2003 House Bill 5331 (Tax breaks for "start-up business")

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Public Act 126 of 2004

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Introduced by Rep. Lorence Wenke (R) on December 2, 2003, to exempt for five years a "qualified start-up business" from any single business tax (SBT) liability in a year in which it does not make a profit. (Note: The SBT is a tax on the value added by a firm in producing a product, which means that a firm may owe SBT tax even though it makes no profit.) A "qualified start-up business" is defined as a firm that has fewer than 25 full-time equivalent employees, has annual sales of less than $1 million, has research and development expenses that make up at least 15-percent of its annual expenses, and is not publicly traded. This does not necessarily apply only to new firms, and the five year exemption is not necessarily the firm's first five years of operation.
- Referred to the House Tax Policy Committee on December 2, 2003.
- Reported in the House on April 21, 2004, with the recommendation that the substitute (H-2) be adopted and that the bill then pass.
- Substitute offered in the House on April 27, 2004, to replace the previous version of the bill with one that incorporates certain additional restrictions and requirements designed to more narrowly target the tax breaks at certain kinds of businesses, and make it harder for non-targeted firms to make themselves eligible by changing their business structure. The substitute passed in the House by voice vote on April 27, 2004.
- Amendment offered by Rep. William O'Neil (D) on April 27, 2004, to cap the annual compensation to officers or owners of firms taking advantage of the tax break at $135,000. The amendment passed in the House by voice vote on April 27, 2004.
Passed in the House (103 to 4) on April 27, 2004. [Vote Details and Comments]
Received in the Senate on April 28, 2004.
- Referred to the Senate Economic Development, Small Business and Regulatory Reform Committee on April 28, 2004.
- Reported in the Senate on May 11, 2004, with the recommendation that the amendments be adopted and that the bill then pass.
- Amendment offered in the Senate on May 12, 2004, to incorporate technical wording changes that do not affect the substance of the bill as previously described. The amendment passed in the Senate by voice vote on May 12, 2004.
Passed in the Senate (37 to 0) on May 13, 2004, to exempt for five years a "qualified start-up business" from any single business tax (SBT) liability in a year in which it does not make a profit. (Note: The SBT is a tax on the value added by a firm in producing a product, which means that a firm may owe SBT tax even though it makes no profit.) A "qualified start-up business" is defined as a firm that has fewer than 25 full-time equivalent employees, has annual sales of less than $1 million, has research and development expenses that make up at least 15-percent of its annual expenses, and is not publicly traded. This does not necessarily apply only to new firms, and the five year exemption is not necessarily the firm's first five years of operation. [Vote Details and Comments]
Received in the House on May 13, 2004.
Passed in the House (104 to 2) on May 18, 2004, to concur with the Senate-passed version of the bill. [Vote Details and Comments]
Signed by Gov. Jennifer Granholm on May 28, 2004.

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1) Rep. Meisner's "no vote explanation" [by Admin003 on May 19, 2004]
Rep. Meisner, having reserved the right to explain his nay vote, made the following statement:

"Mr. Speaker and members of the House:

I continue in opposition to this legislation on the basis that it, like so many others, will make worse the instability of our budget situation by piling tax exemptions on top of the billions in breaks we give away each year without any notice given to the effectiveness of previous efforts."

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2) Rep. Hopgood's "no vote explanation" [by Admin003 on April 29, 2004]
Rep. Hopgood, having reserved the right to explain his protest against the passage of the bill, made the following statement:

"Mr. Speaker and members of the House:

I voted no on the package of bills deemed to assist 'start-up' businesses (HB 5331, 5335, 5341-43, 5345; SB 863, 865, 867, 872, 875) because they will actually amount to very little in terms of tax relief to business but will cost the state treasury up to $15 million at a time when, if revenues are not increased, significant reductions will have to take place in programs to seniors, education and health care.

The bills also have the potential of undermining existing economic development programs and incentives and pitting local units against each other in the race to land businesses. Local units will again be forced to choose."

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3) 2003 House Bill 5331 (Tax breaks for "start-up business") [by admin on January 1, 2001]
Introduced in the House on December 2, 2003, to exempt for five years a "qualified start-up business" from any single business tax (SBT) liability in a year in which it does not make a profit. (Note: The SBT is a tax on the value added by a firm in producing a product, which means that a firm may owe SBT tax even though it makes no profit.) A "qualified start-up business" is defined as a firm that has fewer than 25 full-time equivalent employees, has annual sales of less than $1 million, has research and development expenses that make up at least 15-percent of its annual expenses, and is not publicly traded. This does not necessarily apply only to new firms, and the five year exemption is not necessarily the firm's first five years of operation

The vote was 103 in favor, 4 opposed and 2 not voting

(House Roll Call 277 at House Journal 34)

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