ACCESSIBILITY/VISITABILITY CREDITS S.B. 395 (S-2):
SUMMARY OF BILL
REPORTED FROM COMMITTEE
Senate Bill 395 (Substitute S-2 as reported)
Sponsor: Senator Vincent Gregory
CONTENT
The bill would amend the Income Tax Act to do the following:
-- Allow a taxpayer to claim a credit against the individual income tax for tax years beginning on and after January 1, 2017, and before January 1, 2022, in an amount equal to 4.0% of the total purchase price paid for a qualified principal residence or 50% of the total amount spent for the retrofitting of a principal residence for the purpose of improving accessibility or providing visitability.
-- Limit the amount of a credit to $5,000, and provide that a taxpayer could not claim more than one credit for the same principal residence.
-- Require a taxpayer to request certification from the Michigan State Housing Development Authority (MSHDA) in order to qualify for a credit, and require MSHDA to approve or deny all requests for certification.
-- Limit the total amount of credits that MSHDA could certify in any one tax year to $1.0 million.
A taxpayer would have to claim the tax credit for the same tax year in which the residence was purchased or the retrofitting was completed. If the amount of the credit allowed would exceed the tax liability of the taxpayer for that tax year, the excess portion could not be refunded but could be carried forward to offset tax liability in subsequent tax years for a period not to exceed seven tax years or until used up, whichever occurred first.
The bill would define "qualified principal residence" as a principal residence that is designed to improve accessibility or provide visitability. "Accessibility" would mean that a residence is designed to provide the taxpayer or an individual who is related to the taxpayer or resides with the taxpayer, who has one or more physical limitations in daily life activities as verified by that individual's physician, with the ability to enter, exit, and use the property with and without assistance. The bill would define "visitability" as a residence designed to include all of the following: at least one zero-step entrance; at least one full or half bathroom on the main floor; and all doorways on the main floor with a minimum of 32 inches of clear passage space
Proposed MCL 206.277 Legislative Analyst: Drew Krogulecki
FISCAL IMPACT
The bill would reduce General Fund revenue by an amount that would increase over the first three or more years the bill was effective, eventually averaging approximately $1.0 million per year. While the bill would cap the amount of credits certified in a given year at $1.0 million, the credits would not be refundable and thus the portion that would actually be claimed in a given year would depend on affected taxpayers' liabilities. In tax year 2013, taxpayers exhibited an average liability before credits of approximately $1,665, implying that an average taxpayer would take roughly three tax years to fully exhaust the maximum credit
and that the maximum cost imposed by the bill would not be reached for at least three years. Based on data from other states with similar credits, the average credit would likely be near the $5,000 maximum, and approximately 200 to 250 taxpayers would seek certification each year.
Because of the carry-forward provisions and timing differences between when a credit would be certified and when a taxpayer filed a return claiming the credit, the actual revenue loss could be greater or less than the $1.0 million limit under the bill. The limit would affect the credits certified by the Michigan State Housing Development Authority, not the credits paid by the Michigan Department of Treasury when it processes tax returns.
Although the School Aid Fund receives revenue from the individual income tax, credits are applied against the portion received by the General Fund. As a result, all of the reduction in revenue under the bill would lower General Fund revenue. Because the bill would not allow taxpayers to qualify for credits after tax year 2021, the reduction in revenue would gradually decline to zero sometime after fiscal year 2021-22 as taxpayers exhausted the portion of the credit carried forward.
In addition, the bill would result in significant costs to the Department of Treasury and the Michigan State Housing Development Authority. The Authority has indicated that, in order to issue the tax credits, it would have to set up a new system to perform sight inspections, issue certifications, and process the credits. Additional personnel would be required at MSHDA to conduct the inspections. The expenses could be $100,000 to $200,000. Thus, the administrative cost for the program would be an additional 10% to 20% of the $1.0 million in credits that could be certified yearly.
Date Completed: 3-15-16 Fiscal Analyst: Cory Savino
David Zin
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.