SENATE BILL No. 1513

November 30, 2006, Introduced by Senator EMERSON and referred to the Committee on Finance.

A bill to provide for the imposition, levy, computation,

collection, assessment, and enforcement, by lien or otherwise, of

taxes on certain commercial, business, and financial activities; to

prescribe the manner and times of making certain reports and paying

taxes; to prescribe the powers and duties of public officers and

state departments; to permit the inspection of records of

taxpayers; to provide for interest and penalties; to provide

exemptions, credits, and refunds; to provide for the disposition of

funds; to provide for the interrelation of this act with other

acts; and to make appropriations.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

CHAPTER 1

Sec. 1. This act shall be known and may be cited as the

"Michigan business tax act".

Sec. 2. A term used in this act and not defined differently

shall have the same meaning as when used in comparable context in

the laws of the United States relating to federal income taxes in

effect for the tax year unless a different meaning is clearly

required. A reference in this act to the internal revenue code

includes other provisions of the laws of the United States relating

to federal income taxes.

Sec. 3. (1) "Affiliated group" means 2 or more United States

corporations, 1 of which owns or controls, directly or indirectly,

80% or more of the capital stock or other ownership interest with

voting rights of the other United States corporation or United

States corporations. As used in this subsection, "United States

corporation" means a domestic corporation as that term is defined

in section 7701(a)(3) and (4) of the internal revenue code.

(2) "Business activity" means a transfer of legal or equitable

title to or rental of property, whether real, personal, or mixed,

tangible or intangible, or the performance of services, or a

combination thereof, made or engaged in, or caused to be made or

engaged in, whether in intrastate, interstate, or foreign commerce,

with the object of gain, benefit, or advantage, whether direct or

indirect, to the taxpayer or to others, but does not include the

services rendered by an employee to his or her employer, services

as a director of a corporation, or a casual transaction. Although

an activity of a taxpayer may be incidental to another or others of

his or her business activities, each activity shall be considered

to be business engaged in within the meaning of this act.

(3) "Business income" means federal taxable income plus the

amount of a deduction claimed under section 199 of the internal

revenue code related to domestic production activities, except that

for a person other than a corporation business income means that

part of federal taxable income derived from business activity plus

the amount of a deduction claimed under section 199 of the internal

revenue code related to domestic production activities. For a

partnership, business income includes payments and items of income

and expense that are attributable to business activity of the

partnership and separately reported to the partners.

Sec. 4. (1) "Casual transaction" means a transaction made or

engaged in other than in the ordinary course of repeated and

successive transactions of a like character, except that a

transaction made or engaged in by a person that is incidental to

that person's regular business activity is a business activity

within the meaning of this act. A transaction that is incidental to

a person's regular business activity includes transactions that

occur as a result of or in connection with the person's regular

business activity. Sales of intangible investment assets by an

individual that are not incidental to the individual's regular

business activity, and that result in gross receipts of less than

$350,000.00 in any 1 tax year, are considered not to be repeated

and successive, and are considered to be casual transactions.

(2) "Client" means an entity whose employment operations are

managed by a professional employer organization.

(3) Except as otherwise provided in subsections (4) and (5),

"compensation" means all wages, salaries, fees, bonuses,

commissions, or other payments made in the tax year on behalf of or

for the benefit of employees, officers, or directors of the

taxpayers. Compensation includes, but is not limited to, payments

that are subject to or specifically exempt or excepted from

withholding under sections 3401 to 3406 of the internal revenue

code. Compensation also includes, on a cash or accrual basis

consistent with the taxpayer's method of accounting for federal

income tax purposes, payments to individuals not currently working,

payments to dependents and heirs of individuals based on current or

previous labor services rendered by those individuals, payments to

a pension, retirement, or profit sharing plan, and payments for

insurance for which employees are the beneficiaries, including

payments under health and welfare and noninsured benefit plans and

payment of fees for the administration of health and welfare and

noninsured benefit plans. Compensation does not include any of the

following:

(a) Discounts on the price of the taxpayer's merchandise or

services sold to the taxpayer's employees, officers, or directors

that are not available to other customers.

(b) Payments to an independent contractor.

funds.

(d) The employer's portion of payments under the federal

insurance contributions act, chapter 21 of subtitle C of the

internal revenue code, 26 USC 3101 to 3128, the railroad retirement

tax act, chapter 22 of subtitle C of the internal revenue code, 26

USC 3201 to 3233, and similar social insurance programs.

(e) Payments, including self-insurance payments, for worker's

compensation insurance or federal employers' liability act

insurance pursuant to 45 USC 51 to 60.

(f) Payments under health and welfare and noninsured benefit

plans for the benefit of persons who are residents of this state

and payments of fees for the administration of health and welfare

and noninsured benefit plans for the benefit of persons who are

residents of this state.

(4) Except as otherwise provided in subsection (5), for

purposes of determining compensation of a professional employer

organization, compensation includes payments by the professional

employer organization to the officers and employees of an entity

whose employment operations are managed by the professional

employer organization. Except as otherwise provided in subsection

(5), compensation of the entity whose employment operations are

managed by a professional employer organization does not include

compensation paid by the professional employer organization to the

officers and employees of the entity whose employment operations

are managed by the professional employer organization.

(5) Notwithstanding the provisions of subsection (4), the

following apply:

(a) A professional employer organization and a client may

jointly elect, in a manner determined by the department, to include

in the compensation of the client, and exclude from the

compensation of the professional employer organization,

compensation paid by the professional employer organization to the

officers of the client and to employees of the professional

employer organization who are assigned to and perform services for

the client and who are not temporary employees.

(b) Officers and employees of a client that has made an

election under subdivision (a) include employees for whom the

professional employer organization is required to withhold taxes

for federal income tax purposes. This subdivision does not apply to

compensation paid to a temporary employee.

election under subdivision (a) shall submit to the client, within

30 days after the end of the client's tax year, a statement

reporting the compensation paid to employees and officers of the

client that was reimbursed by the client. If the report required by

this subdivision is not submitted, the amount of compensation shall

be considered to be the entire amount paid by the client to the

professional employer organization.

(6) "Corporation" means a taxpayer that is required or has

elected to file as a corporation under the internal revenue code.

(7) "Department" means the department of treasury.

Sec. 5. (1) "Employee" means an employee as defined in section

3401(c) of the internal revenue code. A person from whom an

employer is required to withhold for federal income tax purposes is

prima facie considered an employee.

(2) "Employer" means an employer as defined in section 3401(d)

of the internal revenue code. A person required to withhold for

federal income tax purposes is prima facie considered an employer.

(3) "Federal taxable income" means taxable income as defined

in section 63 of the internal revenue code.

(4) "Financial organization" means a bank, industrial bank,

trust company, building and loan or savings and loan association,

bank holding company as defined in 12 USC 1841, credit union,

safety and collateral deposit company, regulated investment company

as defined in the internal revenue code, or any other association,

joint stock company, or corporation at least 90% of whose assets

consist of intangible personal property and at least 90% of whose

gross receipts income consists of dividends or interest or other

charges resulting from the use of money or credit.

Sec. 6. (1) "Gross receipts" means the entire amount received

by the taxpayer from any activity whether in intrastate,

interstate, or foreign commerce carried on for direct or indirect

gain, benefit, or advantage to the taxpayer or to others except for

the following:

(a) Proceeds from sales by a principal that the taxpayer

collects in an agency capacity solely on behalf of the principal

and delivers to the principal.

(b) Amounts received by the taxpayer as an agent solely on

behalf of the principal that are expended by the taxpayer for any

of the following:

(i) The performance of a service by a third party for the

benefit of the principal that is required by law to be performed by

a licensed person.

(ii) The performance of a service by a third party for the

benefit of the principal that the taxpayer has not undertaken a

contractual duty to perform.

(iii) Principal and interest under a mortgage loan or land

contract, lease or rental payments, or taxes, utilities, or

insurance premiums relating to real or personal property owned or

leased by the principal.

(iv) A capital asset of a type that is, or under the internal

revenue code will become, eligible for depreciation, amortization,

or accelerated cost recovery by the principal for federal income

tax purposes, or for real property owned or leased by the

principal.

(v) Property not described under subparagraph (iv) that is

purchased by the taxpayer on behalf of the principal and that the

taxpayer does not take title to or use in the course of performing

its contractual business activities.

(vi) Fees, taxes, assessments, levies, fines, penalties, or

other payments established by law that are paid to a governmental

entity and that are the legal obligation of the principal.

corporation engaged in the international operation of aircraft

under section 883(a) of the internal revenue code.

(d) Amounts received by an advertising agency used to acquire

advertising media time, space, production, or talent on behalf of

another person.

(e) Notwithstanding any other provision of this section,

amounts received by a taxpayer that manages real property owned by

the taxpayer's client that are deposited into a separate account

kept in the name of the taxpayer's client and that are not

reimbursements to the taxpayer and are not indirect payments for

management services that the taxpayer provides to that client.

(f) Proceeds from the taxpayer's transfer of an account

receivable if the sale that generated the account receivable was

included in gross receipts for federal income tax purposes. This

subdivision does not apply to a taxpayer that during the tax year

both buys and sells any receivables.

(g) Proceeds from any of the following:

(i) The original issue of stock or equity instruments.

(ii) The original issue of debt instruments.

(h) Refunds from returned merchandise.

(i) Cash and in-kind discounts.

(j) Trade discounts.

(k) Federal, state, or local tax refunds.

(l) Security deposits.

(m) Payment of the principal portion of loans.

(n) Value of property received in a like-kind exchange.

(o) Proceeds from a sale, transaction, exchange, involuntary

conversion, or other disposition of tangible, intangible, or real

property that is a capital asset as defined in section 1221(a) of

the internal revenue code or land that qualifies as property used

in the trade or business as defined in section 1231(b) of the

internal revenue code, less any gain from the disposition to the

extent that gain is included in federal taxable income.

(p) The proceeds from a policy of insurance, a settlement of a

claim, or a judgment in a civil action less any proceeds under this

subdivision that are included in federal taxable income.

(2) "Insurance company" means an authorized insurer as defined

in section 106 of the insurance code of 1956, 1956 PA 218, MCL

500.106.

(3) "Internal revenue code" means the United States internal

revenue code of 1986 in effect on January 1, 2008 or, at the option

of the taxpayer, in effect for the tax year.

(4) "Inventory" means, except as provided in subdivision (d),

all of the following:

(a) The stock of goods held for resale in the regular course

of trade of a retail or wholesale business.

(b) Finished goods, goods in process, and raw materials of a

manufacturing business.

(d) Inventory does not include either of the following:

(i) Personal property under lease or principally intended for

lease rather than sale.

(ii) Property allowed a deduction or allowance for depreciation

or depletion under the internal revenue code.

(5) "Officer" means an officer of a corporation other than a

subchapter S corporation, including all of the following:

(a) The chairperson of the board.

(b) The president, vice-president, secretary, or treasurer of

the corporation or board.

subdivisions (a) and (b).

Sec. 7. (1) "Partner" means a partner or member of a

partnership.

(2) "Partnership" means a taxpayer that is required to or has

elected to file as a partnership for federal income tax purposes.

(3) "Person" means an individual, firm, bank, financial

institution, limited partnership, co-partnership, partnership,

joint venture, association, corporation, receiver, estate, trust,

or any other group or combination of groups acting as a unit.

(4) "Professional employer organization" means an organization

that provides the management and administration of the human

resources of another entity by contractually assuming substantial

employer rights and responsibilities through a professional

employer agreement that establishes an employer relationship with

the leased officers or employees assigned to the other entity by

doing all of the following:

(a) Maintaining the right of direction and control of

employees' work, although this responsibility may be shared with

the other entity.

(b) Paying wages and employment taxes of the employees out of

its own accounts.

employment taxes for the employees.

(d) Retaining the right to hire and fire employees.

(5) "Rent" includes a lease payment or other payment for the

use of any property to which the taxpayer does not have legal or

equitable title.

(6) "Revenue mile" means the transportation for a

consideration of 1 net ton in weight or 1 passenger the distance of

1 mile.

Sec. 8. (1) "Sale" or "sales" means the amounts received by

the taxpayer as consideration from the following:

(a) The transfer of title to, or possession of, property that

is stock in trade or other property of a kind that would properly

be included in the inventory of the taxpayer if on hand at the

close of the tax period or property held by the taxpayer primarily

for sale to customers in the ordinary course of the taxpayer's

trade or business.

(b) The performance of services that constitute business

activities other than those included in subdivision (a), or any

combination of business activities described in this subdivision

and subdivision (a).

intangible property that constitutes business activity.

(2) "Shareholder" means a person who owns outstanding stock in

a business or is a member of a business entity that files as a

corporation for federal income tax purposes. An individual is

considered as the owner of the stock owned, directly or indirectly,

by or for family members as defined by section 318(a)(1) of the

internal revenue code.

(3) "State" means any state of the United States, the District

of Columbia, the Commonwealth of Puerto Rico, any territory or

possession of the United States, and any foreign country, or a

political subdivision of any of the foregoing.

Sec. 9. (1) "Tax base" means gross receipts before

apportionment or allocation plus the additions provided in this

section.

(2) Add the total value of assets at the beginning of the tax

year as determined under subdivision (a), not including inventory,

or for a financial organization or a mortgage company as defined in

section 45, the average value of property owned or rented by the

taxpayer as determined under subdivision (b):

(a) The total asset value of the taxpayer is the value of

assets that is required to be reported for federal income tax

purposes or the value that would be required to be reported if the

reporting of those assets were required. As used in this

subdivision, "assets" includes the following subparagraphs (i)

through (x) and excludes subparagraphs (xi) through (xiii):

(i) Cash.

(ii) Trade notes and accounts receivable.

(iii) Loans to shareholders.

(iv) Mortgage and real estate loans.

(v) Other investments.

(vi) Buildings and other depreciable assets less accumulated

depreciation.

(vii) Depletable assets less accumulated depreciation.

(viii) Land, net of amortization.

(ix) Amortizable intangible assets, less accumulated

amortization.

(x) Other assets.

(xi) United States treasury securities or other United States

government obligations exempted from state taxation under federal

law.

(xii) Tax exempt obligations.

(xiii) Goodwill.

(b) Property owned by the taxpayer is valued at its original

cost. Property rented by the taxpayer is valued at 8 times the net

annual rental rate. Net annual rental rate is the annual rental

rate paid by the taxpayer less any annual rental rate received by

the taxpayer from subrentals. The average value of property is

determined by averaging the values at the beginning and ending of

the tax year, unless the treasurer requires the periodic averaging

of values during the tax year if the treasurer determines that

periodic averaging is reasonably required to reflect properly the

average value of the taxpayer's property.

(3) If business income less, to the extent included in federal

taxable income, dividends received or considered received including

the foreign dividend gross-up provided for in the internal revenue

code is greater than zero, multiply that amount by 15 and add the

result to the tax base.

Sec. 10. (1) "Tax" means the tax imposed under this act,

including interest and penalties under this act, unless the term is

given a more limited meaning in the context of this act or a

provision of this act.

(2) "Tax year" means the calendar year, or the fiscal year

ending during the calendar year, upon the basis of which the tax

base of a taxpayer is computed under this act. If a return is made

for a fractional part of a year, tax year means the period for

which the return is made. Except for the first return required by

this act, a taxpayer's tax year is for the same period as is

covered by its federal income tax return. A person that has a 52-

or 53-week tax year beginning not more than 7 days before December

31 of any year is considered to have a tax year beginning after

December of that tax year.

(3) "Taxpayer" means a person liable for a tax, interest, or

penalty under this act.

(4) "Temporary employee" means an employee that meets both of

the following criteria:

(a) The wages and other compensation of the employee are

determined exclusively by the entity that supplies the temporary

employee.

(b) The employee is employed by an entity that provides the

employee primarily for the purpose of meeting temporary or seasonal

employee needs of an entity's customers.

(5) "Unrelated business activity" means any business activity

that gives rise to unrelated taxable income as defined in the

internal revenue code.

Sec. 11. (1) A foreign person shall calculate business income

under this section and, except as otherwise provided in this

section, the tax base of a foreign person is subject to all

adjustments and other provisions of this act.

(2) Except as otherwise provided in this section, except for a

taxpayer that pays the tax imposed under sections 21 and 22, the

tax base of a foreign person includes the sum of business income

and the additions under section 9 that are related to United States

business activity, whether or not the foreign person is subject to

taxation under the internal revenue code.

(3) Compensation of a foreign person is total compensation

paid to employees, officers, and directors of the foreign person

for services performed in the United States.

(4) Notwithstanding the provisions of subsection (3), a

foreign person that does not have a permanent establishment in the

United States and whose business activity consists of the

transportation of persons or property for others by motor vehicle

may elect for purposes of this section to calculate compensation

related to United States business activity by 1 of the following

methods:

(a) Calculate compensation under subsection (3) and reduce the

final calculation by 50%.

(b) Calculate compensation by determining total compensation

everywhere, apportioned to the United States by a formula, the

numerator of which is revenue miles traveled in the United States

and the denominator of which is revenue miles traveled everywhere.

(5) To calculate business income and the additions under

section 9 that are related to United States business activity, a

foreign person that does not have a permanent establishment in the

United States during the tax year or that is not subject to

taxation under the internal revenue code for the tax year may use

amounts that reasonably approximate the federal taxable income and

the permitted deductions the person would have had had the person

been subject to the internal revenue code, provided the foreign

person does not in the ordinary course of its business maintain tax

or financial accounting records in accordance with the tax

accounting requirements of the internal revenue code. The tax base

of a foreign person described in this subsection shall not include

gross income from sales shipped or delivered to any purchaser

within the United States and for which title transfers outside the

United States.

(6) To calculate business income and the additions under

section 9 that are related to United States business activity, a

Canadian person that is subject to Canadian federal income tax

under the income tax act (R.S.C. 1985, c. 1 (5th Supp)) may use

amounts properly calculated under the income tax act (R.S.C. 1985,

c. 1 (5th Supp)) to reasonably approximate business income and the

additions under section 9 that are related to United States

business activity. Amounts calculated under this subsection are

presumed to reasonably approximate business income and the

additions under section 9 that are related to United States

business activity. The tax base of a Canadian person shall not

include gross income from sales shipped or delivered to any

purchaser within the United States and for which title transfers

outside the United States. As used in this subsection, "Canadian

person" means a foreign person that does not have a permanent

establishment in the United States during the tax year or that is

not subject to taxation under the internal revenue code for the tax

year and is either of the following:

(a) An entity formed under the laws of Canada or a province of

Canada.

(b) An individual who is physically present in Canada in the

aggregate exceeding 182 days in the tax year.

(7) As used in this section:

(a) "Business income" means, for a foreign person, gross

income attributable to the taxpayer's United States business

activity and gross income derived from sources within the United

States minus the deductions allowed under the internal revenue code

that are related to that gross income. Gross income includes the

proceeds from sales shipped or delivered to any purchaser within

the United States and for which title transfers within the United

States; proceeds from services performed within the United States;

and a pro rata proportion of the proceeds from services performed

both within and outside the United States, based on cost of

performance.

(b) "Compensation" means, for a foreign person, the daily

compensation paid to each employee, officer, and director of the

foreign person multiplied by the number of days that the employee,

officer, or director has physical contact with the United States in

the tax year. Physical contact with the United States for any part

of a day equals 1 day.

receipts as defined in section 6(1) from United States business

activity or from sources within the United States. Gross receipts

includes all sales for which title transfers within the United

States; proceeds from all services performed within the United

States; and a pro rata portion of proceeds from services performed

both within and outside of the United States based on costs of

performance.

(d) "Permanent establishment" means either of the following:

(i) If an income tax treaty applies to the foreign person, that

term as defined in that income tax treaty in effect between the

United States and another nation.

(ii) If an income tax treaty does not apply to the foreign

person, that term as defined in the United States model income tax

convention.

(e) "Property" means, for a foreign person, all of the

taxpayer's real and tangible personal property owned or rented in

the United States during the tax year.

(f) "United States person" means that term as defined in

section 7701(a)(30) of the internal revenue code.

(8) As used in this section and sections 43, 44, and 45,

"foreign person" means either of the following:

(a) An individual who is not a United States resident, whether

or not the individual is subject to taxation under the internal

revenue code.

(b) A person formed under the laws of a foreign country or a

political subdivision of a foreign country, whether or not the

person is subject to taxation under the internal revenue code.

Sec. 12. The tax base of nonprofit persons not required to pay

federal income taxes shall be the sum of the additions specified in

section 9.

CHAPTER 2

Sec. 20. (1) Except as otherwise provided in this act, there

is levied and imposed a specific tax of 0.125% on the tax base of

every person with business activity within this state adjusted for

the exemptions provided in section 23 allocated or apportioned to

this state

(2) The tax levied and imposed under this section is upon the

privilege of doing business and not upon income or property.

Sec. 21. (1) Each insurance company shall pay a tax determined

under this section.

(2) Except as otherwise provided by this section, the tax

imposed by this act on each insurance company shall be a tax equal

to 1.25% of gross direct premiums written on property or risk

located or residing in this state. Direct premiums do not include

any of the following:

(a) Premiums on policies not taken.

(b) Returned premiums on canceled policies.

(d) Receipts on reinsurance premiums if the tax has been paid

on the original premiums.

(3) The tax calculated under this section is in lieu of all

other privilege or franchise fees or taxes imposed by any other law

of this state, except taxes on real and personal property, taxes

collected under the general sales tax act, 1933 PA 167, MCL 205.1

to 205.78, and taxes collected under the use tax act, 1937 PA 94,

MCL 205.91 to 205.111, and except as otherwise provided in this act

and in the insurance code of 1956, 1956 PA 218, MCL 500.100 to

500.8302.

Sec. 22. (1) An insurance company is subject to the tax

imposed by this act or by section 476a of the insurance code of

1956, 1956 PA 218, MCL 500.476a, if applicable, whichever is

greater.

(2) The tax year of an insurance company is the calendar year.

(3) Notwithstanding section 72, an insurance company shall

file the annual return required under this act before March 2 after

the end of the tax year, and an automatic extension under section

72(4) is not available.

(4) For the purpose of calculating an estimated payment

required by section 70, the greater of the amount of tax imposed on

an insurance company under this act or under section 476a of the

insurance code of 1956, 1956 PA 218, MCL 500.476a, shall be

considered the insurance company's tax liability for the

immediately preceding tax year.

(5) The requirements of section 28(1)(f) of 1941 PA 122, MCL

205.28, that prohibit an employee or authorized representative of,

a former employee or authorized representative of, or anyone

connected with the department from divulging any facts or

information obtained in connection with the administration of a

tax, do not apply to disclosure of a tax return required by this

section.

Sec. 23. (1) The following are exempt from the tax imposed by

this act:

(a) The United States, this state, other states, and the

agencies, political subdivisions, and enterprises of the United

States, this state, and other states.

(b) A person who is exempt from federal income tax under the

internal revenue code, and a partnership, limited liability

company, joint venture, general partnership, limited partnership,

unincorporated association, or other group or combination of

entities acting as a unit if the activities of the entity are

exclusively related to the charitable, educational, or other

purpose or function that is the basis for the exemption under the

internal revenue code from federal income taxation of the partners

or members and if all of the partners or members of the entity are

exempt from federal income tax under the internal revenue code,

except the following:

(i) An organization included under section 501(c)(12) or

501(c)(16) of the internal revenue code.

(ii) An organization exempt under section 501(c)(4) of the

internal revenue code that would be exempt under section 501(c)(12)

of the internal revenue code except that it failed to meet the

requirements in section 501(c)(12) that 85% or more of its income

consist of amounts collected from members.

(iii) The adjusted tax base attributable to the activities

giving rise to the unrelated taxable business income of an exempt

person.

this subdivision, "nonprofit cooperative housing corporation" means

a cooperative housing corporation that is engaged in providing

housing services to its stockholders and members and that does not

pay dividends or interest on stock or membership investment but

that does distribute all earnings to its stockholders or members.

The exemption under this subdivision does not apply to a business

activity of a nonprofit cooperative housing corporation other than

providing housing services to its stockholders and members.

(d) That portion of the tax base attributable to the

production of agricultural goods by a person whose primary activity

is the production of agricultural goods. "Production of

agricultural goods" means commercial farming, including, but not

limited to, cultivation of the soil; growing and harvesting of an

agricultural, horticultural, or floricultural commodity; dairying;

raising of livestock, bees, fish, fur-bearing animals, or poultry;

or turf or tree farming, but does not include the marketing at

retail of agricultural goods except for sales of nursery stock

grown by the seller and sold to a nursery dealer licensed under

section 9 of the insect pest and plant disease act, 1931 PA 189,

MCL 286.209.

(e) Except as provided in subsection (3), a farmers'

cooperative corporation organized within the limitations of section

98 of 1931 PA 327, MCL 450.98, that was at any time exempt under

subdivision (c) because the corporation was exempt from federal

income taxes under section 521 of the internal revenue code and

that would continue to be exempt under section 521 of the internal

revenue code except for either of the following activities:

(i) The corporation's repurchase from nonproducer customers of

portions or components of commodities the corporation markets to

those nonproducer customers and the corporation's subsequent

manufacturing or marketing of the repurchased portions or

components of the commodities.

(ii) The corporation's incidental or emergency purchases of

commodities from nonproducers to facilitate the manufacturing or

marketing of commodities purchased from producers.

(f) That portion of the tax base attributable to the direct

and indirect marketing activities of a farmers' cooperative

corporation organized within the limitations of section 98 of 1931

PA 327, MCL 450.98, if those marketing activities are provided on

behalf of the members of that corporation and are related to the

members' direct sales of their products to third parties or, for

livestock, are related to the members' direct or indirect sales of

that product to third parties. Marketing activities for a product

that is not livestock are not exempt under this subdivision if the

farmers' cooperative corporation takes physical possession of the

product. As used in this subdivision, "marketing activities" means

activities that include, but are not limited to, all of the

following:

(i) Activities under the agricultural commodities marketing

act, 1965 PA 232, MCL 290.651 to 290.674, and the agricultural

marketing and bargaining act, 1972 PA 344, MCL 290.701 to 290.726.

(ii) Dissemination of market information.

(iii) Establishment of price and other terms of trade.

(iv) Promotion.

(v) Research relating to members' products.

(g) That portion of the tax base attributable to the services

provided by an attorney-in-fact to a reciprocal insurer pursuant to

chapter 72 of the insurance code of 1956, 1956 PA 218, MCL 500.7200

to 500.7234.

(h) That portion of the tax base attributable to a multiple

employer welfare arrangement that provides dental benefits only and

that has a certificate of authority under chapter 70 of the

insurance code of 1956, 1956 PA 218, MCL 500.7001 to 500.7090.

(2) Subsection (1)(e) does not exempt a farmers' cooperative

corporation if the total dollar value of the farmers' cooperative

corporation's incidental and emergency purchases described in

subsection (1)(e)(ii) are equal to or greater than 5% of the

corporation's total purchases.

(3) Except as otherwise provided in this section, a farmers'

cooperative corporation shall exclude from adjusted tax base the

revenue and expenses attributable to business transacted with

farmer or farmer cooperative corporation patrons to whom net

earnings are allocated in the form of patronage dividends as

defined in section 1388 of the internal revenue code.

(4) As used in subsection (1)(b), "exclusively" means that

term as applied for purposes of section 501(c)(3) of the internal

revenue code.

Sec. 24. (1) A taxpayer that meets the criteria under

subsection (4) and that is a qualified start-up business that does

not have business income for 2 consecutive tax years may claim a

credit against the tax imposed under this act for the second of

those 2 consecutive tax years and each immediately following

consecutive tax year in which the taxpayer does not have business

income equal to the taxpayer's tax liability for the tax year in

which the taxpayer has no business income. If the taxpayer has

business income in any tax year after the credit under this section

is claimed, the taxpayer shall claim the credit under this section

for any following tax year only if the taxpayer subsequently has no

business income for 2 consecutive tax years. The taxpayer may claim

the credit for the second of those 2 consecutive tax years and each

immediately following consecutive tax year in which the taxpayer

does not have business income.

(2) A credit under this section shall not be claimed for more

than a total of 5 tax years.

(3) A taxpayer that qualified to claim the credit under

section 31a of former 1975 PA 228 may claim the credit under this

section for a total of 5 years, reduced by the number of years the

taxpayer was eligible to claim the credit under section 31a of

former 1975 PA 228.

(4) If a taxpayer that took the credit under this section has

no business activity in this state and has any business activity

outside of this state for any of the first 3 tax years after the

last tax year for which it took the credit under this section, the

taxpayer shall add to its tax liability the following amounts:

(a) If the taxpayer has no business activity in this state for

the first tax year after the last tax year for which a credit under

this section is claimed, 100% of the total of all credits claimed

under this section.

(b) If the taxpayer has no business activity in this state for

the second tax year after the last tax year for which a credit

under this section is claimed, 67% of the total of all credits

claimed under this section.

year after the last tax year for which a credit under this section

is claimed, 33% of the total of all credits claimed under this

section.

(5) A member of an affiliated group as defined in this act, a

controlled group of corporations as defined in section 1563 of the

internal revenue code and further described in 26 CFR 1.414(b)-1

and 1.414(c)-1 to 1.414(c)-5, or an entity under common control as

defined by the internal revenue code shall determine number of

employees, sales, and business income for purposes of this section

on a consolidated basis.

(6) For the tax year for which a credit under this section is

claimed, compensation, directors' fees, or distributive shares paid

by the taxpayer to any 1 of the following shall not exceed

$135,000.00:

(a) A shareholder or officer of a corporation other than an S

corporation.

(b) A partner of a partnership or limited liability

partnership.

(d) A member of a limited liability corporation.

(e) An individual who is an owner.

(7) As used in this section:

(a) "Business income" means business income as defined in

section 3 excluding funds received from small business innovation

research grants and small business technology transfer programs

established under the small business innovation development act of

1982, Public Law 97-219, reauthorized under the small business

research and development enhancement act, Public Law 102-564, and

subsequently reauthorized under the small business reauthorization

act of 2000, Public Law 106-554.

(b) "Michigan economic development corporation" means the

public body corporate created under section 28 of article VII of

the state constitution of 1963 and the urban cooperation act of

1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, by a contractual

interlocal agreement effective April 5, 1999, as amended, between

local participating economic development corporations formed under

the economic development corporations act, 1974 PA 338, MCL

125.1601 to 125.1636, and the Michigan strategic fund.

all of the following criteria as certified annually by the Michigan

economic development corporation:

(i) Has fewer than 25 full-time equivalent employees.

(ii) Has sales of less than $1,000,000.00 in the tax year for

which the credit under this section is claimed.

(iii) Research and development expenses make up at least 15% of

its expenses in the tax year for which the credit under this

section is claimed.

(iv) Is not publicly traded.

(v) Met 1 of the following criteria during 1 of the initial 2

consecutive tax years in which the qualified start-up business had

no business income:

(A) During the immediately preceding 7 years was in 1 of the

first 2 years of contribution liability under section 19 of the

Michigan employment security act, 1936 (Ex Sess) PA 1, MCL 421.19.

(B) During the immediately preceding 7 years would have been

in 1 of the first 2 years of contribution liability under section

19 of the Michigan employment security act, 1936 (Ex Sess) PA 1,

MCL 421.19, if the qualified start-up business had employees and

was liable under the Michigan employment security act, 1936 (Ex

Sess) PA 1, MCL 421.1 to 421.75.

in 1 of the first 2 years of contribution liability under section

19 of the Michigan employment security act, 1936 (Ex Sess) PA 1,

MCL 421.19, if the qualified start-up business had not assumed

successor liability under section 15(g) of the Michigan employment

security act, 1936 (Ex Sess) PA 1, MCL 421.15.

(d) "Research and development" means qualified research as

that term is defined in section 41(d) of the internal revenue code.

Sec. 25. (1) The credit provided in this section shall be

taken before any other credit under this act and is available to

any person with gross receipts that do not exceed $10,000,000.00

and with adjusted business income minus the loss adjustment that

does not exceed $475,000.00, subject to the following:

(a) An individual, a partnership, or a subchapter S

corporation is disqualified if the individual, any 1 partner of the

partnership, or any 1 shareholder of the subchapter S corporation

receives more than $115,000.00 as a distributive share of the

adjusted business income minus the loss adjustment of the

individual, the partnership, or the subchapter S corporation.

(b) A corporation other than a subchapter S corporation is

disqualified if either of the following occur for the respective

tax year:

(i) Compensation and directors' fees of a shareholder or

officer exceed $115,000.00.

(ii) The sum of the following amounts exceeds $115,000.00:

(A) Compensation and directors' fees of a shareholder.

(B) The product of the percentage of outstanding ownership or

of outstanding stock owned by that shareholder multiplied by the

difference between the sum of business income and, to the extent

deducted in determining federal taxable income, a carry back or a

carry over of a net operating loss or capital loss, minus the loss

adjustment.

subsection (3), the credit determined under this subsection shall

be reduced by the following percentages in the following

circumstances:

(i) If an individual, any 1 partner of the partnership, or any

1 shareholder of the subchapter S corporation receives as a

distributive share of adjusted business income minus the loss

adjustment of the individual, partnership, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is more than $95,000.00 but less than $100,000.00, the credit is

reduced by 20%.

(ii) If an individual, any 1 partner of the partnership, or any

1 shareholder of the subchapter S corporation receives as a

distributive share of adjusted business income minus the loss

adjustment of the individual, partnership, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $100,000.00 or more but less than $105,000.00, the credit is

reduced by 40%.

(iii) If an individual, any 1 partner of the partnership, or any

1 shareholder of the subchapter S corporation receives as a

distributive share of adjusted business income minus the loss

adjustment of the individual, partnership, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $105,000.00 or more but less than $110,000.00, the credit is

reduced by 60%.

(iv) If an individual, any 1 partner of the partnership, or any

1 shareholder of the subchapter S corporation receives as a

distributive share of adjusted business income minus the loss

adjustment of the individual, partnership, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $110,000.00 or more but not in excess of $115,000.00, the credit

is reduced by 80%.

(2) For the purposes of determining disqualification under

subsection (1), an active shareholder's share of business income

shall not be attributed to another active shareholder.

(3) To determine the reduction percentage under subsection

(1)(c), the following apply:

(a) The reduction percentage for a partnership or subchapter S

corporation is based on the distributive share of adjusted business

income minus loss adjustment of the partner or shareholder with the

greatest distributive share of adjusted business income minus loss

adjustment.

(b) The reduction percentage for a corporation other than a

subchapter S corporation is the greater of the following:

(i) The reduction percentage based on the compensation and

directors' fees of the shareholder or officer with the greatest

amount of compensation and directors' fees.

(ii) The reduction percentage based on the sum of the amounts

in subsection (1)(b)(ii)(A) and (B) for the shareholder or officer

with the greatest sum of the amounts in subsection (1)(b)(ii)(A) and

(B).

(4) A person who qualifies under subsection (1) is allowed a

credit against the tax imposed under section 20. The credit under

this subsection is the amount by which the tax imposed under

section 20 exceeds 1.8% of adjusted business income.

(5) If gross receipts exceed $9,000,000.00, the credit shall

be reduced by a fraction, the numerator of which is the amount of

gross receipts over $9,000,000.00 and the denominator of which is

$1,000,000.00. The credit shall not exceed 100% of the tax

liability imposed by section 20.

(6) An affiliated group as defined in this act, a controlled

group of corporations as defined in section 1563 of the internal

revenue code and further described in 26 CFR 1.414(b)-1 and

1.414(c)-1 to 1.414(c)-5, or an entity under common control as

defined by the internal revenue code shall not take the credit

allowed by this section unless the business activities of the

entities are consolidated. The gross receipts, adjusted business

income, and tax base of all members of the group must be combined

to determine eligibility and to compute the credit under this

section. If any 1 individual, partner, officer, or shareholder has

compensation or a distributive share of adjusted business income,

or a combination of compensation and a distributive share of

adjusted business income, in excess of the amounts specified in

this section from any 1 member of the group, the group is not

eligible for the credit. Each member's business activities

attributable to its tax year or years ending within the calendar

year are required to be consolidated on a form prescribed by the

department.

(7) For a person that reports for a tax year less than 12

months, the amounts specified in this section for gross receipts,

adjusted business income, and share of business income shall be

multiplied by a fraction, the numerator of which is the number of

months in the tax year and the denominator of which is 12.

(8) The department shall permit a taxpayer that elects to

claim the credit allowed under this section based on the amount by

which the tax imposed under section 20 exceeds the percentage of

adjusted business income for the tax year as determined under

subsection (4), and that is not required to reduce the credit

pursuant to subsection (1) or (5), to file and pay the tax imposed

by this act without computing the tax imposed under section 20.

(9) If a professional employer organization does not make an

election under section 4(5) with each of its clients, the

professional employer organization shall not claim a credit under

this section. If a client does not make an election under section

4(5) with its professional employer organization, the client shall

not claim a credit under this section.

(10) As used in this section:

(a) "Active shareholder" means a shareholder who receives at

least $10,000.00 in compensation, directors' fees, or dividends

from the business, and who owns at least 5% of the outstanding

stock or other ownership interest.

(b) "Adjusted business income" means business income as

defined in section 3 with all of the following adjustments:

(i) Add compensation and directors' fees of active shareholders

of a corporation.

(ii) Add, to the extent deducted in determining federal taxable

income, a carry back or a carry over of a net operating loss.

(iii) Add, to the extent deducted in determining federal taxable

income, a capital loss.

(iv) Add compensation and directors' fees of officers of a

corporation.

business income was less than zero in any of the 5 tax years

immediately preceding the tax year for which eligibility for the

credit under this section is being determined. In determining the

loss adjustment for a tax year, a taxpayer is not required to use

more of the taxpayer's total negative adjusted business income than

the amount needed to qualify the taxpayer for the credit under this

section. A taxpayer shall not be considered to have used any

portion of the taxpayer's negative adjusted business income amount

unless the portion used is necessary to qualify for the credit

under this section. A taxpayer shall not reuse a negative adjusted

business income amount used as a loss adjustment in a previous tax

year or use a negative adjusted business income amount from a year

in which the taxpayer did not receive the credit under this

section.

(d) "Subchapter S corporation" means a corporation that elects

to be subject to taxation under subchapter S of chapter 1 of

subtitle A of the internal revenue code, 26 USC 1361 to 1379.

Sec. 26. (1) For tax years that begin after December 31, 2008,

a taxpayer that has been issued a tax voucher certificate under

section 23 of the Michigan early stage venture investment act of

2003, 2003 PA 296, MCL 125.2253, or any taxpayer to which all or a

portion of a tax voucher is transferred pursuant to the Michigan

early stage venture investment act of 2003, 2003 PA 296, MCL

125.2231 to 125.2263, may use the tax voucher to pay a liability of

the taxpayer due under this act.

(2) On and after November 21, 2005, the total amount of all

tax voucher certificates that shall be approved under this section,

section 37e of former 1975 PA 228, and the Michigan early stage

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

125.2263, shall not exceed an amount sufficient to allow the

Michigan early stage venture investment corporation to raise

$450,000,000.00 for the purposes authorized under the Michigan

early stage venture investment act of 2003, 2003 PA 296, MCL

125.2231 to 125.2263. The total amount of all tax voucher

certificates under this section and section 37e of former 1975 PA

228 shall not exceed $600,000,000.00.

(3) The department shall not approve a tax voucher certificate

under section 23(2) of the Michigan early stage venture investment

act of 2003, 2003 PA 296, MCL 125.2253, after December 31, 2015.

(4) For tax voucher certificates approved under subsection

(2), the amount of tax voucher certificates approved by the

department for use in any tax year shall not exceed 25% of the

total amount of all tax voucher certificates approved by the

department.

(5) Investors shall apply to the Michigan early stage venture

investment corporation for approval of tax voucher certificates at

the time and in the manner required under the Michigan early stage

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

125.2263.

(6) The Michigan early stage venture investment corporation

shall determine which investors are eligible for tax vouchers and

the amount of the tax vouchers allowed to each investor as provided

in the Michigan early stage venture investment act of 2003, 2003 PA

296, MCL 125.2231 to 125.2263.

(7) The tax voucher certificate, and any completed transfer

form that was issued pursuant to the Michigan early stage venture

investment act of 2003, 2003 PA 296, MCL 125.2231 to 125.2263,

shall be attached to the taxpayer's annual return under this act.

The department may prescribe and implement alternative methods of

reporting and recording ownership, transfer, and utilization of tax

voucher certificates that are not inconsistent with this act.

(8) A tax voucher shall be used to pay a liability of the

taxpayer due under this act only in a tax year that begins after

December 31, 2008. The amount of the tax voucher that may be used

to pay a liability of the taxpayer due under this act in any tax

year shall not exceed the lesser of the following:

(a) The amount of the tax voucher stated on the tax voucher

certificate held by the taxpayer.

(b) The amount authorized to be used in the tax year under the

terms of the tax voucher certificate.

year for which the tax voucher is to be applied.

(9) The department shall administer transfers of tax voucher

certificates or the transfer of the right to be issued and receive

a tax voucher certificate as provided in the Michigan early stage

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

125.2263, and shall take any action necessary to enforce and

effectuate the permissible issuance and use of tax voucher

certificates in a manner authorized under this section and the

Michigan early stage venture investment act of 2003, 2003 PA 296,

MCL 125.2231 to 125.2263.

(10) If the amount of a tax voucher certificate held by a

taxpayer or transferee exceeds the amount the taxpayer or

transferee may use under subsection (8)(b) or (c) in a tax year,

that excess may be used by the taxpayer or transferee to pay,

subject to the limitations of subsection (8), any future liability

of the taxpayer or transferee under this act.

(11) If a taxpayer requests, the department shall issue

separate replacement tax voucher certificates, or replacement

approval letters, evidencing the right of the holder to be issued

and receive a tax voucher certificate in an aggregate amount equal

to the amount of a tax voucher certificate or an approval letter

presented by a taxpayer. Replacement tax voucher certificates may

be used, and replacement approval letters may be issued, to

evidence the right to be issued and receive a tax voucher

certificate that will be used for 1 or more of the following

purposes:

(a) To pay any liability of the taxpayer under this act to the

extent permitted in any tax year by subsection (8).

(b) To pay any liability of the taxpayer under and to the

extent allowed under section 270 of the income tax act of 1967,

1967 PA 281, MCL 206.270.

replacement tax voucher certificate to pay any liability under this

act to the extent allowed under subsection (8).

(d) To be transferred to a person who may use the tax voucher

certificate to pay any liability under and to the extent allowed

under section 270 of the income tax act of 1967, 1967 PA 281, MCL

206.270.

(12) As used in this section:

(a) "Investor" means that term as defined in the Michigan

early stage venture investment act of 2003, 2003 PA 296, MCL

125.2231 to 125.2263.

(b) "Certificate" means the certificate issued under section

23 of the Michigan early stage venture investment act of 2003, 2003

PA 296, MCL 125.2253.

certificate has been transferred under section 23 of the Michigan

early stage venture investment act of 2003, 2003 PA 296, MCL

125.2253, and this section.

Sec. 27. (1) A taxpayer that is not subject to the income tax

act of 1967, 1967 PA 281, MCL 206.1 to 206.532, may claim a credit

against the tax imposed by this act, subject to the applicable

limitations under this section, equal to 50% of the aggregate

amount of charitable contributions made by the taxpayer during the

tax year to all of the following:

(a) A public broadcast station as defined by 47 USC 397 that

is not affiliated with an institution of higher education.

(b) A public library.

a nonprofit corporation, fund, foundation, trust, or association

organized and operated exclusively for the benefit of an

institution of higher learning.

(d) The Michigan colleges foundation,

(2) The tax credit allowed under this section for a donation

under subsection (1)(c) is allowed only if the donee corporation,

fund, foundation, trust, or association is controlled or approved

and reviewed by the governing board of the institution of higher

learning that benefits from the charitable contributions. The

nonprofit corporation, fund, foundation, trust, or association

shall provide copies of its annual independently audited financial

statements to the auditor general of this state and chairpersons of

the appropriation committees of the senate and house or

representatives.

(3) The credit allowed under this section for any tax year

shall not exceed 5% of the tax liability of the taxpayer for that

tax year as determined without regard to this section or $5,000.00,

whichever is less.

(4) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability shall not be

refunded.

(5) As used in this section:

(a) "Institution of higher learning" means an educational

institution located within this state meeting all of the following

requirements:

(i) Maintains a regular faculty and curriculum and has a

regularly enrolled body of students in attendance at the place

where its educational activities are carried on.

(ii) Regularly offers education above the twelfth grade.

(iii) Awards associate, bachelor's, master's, or doctoral

degrees or any combination of those degrees or higher education

credits acceptable for those degrees granted by other institutions

of higher learning.

(iv) Is recognized by the state board of education as an

institution of higher learning and appears as an institution of

higher learning in the annual publication of the department of

education entitled "the directory of institutions of higher

education".

(b) "Public library" means a public library as defined in

section 2 of 1977 PA 89, MCL 397.552.

Sec. 28. (1) A taxpayer that is an employer or carrier that is

subject to the worker's disability compensation act of 1969, 1969

PA 317, MCL 418.101 to 418.941, may claim a credit against the tax

imposed by this act an amount equal to the amount paid during that

tax year by the taxpayer pursuant to section 352 of the worker's

disability compensation act of 1969, 1969 PA 317, MCL 418.352, as

certified by the director of the bureau of worker's disability

compensation pursuant to section 391(6) of the worker's disability

compensation act of 1969, 1969 PA 317, MCL 418.391.

(2) A taxpayer that claims a credit under this section shall

claim a portion of the credit allowed by this section equal to the

payments made during a calendar quarter pursuant to section 352 of

the worker's disability compensation act of 1969, 1969 PA 317, MCL

418.352, against the estimated tax payments made under section 71.

Any subsequent increase or decrease in the amount claimed for

payments made by the insurer or self-insurer shall be reflected in

the amount of the credit taken for the calendar quarter in which

the amount of the adjustment is finalized.

(3) The credit under this section is in addition to any other

credits the taxpayer is eligible for under this act.

(4) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability shall be

refunded.

Sec. 29. (1) Subject to the applicable limitations in this

section, a taxpayer that does not claim a credit under section 261

of the income tax act of 1967, 1967 PA 281, MCL 206.261, may claim

a credit against the tax imposed by this act equal to 50% of the

amount the taxpayer contributed during the tax year to an endowment

fund of a community foundation.

(2) The credit allowed by this section shall not exceed 5% of

the taxpayer's tax liability for the tax year before claiming any

credits allowed by this act or $5,000.00, whichever is less.

(3) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability shall not be

refunded.

(4) A taxpayer may claim a credit under this section for

contributions to a community foundation made before the expiration

of the 18-month period after a community foundation was

incorporated or established during which the community foundation

must build an endowment value of $100,000.00 as provided in

subsection (6)(g). If the community foundation does not reach the

required $100,000.00 endowment value during that 18-month period,

contributions to the community foundation made after the date on

which the 18-month period expires shall not be used to calculate a

credit under this section. At any time after the expiration of the

18-month period under subsection (6)(g) that the community

foundation has an endowment value of $100,000.00, the community

foundation may apply to the department for certification under this

section.

(5) On or before July 1 of each year, the department shall

report to the house of representatives committee on tax policy and

the senate finance committee the total amount of tax credits

claimed under this section and under section 261 of the income tax

act of 1967, 1967 PA 281, MCL 206.261, for the immediately

preceding tax year.

(6) As used in this section, "community foundation" means an

organization that applies for certification under subsection (4) on

or before May 15 of the tax year for which the taxpayer is claiming

the credit and that the department certifies for that tax year as

meeting all of the following requirements:

(a) Qualifies for exemption from federal income taxation under

section 501(c)(3) of the internal revenue code.

(b) Supports a broad range of charitable activities within the

specific geographic area of this state that it serves, such as a

municipality or county.

funds by seeking gifts and bequests from a wide range of potential

donors in the community or area served.

(d) Is publicly supported as defined by the regulations of the

United States department of treasury, 26 CFR 1.170A-9(e)(10). To

maintain certification, the community foundation shall submit

documentation to the department annually that demonstrates

compliance with this subdivision.

(e) Is not a supporting organization as an organization is

described in section 509(a)(3) of the internal revenue code and in

26 CFR 1.509(a)-4 and 1.509(a)-5.

(f) Meets the requirements for treatment as a single entity

contained in 26 CFR 1.170A-9(e)(11).

(g) Except as provided in subsection (4), is incorporated or

established as a trust at least 6 months before the beginning of

the tax year for which the credit under this section is claimed and

that has an endowment value of at least $100,000.00 before the

expiration of 18 months after the community foundation is

incorporated or established.

(h) Has an independent governing body representing the general

public's interest and that is not appointed by a single outside

entity.

(i) Provides evidence to the department that the community

foundation has, before the expiration of 6 months after the

community foundation is incorporated or established, and maintains

continually during the tax year for which the credit under this

section is claimed, at least 1 part-time or full-time employee.

(j) For community foundations that have an endowment value of

$1,000,000.00 or more only, the community foundation is subject to

an annual independent financial audit and provides copies of that

audit to the department not more than 3 months after the completion

of the audit. For community foundations that have an endowment

value of less than $1,000,000.00, the community foundation is

subject to an annual review and an audit every third year.

(k) In addition to all other criteria listed in this

subsection for a community foundation that is incorporated or

established after January 9, 2001, operates in a county of this

state that was not served by a community foundation when the

community foundation was incorporated or established or operates as

a geographic component of an existing certified community

foundation.

Sec. 30. (1) A taxpayer who does not claim a credit under

section 261 of the income tax act of 1967, 1967 PA 281, MCL

206.261, for a contribution to a shelter for homeless persons, food

kitchen, food bank, or other entity, the primary purpose of which

is to provide overnight accommodation, food, or meals to persons

who are indigent, may claim a credit against the tax imposed by

this act equal to 50% of the cash amount the taxpayer contributed

during the tax year to a shelter for homeless persons, food

kitchen, food bank, or other entity, the primary purpose of which

is to provide overnight accommodation, food, or meals to persons

who are indigent, if a contribution to that entity is tax

deductible for the donor under the internal revenue code.

(2) The credit allowed by this section shall not exceed 5% of

the taxpayer's tax liability for the tax year before claiming any

credits allowed by this act or $5,000.00, whichever is less.

(3) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability shall not be

refunded.

(4) An entity described in subsection (1) may request that the

department determine whether a contribution to that entity

qualifies for the credit under this section. The department shall

make a determination and respond to a request no later than 30 days

after the department receives the request.

(5) On or before July 1 of each year, the department shall

report to the house of representatives committee on tax policy and

the senate committee on finance the total amount of tax credits

claimed under this section, section 29, and section 261 of the

income tax act of 1967, 1967 PA 281, MCL 206.261, for the

immediately preceding tax year.

Sec. 31. (1) A taxpayer may claim a credit against the tax

imposed by this act for 1 or more of the following as applicable:

(a) The credit allowed under subsection (2).

(b) The credit allowed under subsection (6).

(2) A taxpayer that is certified under the Michigan next

energy authority act, 2002 PA 593, MCL 207.821 to 207.827, as an

eligible taxpayer may claim a nonrefundable credit for the tax year

equal to the amount determined under subdivision (a) or (b),

whichever is less:

(a) The amount by which the taxpayer's tax liability

attributable to qualified business activity for the tax year

exceeds the taxpayer's baseline tax liability attributable to

qualified business activity.

(b) Ten percent of the amount by which the taxpayer's adjusted

qualified business activity performed in this state outside of a

renaissance zone for the tax year exceeds the taxpayer's adjusted

qualified business activity performed in this state outside of a

renaissance zone for the 2001 tax year under section 39e of former

1975 PA 228.

(3) For any tax year in which the eligible taxpayer's tax

liability attributable to qualified business activity for the tax

year does not exceed the taxpayer's baseline tax liability

attributable to qualified business activity, the eligible taxpayer

shall not claim the credit allowed under subsection (2).

(4) An affiliated group as defined in this act, a controlled

group of corporations as defined in section 1563 of the internal

revenue code and further described in 26 CFR 1.414(b)-1 and

1.414(c)-1 to 1.414(c)-5, or an entity under common control as

defined by the internal revenue code shall not take the credit

allowed under subsection (2) unless the qualified business activity

of the group or entities is consolidated.

(5) A taxpayer that claims a credit under subsection (2) shall

attach a copy of each of the following as issued pursuant to the

Michigan next energy authority act, 2002 PA 593, MCL 207.821 to

207.827, to the annual return required under this act for each tax

year in which the taxpayer claims the credit allowed under

subsection (2):

(a) The proof of certification that the taxpayer is an

eligible taxpayer for the tax year.

(b) The proof of certification of the taxpayer's tax liability

attributable to qualified business activity for the tax year.

liability attributable to qualified business activity.

(6) A taxpayer that is a qualified alternative energy entity

may claim a credit for the taxpayer's qualified payroll amount. A

taxpayer shall claim the credit under this subsection after all

allowable nonrefundable credits under this act.

(7) If the credit allowed under subsection (6) exceeds the tax

liability of the taxpayer for the tax year, that portion of the

credit that exceeds the tax liability shall be refunded.

(8) As used in this section:

(a) "Adjusted qualified business activity performed in this

state outside of a renaissance zone" means either of the following:

(i) Except as provided in subparagraph (ii), the taxpayer's

payroll for qualified business activity performed in this state

outside of a renaissance zone.

(ii) For a partnership, limited liability company, S

corporation, or individual, the amount determined under

subparagraph (i) plus the product of the following as related to the

taxpayer:

(A) Business income.

(B) The apportionment factor as determined under chapter 3.

(b) "Alternative energy business activity factor" means a

fraction, the numerator of which is the ratio of the value of the

taxpayer's property used for qualified business activity and

located in this state outside of a renaissance zone for the year

for which the factor is being calculated to the value of all of the

taxpayer's property located in this state for that year plus the

ratio of the taxpayer's payroll for qualified business activity

performed in this state outside of a renaissance zone for that year

to all of the taxpayer's payroll in this state for that year and

the denominator of which is 2.

"alternative energy system", "alternative energy vehicle", and

"alternative energy technology" mean those terms as defined in the

Michigan next energy authority act, 2002 PA 593, MCL 207.821 to

207.827.

(d) "Alternative energy zone" means a renaissance zone

designated as an alternative energy zone by the board of the

Michigan strategic fund under section 8a of the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2688a.

(e) "Baseline tax liability attributable to qualified business

activity" means the taxpayer's tax liability for the 2001 tax year

under former 1975 PA 228 multiplied by the taxpayer's alternative

energy business activity factor for the 2001 tax year under former

1975 PA 228. A taxpayer with a 2001 tax year of less than 12 months

under former 1975 PA 228 shall annualize the amount calculated

under this subdivision as necessary to determine baseline tax

liability attributable to qualified business activity that reflects

a 12-month period.

(f) "Eligible taxpayer" means a taxpayer that has proof of

certification of qualified business activity under the Michigan

next energy authority act, 2002 PA 593, MCL 207.821 to 207.827.

(g) "Payroll" means total salaries and wages before deducting

any personal or dependency exemptions.

(h) "Qualified alternative energy entity" means a taxpayer

located in an alternative energy zone.

(i) "Qualified business activity" means research, development,

or manufacturing of an alternative energy marine propulsion system,

an alternative energy system, an alternative energy vehicle,

alternative energy technology, or renewable fuel.

(j) "Qualified employee" means an individual who is employed

by a qualified alternative energy entity, whose job

responsibilities are related to the research, development, or

manufacturing activities of the qualified alternative energy

entity, and whose regular place of employment is within an

alternative energy zone.

(k) "Qualified payroll amount" means an amount equal to

payroll of the qualified alternative energy entity attributable to

all qualified employees in the tax year of the qualified

alternative energy entity for which the credit under subsection (6)

is being claimed, multiplied by the tax rate for that tax year.

(l) "Renaissance zone" means a renaissance zone designated

under the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681

to 125.2696.

(m) "Renewable fuel" means 1 or more of the following:

(i) Biodiesel or biodiesel blends containing at least 20%

biodiesel. As used in this subparagraph, "biodiesel" means a diesel

fuel substitute consisting of methyl or ethyl esters produced from

the transesterification of animal or vegetable fats with methanol

or ethanol.

(ii) Biomass. As used in this subparagraph, "biomass" means

residues from the wood and paper products industries, residues from

food production and processing, trees and grasses grown

specifically to be used as energy crops, and gaseous fuels produced

from solid biomass, animal wastes, municipal waste, or landfills.

(n) "Tax liability attributable to qualified business

activity" means the taxpayer's tax liability multiplied by the

taxpayer's alternative energy business activity factor for the tax

year.

(o) "Tax rate" means the rate imposed under section 51e of the

income tax act of 1967, 1967 PA 281, MCL 206.51e, annualized as

necessary, for the tax year in which the qualified alternative

energy entity claims a credit under subsection (6).

Sec. 32. (1) For a period of time not to exceed 20 years as

determined by the Michigan economic growth authority, a taxpayer

that is an authorized business or an eligible taxpayer may claim a

credit against the tax imposed by section 20 equal to the amount

certified each year by the Michigan economic growth authority as

follows:

(a) For an authorized business for the tax year, an amount not

to exceed the payroll of the authorized business attributable to

employees who perform qualified new jobs as determined under the

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

207.810, multiplied by the tax rate.

(b) For an eligible business as determined under section

8(5)(a) of the Michigan economic growth authority act, 1995 PA 24,

MCL 207.808, an amount not to exceed 50% of the payroll of the

eligible taxpayer attributable to employees who perform retained

jobs as determined under the Michigan economic growth authority

act, 1995 PA 24, MCL 207.801 to 207.810, multiplied by the tax rate

for the tax year.

8(5)(b) of the Michigan economic growth authority act, 1995 PA 24,

MCL 207.808, an amount not to exceed the payroll of the eligible

taxpayer attributable to employees who perform retained jobs as

determined under the Michigan economic growth authority act, 1995

PA 24, MCL 207.801 to 207.810, multiplied by the tax rate for the

tax year.

(2) A taxpayer shall not claim a credit under this section

unless the Michigan economic growth authority has issued a

certificate to the taxpayer. The taxpayer shall attach the

certificate to the annual return filed under this act on which a

credit under this section is claimed.

(3) The certificate required by subsection (2) shall state all

of the following:

(a) The taxpayer is an authorized business or an eligible

taxpayer.

(b) The amount of the credit under this section for the

authorized business or eligible taxpayer for the designated tax

year.

the Michigan department of treasury number assigned to the

taxpayer.

(4) The Michigan economic growth authority may certify a

credit under this section based on an agreement entered into prior

to January 1, 2008 pursuant to section 37c of former 1975 PA 228.

The number of years for which the credit may be claimed under this

section shall equal the maximum number of years designated in the

resolution reduced by the number of years for which a credit has

been claimed under section 37c of former 1975 PA 228.

(5) If the credit allowed under this section exceeds the tax

liability of the taxpayer for the tax year, that portion of the

credit that exceeds the tax liability of the taxpayer shall be

refunded.

(6) A taxpayer that claims a credit under subsection (1)(a),

section 33(a), or section 37c or 37d of former 1975 PA 228, that

has an agreement with the Michigan economic growth authority based

on qualified new jobs as defined in section 3(n)(ii) of the

Michigan economic growth authority act, 1995 PA 24, MCL 207.803,

and that removes from this state 51% or more of those qualified new

jobs within 3 years after the first year in which the taxpayer

claims a credit described in this subsection shall pay to the

department no later than 12 months after those qualified new jobs

are removed from the state an amount equal to the total of all

credits described in this subsection that were claimed by the

taxpayer.

(7) If the Michigan economic growth authority or a designee of

the Michigan economic growth authority requests that a taxpayer who

claims the credit under this section get a statement prepared by a

certified public accountant verifying that the actual number of new

jobs created is the same number of new jobs used to calculate the

credit under this section, the taxpayer shall get the statement and

attach that statement to its annual return under this act on which

the credit under this section is claimed.

(8) For a credit allowed under this section, an affiliated

group as defined in this act, a controlled group of corporations as

defined in section 1563 of the internal revenue code and further

described in 26 CFR 1.414(b)-1 and 1.414(c)-1 to 1.414(c)-5, or an

entity under common control as defined by the internal revenue code

shall claim only 1 credit for each tax year as follows:

(a) For an authorized business, for each expansion or location

evidenced by a written agreement whether or not a combined or

consolidated return is filed.

(b) For an eligible taxpayer, as provided in each written

agreement whether or not a combined or consolidated return is

filed.

(9) A credit shall not be claimed by a taxpayer under this

section if the taxpayer's initial certification as required in

subsection (3) is issued after December 31, 2013.

(10) As used in this section:

(a) "Authorized business", "facility", "full-time job",

"qualified high-technology business", and "written agreement" mean

those terms as defined in the Michigan economic growth authority

act, 1995 PA 24, MCL 207.801 to 207.810.

(b) "Eligible taxpayer" means an eligible business that meets

the criteria under section 8(5) of the Michigan economic growth

authority act, 1995 PA 24, MCL 207.808.

economic growth authority created in the Michigan economic growth

authority act, 1995 PA 24, MCL 207.801 to 207.810.

(d) "Payroll" means the total salaries and wages before

deducting any personal or dependency exemptions.

(e) "Qualified new jobs" means 1 or more of the following:

(i) The average number of full-time jobs at a facility of an

authorized business for a tax year in excess of the average number

of full-time jobs the authorized business maintained in this state

prior to the expansion or location as that is determined under the

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

207.810.

(ii) The average number of full-time jobs at a facility created

by an eligible business within 120 days before becoming an

authorized business that is in excess of the average number of

full-time jobs that the business maintained in this state 120 days

before becoming an authorized business, as determined under the

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

207.810.

(f) "Tax rate" means the rate imposed under section 51e of the

income tax act of 1967, 1967 PA 281, MCL 206.51e, for the tax year

in which the tax year of the taxpayer for which the credit is being

computed begins.

Sec. 33. (1) A taxpayer that is a business located and

conducting business activity within a renaissance zone may claim a

credit against the tax imposed by this act for the tax year to the

extent and for the duration provided pursuant to the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2681 to 125.2696, equal

to the lesser of the following:

(a) The tax liability attributable to business activity

conducted within a renaissance zone in the tax year.

(b) Ten percent of adjusted services performed in a designated

renaissance zone.

a renaissance zone before January 1, 2008, the product of the

following:

(i) The credit claimed under section 39b of former 1975 PA 228

for the tax year ending in 2007.

(ii) The ratio of the taxpayer's payroll in this state in the

tax year divided by the taxpayer's payroll in this state in its tax

year ending in 2007 under former 1975 PA 228.

(iii) The ratio of the taxpayer's renaissance zone business

activity factor for the tax year divided by the taxpayer's

renaissance zone business activity factor for its tax year ending

in 2007 under section 39b of former 1975 PA 228.

(2) Any portion of the taxpayer's tax liability that is

attributable to illegal activity conducted in the renaissance zone

shall not be used to calculate a credit under this section.

(3) The credit allowed under this section continues through

the tax year in which the renaissance zone designation expires.

(4) If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

portion of the credit that exceeds the tax liability shall not be

refunded.

(5) A taxpayer that claims a credit under this section shall

not employ, pay a speaker fee to, or provide any remuneration,

compensation, or consideration to any person employed by the state,

the state administrative board created in 1921 PA 2, MCL 17.1 to

17.3, or the renaissance zone review board created in 1996 PA 376,

MCL 125.2681 to 125.2696, whose employment relates or related in

any way to the authorization or enforcement of the credit allowed

under this section for any year in which the taxpayer claims a

credit under this section and for the 3 years after the last year

that a credit is claimed.

(6) To be eligible for the credit allowed under this section,

an otherwise qualified taxpayer shall file an annual return under

this act in a format determined by the department.

(7) Any portion of the taxpayer's tax liability that is

attributable to business activity related to the operation of a

casino, and business activity that is associated or affiliated with

the operation of a casino, including, but not limited to, the

operation of a parking lot, hotel, motel, or retail store, shall

not be used to calculate a credit under this section.

(8) As used in this section:

(a) "Adjusted services performed in a designated renaissance

zone" means either of the following:

(i) Except as provided in subparagraph (ii), the sum of the

taxpayer's payroll for services performed in a designated

renaissance zone plus an amount equal to the amount deducted in

arriving at federal taxable income for the tax year for

depreciation, amortization, or immediate or accelerated write-off

for tangible property exempt under section 7ff of the general

property tax act, 1893 PA 206, MCL 211.7ff, in the tax year or, for

new property, in the immediately following tax year.

(ii) For a partnership, limited liability company, S

corporation, or individual, the amount determined under

subparagraph (i) plus the product of the following as related to the

taxpayer if greater than zero:

(A) Business income.

(B) The ratio of the taxpayer's total sales in this state

during the tax year divided by the taxpayer's total sales

everywhere during the tax year.

(b) "Casino" means a casino regulated by this state pursuant

to the Michigan gaming control and revenue act, the Initiated Law

of 1996, MCL 432.201 to 432.226.

to, or exempt from, the collection of taxes under the general

property tax act, 1893 PA 206, MCL 211.1 to 211.157, and has not

been subject to, or exempt from, ad valorem property taxes levied

in another state, except that receiving an exemption as inventory

property does not disqualify property.

(d) "Payroll" means total salaries and wages before deducting

any personal or dependency exemptions.

(e) "Renaissance zone" means that term as defined in the

Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

125.2696.

(f) "Renaissance zone business activity factor" means a

fraction, the numerator of which is the ratio of the average value

of the taxpayer's property located in a designated renaissance zone

to the average value of the taxpayer's property in this state plus

the ratio of the taxpayer's payroll for services performed in a

designated renaissance zone to all of the taxpayer's payroll in

this state and the denominator of which is 2.

(g) "Tax liability attributable to business activity conducted

within a renaissance zone" means the taxpayer's tax liability

multiplied by the renaissance zone business activity factor.

Sec. 34. (1) A qualified taxpayer with a rehabilitation plan

certified after December 31, 2007 or a qualified taxpayer that has

a rehabilitation plan certified before January 1, 2008 under

section 39c of former 1975 PA 228 for the rehabilitation of a

historic resource for which a certification of completed

rehabilitation has been issued after the end of the taxpayer's last

tax year may credit against the tax imposed by this act the amount

determined pursuant to subsection (2) for the qualified

expenditures for the rehabilitation of a historic resource pursuant

to the rehabilitation plan in the year in which the certification

of completed rehabilitation of the historic resource is issued

provided that the certification of completed rehabilitation was

issued not more than 5 years after the rehabilitation plan was

certified by the Michigan historical center.

(2) The credit allowed under this section shall be 25% of the

qualified expenditures that are eligible for the credit under

section 47(a)(2) of the internal revenue code if the taxpayer is

eligible for the credit under section 47(a)(2) of the internal

revenue code or, if the taxpayer is not eligible for the credit

under section 47(a)(2) of the internal revenue code, 25% of the

qualified expenditures that would qualify under section 47(a)(2) of

the internal revenue code except that the expenditures are made to

a historic resource that is not eligible for the credit under

section 47(a)(2) of the internal revenue code, subject to both of

the following:

(a) A taxpayer with qualified expenditures that are eligible

for the credit under section 47(a)(2) of the internal revenue code

may not claim a credit under this section for those qualified

expenditures unless the taxpayer has claimed and received a credit

for those qualified expenditures under section 47(a)(2) of the

internal revenue code.

(b) A credit under this section shall be reduced by the amount

of a credit received by the taxpayer for the same qualified

expenditures under section 47(a)(2) of the internal revenue code.

(3) To be eligible for the credit under this section, the

taxpayer shall apply to and receive from the Michigan historical

center certification that the historic significance, the

rehabilitation plan, and the completed rehabilitation of the

historic resource meet the criteria under subsection (6) and either

of the following:

(a) All of the following criteria:

(i) The historic resource contributes to the significance of

the historic district in which it is located.

(ii) Both the rehabilitation plan and completed rehabilitation

of the historic resource meet the federal secretary of the

interior's standards for rehabilitation and guidelines for

rehabilitating historic buildings, 36 CFR part 67.

(iii) All rehabilitation work has been done to or within the

walls, boundaries, or structures of the historic resource or to

historic resources located within the property boundaries of the

property.

(b) The taxpayer has received certification from the national

park service that the historic resource's significance, the

rehabilitation plan, and the completed rehabilitation qualify for

the credit allowed under section 47(a)(2) of the internal revenue

code.

(4) If a qualified taxpayer is eligible for the credit allowed

under section 47(a)(2) of the internal revenue code, the qualified

taxpayer shall file for certification with the center to qualify

for the credit allowed under section 47(a)(2) of the internal

revenue code. If the qualified taxpayer has previously filed for

certification with the center to qualify for the credit allowed

under section 47(a)(2) of the internal revenue code, additional

filing for the credit allowed under this section is not required.

(5) The center may inspect a historic resource at any time

during the rehabilitation process and may revoke certification of

completed rehabilitation if the rehabilitation was not undertaken

as represented in the rehabilitation plan or if unapproved

alterations to the completed rehabilitation are made during the 5

years after the tax year in which the credit was claimed. The

center shall promptly notify the department of a revocation.

(6) Qualified expenditures for the rehabilitation of a

historic resource may be used to calculate the credit under this

section if the historic resource meets 1 of the criteria listed in

subdivision (a) and 1 of the criteria listed in subdivision (b):

(a) The resource is 1 of the following during the tax year in

which a credit under this section is claimed for those qualified

expenditures:

(i) Individually listed on the national register of historic

places or state register of historic sites.

(ii) A contributing resource located within a historic district

listed on the national register of historic places or the state

(iii) A contributing resource located within a historic district

designated by a local unit pursuant to an ordinance adopted under

the local historic districts act, 1970 PA 169, MCL 399.201 to

399.215.

(b) The resource meets 1 of the following criteria during the

tax year in which a credit under this section is claimed for those

qualified expenditures:

(i) The historic resource is located in a designated historic

district in a local unit of government with an existing ordinance

under the local historic districts act, 1970 PA 169, MCL 399.201 to

399.215.

(ii) The historic resource is located in an incorporated local

unit of government that does not have an ordinance under the local

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and

has a population of less than 5,000.

(iii) The historic resource is located in an unincorporated

local unit of government.

(iv) The historic resource is located in an incorporated local

unit of government that does not have an ordinance under the local

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and is

located within the boundaries of an association that has been

chartered under 1889 PA 39, MCL 455.51 to 455.72.

(7) If a qualified taxpayer is a partnership, limited

liability company, or subchapter S corporation, the qualified

taxpayer may assign all or any portion of a credit allowed under

this section to its partners, members, or shareholders, based on

the partner's, member's, or shareholder's proportionate share of

ownership or based on an alternative method approved by the

department. A credit assignment under this subsection is

irrevocable and shall be made in the tax year in which a

certificate of completed rehabilitation is issued. A qualified

taxpayer may claim a portion of a credit and assign the remaining

credit amount. A partner, member, or shareholder that is an

assignee shall not subsequently assign a credit or any portion of a

credit assigned to the partner, member, or shareholder under this

subsection. A credit amount assigned under this subsection may be

claimed against the partner's, member's, or shareholder's tax

liability under this act or under the income tax act of 1967, 1967

PA 281, MCL 206.1 to 206.532. A credit assignment under this

subsection shall be made on a form prescribed by the department.

The qualified taxpayer and assignees shall send a copy of the

completed assignment form to the department in the tax year in

which the assignment is made and attach a copy of the completed

assignment form to the annual return required to be filed under

this act for that tax year.

(8) If the credit allowed under this section for the tax year

and any unused carryforward of the credit allowed by this section

exceed the taxpayer's tax liability for the tax year, that portion

that exceeds the tax liability for the tax year shall not be

refunded but may be carried forward to offset tax liability in

subsequent tax years for 10 years or until used up, whichever

occurs first. An unused carryforward of a credit under section 39c

of former 1975 PA 228 that was unused at the end of the last tax

year for which former 1975 PA 228 was in effect may be claimed

against the tax imposed under section 20 for the years the

carryforward would have been available under section 39c of former

1975 PA 228.

(9) If the taxpayer sells a historic resource for which a

credit was claimed under this section or under section 39c of

former 1975 PA 228 less than 5 years after the year in which the

credit was claimed, the following percentage of the credit amount

previously claimed relative to that historic resource shall be

added back to the tax liability of the taxpayer in the year of the

sale:

(a) If the sale is less than 1 year after the year in which

the credit was claimed, 100%.

(b) If the sale is at least 1 year but less than 2 years after

the year in which the credit was claimed, 80%.

after the year in which the credit was claimed, 60%.

(d) If the sale is at least 3 years but less than 4 years

after the year in which the credit was claimed, 40%.

(e) If the sale is at least 4 years but less than 5 years

after the year in which the credit was claimed, 20%.

(f) If the sale is 5 years or more after the year in which the

credit was claimed, an addback to the taxpayer's tax liability

shall not be made.

(10) If a certification of completed rehabilitation is revoked

under subsection (5) less than 5 years after the year in which a

credit was claimed under this section or under section 39c of

former 1975 PA 228, the following percentage of the credit amount

previously claimed relative to that historic resource shall be

added back to the tax liability of the taxpayer in the year of the

revocation:

(a) If the revocation is less than 1 year after the year in

which the credit was claimed, 100%.

(b) If the revocation is at least 1 year but less than 2 years

after the year in which the credit was claimed, 80%.

years after the year in which the credit was claimed, 60%.

(d) If the revocation is at least 3 years but less than 4

years after the year in which the credit was claimed, 40%.

(e) If the revocation is at least 4 years but less than 5

years after the year in which the credit was claimed, 20%.

(f) If the revocation is 5 years or more after the year in

which the credit was claimed, an addback to the taxpayer's tax

liability shall not be made.

(11) The department of history, arts, and libraries through

the Michigan historical center may impose a fee to cover the

administrative cost of implementing the program under this section.

(12) The qualified taxpayer shall attach all of the following

to the qualified taxpayer's annual return required under this act

or under the income tax act of 1967, 1967 PA 281, MCL 206.1 to

206.532, if applicable, on which the credit is claimed:

(a) Certification of completed rehabilitation.

(b) Certification of historic significance related to the

historic resource and the qualified expenditures used to claim a

credit under this section.

assigned any portion of a credit allowed under this section to a

partner, member, or shareholder or if the taxpayer is an assignee

of any portion of a credit allowed under this section.

(13) The department of history, arts, and libraries shall

promulgate rules to implement this section pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328.

(14) The total of the credits claimed under this section and

section 266 of the income tax act of 1967, 1967 PA 281, MCL

206.266, for a rehabilitation project shall not exceed 25% of the

total qualified expenditures eligible for the credit under this

section for that rehabilitation project.

(15) The department of history, arts, and libraries through

the Michigan historical center shall report all of the following to

the legislature annually for the immediately preceding state fiscal

year:

(a) The fee schedule used by the center and the total amount

of fees collected.

(b) A description of each rehabilitation project certified.

project.

(16) As used in this section:

(a) "Contributing resource" means a historic resource that

contributes to the significance of the historic district in which

it is located.

(b) "Historic district" means an area, or group of areas not

necessarily having contiguous boundaries, that contains 1 resource

or a group of resources that are related by history, architecture,

archaeology, engineering, or culture.

historic building, structure, site, object, feature, or open space

located within a historic district designated by the national

or a local unit acting under the local historic districts act, 1970

PA 169, MCL 399.201 to 399.215, or that is individually listed on

the state register of historic sites or national register of

historic places, and includes all of the following:

(i) An owner-occupied personal residence or a historic resource

located within the property boundaries of that personal residence.

(ii) An income-producing commercial, industrial, or residential

resource or a historic resource located within the property

boundaries of that resource.

(iii) A resource owned by a governmental body, nonprofit

organization, or tax-exempt entity that is used primarily by a

taxpayer lessee in a trade or business unrelated to the

governmental body, nonprofit organization, or tax-exempt entity and

that is subject to tax under this act.

(iv) A resource that is occupied or utilized by a governmental

body, nonprofit organization, or tax-exempt entity pursuant to a

long-term lease or lease with option to buy agreement.

(v) Any other resource that could benefit from rehabilitation.

(d) "Last tax year" means the taxpayer's tax year under former

1975 PA 228 that begins after December 31, 2006 and before January

1, 2008.

(e) "Local unit" means a county, city, village, or township.

(f) "Long-term lease" means a lease term of at least 27.5

years for a residential resource or at least 31.5 years for a

nonresidential resource.

(g) "Michigan historical center" or "center" means the state

historic preservation office of the Michigan historical center of

the department of history, arts, and libraries or its successor

agency.

(h) "Open space" means undeveloped land, a naturally

landscaped area, or a formal or man-made landscaped area that

provides a connective link or a buffer between other resources.

(i) "Person" means an individual, partnership, corporation,

association, governmental entity, or other legal entity.

(j) "Qualified expenditures" means capital expenditures that

qualify for a rehabilitation credit under section 47(a)(2) of the

internal revenue code if the taxpayer is eligible for the credit

under section 47(a)(2) of the internal revenue code or, if the

taxpayer is not eligible for the credit under section 47(a)(2) of

the internal revenue code, the qualified expenditures that would

qualify under section 47(a)(2) of the internal revenue code except

that the expenditures are made to a historic resource that is not

eligible for the credit under section 47(a)(2) of the internal

revenue code that were paid not more than 5 years after the

certification of the rehabilitation plan that included those

expenditures was approved by the center, and that were paid after

December 31, 1998 for the rehabilitation of a historic resource.

Qualified expenditures do not include capital expenditures for

nonhistoric additions to a historic resource except an addition

that is required by state or federal regulations that relate to

historic preservation, safety, or accessibility.

(k) "Qualified taxpayer" means a person that is an assignee

under subsection (7) or either owns the resource to be

rehabilitated or has a long-term lease agreement with the owner of

the historic resource and that has qualified expenditures for the

rehabilitation of the historic resource equal to or greater than

10% of the state equalized valuation of the property. If the

historic resource to be rehabilitated is a portion of a historic or

nonhistoric resource, the state equalized valuation of only that

portion of the property shall be used for purposes of this

subdivision. If the assessor for the local tax collecting unit in

which the historic resource is located determines the state

equalized valuation of that portion, that assessor's determination

shall be used for purposes of this subdivision. If the assessor

does not determine that state equalized valuation of that portion,

qualified expenditures, for purposes of this subdivision, shall be

equal to or greater than 5% of the appraised value as determined by

a certified appraiser. If the historic resource to be rehabilitated

does not have a state equalized valuation, qualified expenditures

for purposes of this subdivision shall be equal to or greater than

5% of the appraised value of the resource as determined by a

certified appraiser.

(l) "Rehabilitation plan" means a plan for the rehabilitation

of a historic resource that meets the federal secretary of the

interior's standards for rehabilitation and guidelines for

rehabilitation of historic buildings under 36 CFR part 67.

Sec. 35. (1) Subject to the criteria under this section, a

qualified taxpayer that has a preapproval letter issued after

December 31, 2007 and before January 1, 2013, or a taxpayer that

received a preapproval letter prior to January 1, 2008 under

section 38g of former 1975 PA 228 and has not received a

certificate of completion prior to the taxpayer's last tax year,

provided that the project is completed not more than 5 years after

the preapproval letter for the project is issued, or an assignee

under subsection (20), (21), or (22) may claim a credit that has

been approved under subsection (2), (3), or (4) against the tax

imposed by this act equal to either of the following:

(a) If the total of all credits for a project is $1,000,000.00

or less, 10% of the cost of the qualified taxpayer's eligible

investment paid or accrued by the qualified taxpayer on an eligible

property provided that the project does not exceed the amount

stated in the preapproval letter. If eligible investment exceeds

the amount of eligible investment in the preapproval letter for

that project, the total of all credits for the project shall not

exceed the total of all credits on the certificate of completion.

(b) If the total of all credits for a project is more than

$1,000,000.00 but $30,000,000.00 or less and, except as provided in

subsection (6)(b), the project is located in a qualified local

governmental unit, a percentage as determined by the Michigan

economic growth authority not to exceed 10% of the cost of the

qualified taxpayer's eligible investment as determined under

subsection (9) paid or accrued by the qualified taxpayer on an

eligible property. If eligible investment exceeds the amount of

eligible investment in the preapproval letter for that project, the

total of all credits for the project shall not exceed the total of

all credits on the certificate of completion.

(2) If the cost of a project will be $2,000,000.00 or less, a

qualified taxpayer shall apply to the Michigan economic growth

authority for approval of the project under this subsection. An

application under this subsection shall state whether the project

is a multiphase project. The chairperson of the Michigan economic

growth authority or his or her designee is authorized to approve an

application or project under this subsection. Only the chairperson

of the Michigan economic growth authority is authorized to deny an

application or project under this subsection. A project shall be

approved or denied not more than 45 days after receipt of the

application. If the chairperson of the Michigan economic growth

authority or his or her designee does not approve or deny the

application within 45 days after the application is received by the

Michigan economic growth authority, the application is considered

approved as written. The total of all credits for all projects

approved under this subsection shall not exceed $10,000,000.00 in

any calendar year. If the chairperson of the Michigan economic

growth authority or his or her designee approves a project under

this subsection, the chairperson of the Michigan economic growth

authority or his or her designee shall issue a preapproval letter

that states that the taxpayer is a qualified taxpayer; the maximum

total eligible investment for the project on which credits may be

claimed and the maximum total of all credits for the project when

the project is completed and a certificate of completion is issued;

and the project number assigned by the Michigan economic growth

authority. If a project is denied under this subsection, a taxpayer

is not prohibited from subsequently applying under this subsection

for the same project or for another project. If the authority

approves a total of all credits for all projects under this

subsection of less than $10,000,000.00 in a calendar year, the

authority may carry forward for 1 year only the difference between

$10,000,000.00 and the total of all credits for all projects under

this subsection approved in the immediately preceding calendar

year. The Michigan economic growth authority shall develop and

implement the use of the application form to be used for projects

under this subsection. Before the Michigan economic growth

authority substantially changes the form, the Michigan economic

growth authority shall adopt the changes by resolution and give

notice of the proposed resolution to the secretary of the senate,

to the clerk of the house of representatives, and to each person

who requested from the Michigan economic growth authority in

writing or electronically to be notified regarding proposed

resolutions. The notice and proposed resolution and all attachments

shall be published on the Michigan economic growth authority's

internet website. The Michigan economic growth authority shall hold

a public hearing not sooner than 14 days and not later than 30 days

after the date notice of a proposed resolution is given and offer

an opportunity for persons to present data, views, questions, and

arguments. The Michigan economic growth authority board members or

1 or more persons designated by the Michigan economic growth

authority who have knowledge of the subject matter of the proposed

resolution shall be present at the public hearing and shall

participate in the discussion of the proposed resolution. The

Michigan economic growth authority may act on the proposed

resolution no sooner than 14 days after the public hearing. The

Michigan economic growth authority shall produce a final decision

document that describes the basis for its decision. The final

resolution and all attachments and the decision document shall be

provided to the secretary of the senate and to the clerk of the

house of representatives and shall be published on the Michigan

economic growth authority's internet website. The notice shall

include all of the following:

(a) A copy of the proposed resolution and all attachments.

(b) A statement that any person may express any data, views,

or arguments regarding the proposed resolution.

date by which comments must be mailed or electronically

transmitted, which date shall not be restricted to only before the

date of the public hearing.

(d) The date, time, and place of the public hearing.

(3) If the cost of a project will be for more than

$2,000,000.00 but $10,000,000.00 or less, a qualified taxpayer

shall apply to the Michigan economic growth authority for approval

of the project under this subsection. An application under this

subsection shall state whether the project is a multiphase project.

The chairperson of the Michigan economic growth authority or his or

her designee is authorized to approve an application or project

under this subsection. Only the chairperson of the Michigan

economic growth authority is authorized to deny an application or

project under this subsection. A project shall be approved or

denied not more than 45 days after receipt of the application. If

the chairperson of the Michigan economic growth authority or his or

her designee does not approve or deny an application within 45 days

after the application is received by the Michigan economic growth

authority, the application is considered approved as written. The

total of all credits for all projects approved under this

subsection shall not exceed $30,000,000.00 in any calendar year. If

the authority approves a total of all credits for all projects

under this subsection of less than $30,000,000.00 in a calendar

year, the authority may carry forward for 1 year only the

difference between $30,000,000.00 and the total of all credits for

all projects approved under this subsection in the immediately

preceding calendar year. The criteria in subsection (7) shall be

used when approving projects under this subsection. When approving

projects under this subsection, priority shall be given to projects

on a facility. The total of all credits for an approved project

under this subsection shall not exceed $1,000,000.00. A taxpayer

may apply under this subsection instead of subsection (4) for

approval of a project that will be for more than $10,000,000.00,

but the total of all credits for that project shall not exceed

$1,000,000.00. If the chairperson of the Michigan economic growth

authority or his or her designee approves a project under this

subsection, the chairperson of the Michigan economic growth