June 16, 2005, Introduced by Reps. Gonzales and Meisner and referred to the Committee on Tax Policy.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 36 (MCL 206.36).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 36. (1) "Taxable income" in the case of a resident estate
or trust means federal taxable income as defined in the internal
revenue code subject to the following adjustments:
(a) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, in the
same amount which has been excluded from federal taxable income
less related expenses not deducted in computing federal taxable
income because of section 265 of the internal revenue code.
(b) Add taxes on or measured by income to the extent the taxes
have been deducted in arriving at federal taxable income.
(c) Add losses on the sale or exchange of obligations of the
United States government, the income of which this state is
prohibited from subjecting to a net income tax, to the extent that
the loss has been deducted in arriving at federal taxable income.
(d) Deduct, to the extent included in federal taxable income,
income derived from obligations, or the sale or exchange of
obligations, of the United States government which this state is
prohibited by law from subjecting to a net income tax, reduced by
any interest on indebtedness incurred in carrying the obligations,
and by any expenses incurred in the production of such income to
the extent that the expenses, including amortizable bond premiums,
were deducted in arriving at federal taxable income.
(e) Adjustments resulting from the application of section 271.
(f) Deduct an adjustment resulting from the allocation and
apportionment provisions of chapter 3.
(g) For tax years that begin after December 31, 2005, add, to
the extent deducted in the tax year to arrive at federal taxable
income, expenses incurred in the production of income that is not
taxable under this act.
(2) The respective shares of an estate or trust and its
beneficiaries, including, solely for the purpose of this
allocation, nonresident beneficiaries, in the additions and
subtractions to taxable income shall be in proportion to their
respective shares of distributable net income of the estate or
trust as defined in the internal revenue code. If the estate or
trust has no distributable net income for the taxable year, the
share of each beneficiary in the additions and subtractions shall
be in proportion to his share of the estate or trust income for the
year, under local law or the terms of the instrument, which is
required to be distributed currently and any other amounts of such
income distributed in the year. Any balance of the additions and
subtractions shall be allocated to the estate or trust. If capital
gains and losses are distributed or distributable to a beneficiary
or beneficiaries under the internal revenue code, the fiduciary
shall advise each beneficiary of his share of the adjustment under
section 271. The election or failure to elect under section 271
with respect to capital gains and losses taxable to the estate or
trust shall not affect the beneficiary's right to elect or not to
elect under section 271.
(3) An addition or subtraction shall not be made under this
section which has the effect of duplicating an item of income or
deduction if the taxpayer establishes to the satisfaction of the
commissioner that the item is already reflected in federal taxable
income. If an addition or subtraction with respect to the sale or
exchange of obligations of the United States government proper
adjustment, in accordance with rules promulgated by the
commissioner, of the deduction for excess of capital gains over
capital losses shall be made.