 and each July 1 after 1999, the
maximum tax rate under this subsection on resident individuals
shall be reduced by 0.1 until the rate on resident individuals is
2.0%.
The Before July 1, 2005, the tax rate imposed on
nonresident individuals shall be 50% of the tax rate imposed on
resident individuals each year.
(3) If any 3 of the following conditions exist in a city with
a population of 750,000 or more, the city may apply to the state
administrative board for certification that those conditions exist
and the maximum tax rate under subsection (2)(b) or (3) shall not
be further reduced as provided in subsections (4) and (5):
(a) Funds have been withdrawn from the city's budget
stabilization fund for 2 or more consecutive city fiscal years or
there is a balance of zero in the city's budget stabilization fund.
(b) The city's income tax revenue growth rate is 0.95 or less.
(c) The local tax base growth rate is 80% or less of the
statewide tax base growth rate.
(d) The city's unemployment rate is 10% or higher according to
the most recent statistics available from the Michigan jobs
commission.
(4) If the state administrative board certifies within 60 days
of application that any 3 of the conditions set forth under
subsection (3) are met, the maximum tax rate under subsection (2)
shall not be further reduced from the date of the state
administrative board's certification until the July 1 following the
expiration of 1 year after the state administrative board's
certification unless the city applies for certification that the
conditions continue to exist. Before the expiration of the
certification, the city may apply to the state administrative board
to certify that the conditions continue to exist and if the state
administrative board so certifies, the certification may continue
until the July 1 following the expiration of 1 year after the state
administrative board's certification that the conditions continue
to exist. The city may continue to apply for certification until
the conditions under subsection (3) no longer exist.
(5) Notwithstanding any other provision of this section, if on
July 1 the maximum tax rate on resident individuals is reduced
under subsection (2) after a year or years in which the maximum tax
rate was not reduced because of subsections (3) and (4), the
maximum tax rate on resident individuals shall be the maximum tax
rate in effect on June 30 of that year reduced by 0.1 and the rate
on nonresident individuals shall be 50% of the rate imposed on
resident individuals. On each subsequent July 1, subsection (2)
applies to the maximum tax rates, subject to subsections (3) and
(4).
(6) The governing body of a city may adopt the uniform city
income tax ordinance with the alternative sections as set forth in
chapter 3 instead of the similarly numbered sections as set forth
in chapter 2. The uniform city income tax ordinance may be lawfully
adopted or rescinded by the governing body at any time. The
adoption of an ordinance is effective on and after January 1 or
July 1 following adoption of the ordinance, as specified in the
ordinance, but an ordinance shall not become effective earlier than
45 days after adoption or until approved by the electors if a
referendum petition is filed as authorized in this act or a
referendum is otherwise required. The rescission of an ordinance
shall become effective on the following December 31. The ordinance
may be rescinded at any time by the governing body in the same
manner in which it was adopted and with appropriate enforcement,
collection, and refund provisions with respect to liabilities
incurred prior to the effective date of the rescission of the
ordinance. The ordinance shall not be amended except as provided by
the legislature. A city may amend the ordinance to change the tax
rate to a rate authorized by this act.
(7) Petitions for a referendum election on the question of
adopting an ordinance adopted by the governing body may be filed
with the city clerk not later than the sixth Monday following the
adoption of the ordinance. The petitions shall be signed by a
number of registered electors of the city equal to at least 10%,
but not more than 20%, of the registered electors of the city
voting in the last general municipal election prior to the adoption
of the ordinance by the governing body. If proper petitions are
filed, the question of adopting the ordinance shall be submitted by
the governing body to the city electors at the next primary or
general election or at a special election called for the purpose,
in any case held not less than 45 days nor more than 90 days after
the clerk has reported the filing of the referendum petition to the
city's governing body. The checking of names on the petitions, the
counting, canvassing, and return of the votes on the question, and
other procedures for the election shall be as provided by law or
charter. Upon a favorable vote of the city electors, the ordinance
shall be effective as specified in the ordinance which may be
amended by the governing body of the city following the election to
specify July 1 or January 1 as the effective date of the ordinance,
if the effective date originally specified in the ordinance is
considered impractical or inconvenient for any reason. The
provisions in this section for a referendum election, and for
delaying the effective date of the ordinance if petitions for a
referendum are filed, are not applicable to a city that on January
1, 1964 had in effect a valid ordinance levying and imposing an
excise tax levied on or measured by income. Notwithstanding any
other provision of this act, if an ordinance becomes effective on
any date other than January 1, each tax year shall end on December
31, and the provisions of the ordinance based on a full tax year
are modified accordingly to be applicable to the partial tax year.
(8) The city shall annualize the rates under this section as
necessary.
(9) As used in this section:
(a) "Consumer price index" means the Detroit consumer price
index for all urban consumers as defined and reported by the United
States department of labor, bureau of labor statistics, and as
certified by the state treasurer.
(b) "Income tax revenue growth rate" means a number the
numerator of which is the income tax collections of the city for
the city fiscal year immediately preceding the city's application
under subsection (3) and the denominator of which is the product of
the income tax collections of the city for the city fiscal year
immediately preceding the city fiscal year used to determine the
numerator multiplied by 1 plus the corresponding percentage change
in the average consumer price index for the calendar year ending in
the city fiscal year used to determine the numerator.
(c) "Local tax base growth rate" means the total taxable value
of real property and personal property in the city for the most
recent year for which data is available divided by the total
taxable value of real property and personal property in the city
for the second year immediately preceding the most recent year for
which the data is available.
(d) "Statewide tax base growth rate" means the total taxable
value of real property and personal property in the state for the
most recent year for which the data is available divided by the
total taxable value of real property and personal property in the
state for the second year immediately preceding the most recent
year for which the data is available.
Sec. 3e. Beginning July 1, 2005, a city with a population of
more than 750,000 may amend the ordinance to increase the rate
imposed on nonresident individuals so that the rate imposed on
nonresident individuals is equal to the rate imposed on
corporations and resident individuals, which rate shall not exceed
the maximum allowable rate for corporations and resident
individuals under this act. An amendment to the city income tax
ordinance under this section is not effective unless the amendment
is approved by a majority of the qualified electors voting on the
question.