HB-6012, As Passed Senate, December 13, 2012

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 6012

A bill to amend 1967 PA 281, entitled

"Income tax act of 1967,"

by amending section 623 (MCL 206.623), as amended by 2011 PA 312,

and by adding section 31b.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 31b. (1) Notwithstanding any other provision of this

part, for the 2013 tax year and each tax year after 2013, taxable

income for purposes of this part means taxable income as determined

under section 30 with the following adjustment. For the 2013 tax

year and each tax year after 2013, eliminate all of the following:

(a) Income derived from a mineral to the extent included in

adjusted gross income.

(b) Expenses related to the income deductible under

subdivision (a) to the extent deducted in arriving at adjusted

gross income.

(2) As used in this act:

(a) "Mineral" means that term as defined in section 2 of the

nonferrous metallic minerals extraction severance tax act.

(b) "Qualified taxpayer" means a taxpayer subject to the

minerals severance tax levied under the nonferrous metallic

minerals extraction severance tax act.

Sec. 623. (1) Except as otherwise provided in this part, there

is levied and imposed a corporate income tax on every taxpayer with

business activity within this state or ownership interest or

beneficial interest in a flow-through entity that has business

activity in this state unless prohibited by 15 USC 381 to 384. The

corporate income tax is imposed on the corporate income tax base,

after allocation or apportionment to this state, at the rate of

6.0%.

(2) The corporate income tax base means a taxpayer's business

income subject to the following adjustments, before allocation or

apportionment, and the adjustment in subsection (4) after

allocation or apportionment:

(a) Add interest income and dividends derived from obligations

or securities of states other than this state, in the same amount

that was excluded from federal taxable income, less the related

portion of expenses not deducted in computing federal taxable

income because of sections 265 and 291 of the internal revenue

code.

(b) Add all taxes on or measured by net income including the

tax imposed under this part to the extent that the taxes were

deducted in arriving at federal taxable income.

the extent deducted in arriving at federal taxable income.

(d) To the extent included in federal taxable income, deduct

dividends and royalties received from persons other than United

States persons and foreign operating entities, including, but not

limited to, amounts determined under section 78 of the internal

revenue code or sections 951 to 964 of the internal revenue code.

(e) Except as otherwise provided under this subdivision, to

the extent deducted in arriving at federal taxable income, add any

royalty, interest, or other expense paid to a person related to the

taxpayer by ownership or control for the use of an intangible asset

if the person is not included in the taxpayer's unitary business

group. The addition of any royalty, interest, or other expense

described under this subdivision is not required to be added if the

taxpayer can demonstrate that the transaction has a nontax business

purpose, is conducted with arm's-length pricing and rates and terms

as applied in accordance with sections 482 and 1274(d) of the

internal revenue code, and 1 of the following is true:

(i) The transaction is a pass through of another transaction

between a third party and the related person with comparable rates

and terms.

(ii) An addition would result in double taxation. For purposes

of this subparagraph, double taxation exists if the transaction is

subject to tax in another jurisdiction.

(iii) An addition would be unreasonable as determined by the

state treasurer.

(iv) The related person recipient of the transaction is

organized under the laws of a foreign nation which has in force a

comprehensive income tax treaty with the United States.

(f) To the extent included in federal taxable income, deduct

interest income derived from United States obligations.

(g) For tax years beginning after December 31, 2011, eliminate

all of the following:

(i) Income from producing oil and gas to the extent included in

federal taxable income.

(ii) Expenses of producing oil and gas to the extent deducted

in arriving at federal taxable income.

(h) For tax years beginning after December 31, 2012, for a

qualified taxpayer, eliminate all of the following:

(i) Income derived from a mineral to the extent included in

federal taxable income.

(ii) Expenses related to the income deductible under

subparagraph (i) to the extent deducted in arriving at federal

taxable income.

(3) For purposes of subsection (2), the business income of a

unitary business group is the sum of the business income of each

person included in the unitary business group less any items of

income and related deductions arising from transactions including

dividends between persons included in the unitary business group.

(4) Deduct any available business loss incurred after December

31, 2011. As used in this subsection, "business loss" means a

negative business income taxable amount after allocation or

apportionment. The business loss shall be carried forward to the

year immediately succeeding the loss year as an offset to the

allocated or apportioned corporate income tax base, then

successively to the next 9 taxable years following the loss year or

until the loss is used up, whichever occurs first.

(5) As used in this section, "oil and gas" means oil and gas

that is subject to severance tax under 1929 PA 48, MCL 205.301 to

205.317.

Enacting section 1. This amendatory act does not take effect

unless House Bill No. 6008 of the 96th Legislature is enacted into

law.