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2007 House Bill 5408: Impose Michigan Business Tax surcharge and repeal service tax

Public Act 145 of 2007

  1. Introduced by Rep. Andy Coulouris (D) on October 31, 2007, to create a “vehicle” bill that could be used to raise certain rates, credits and refunds in the Michigan Business Tax by an amount determined to equal the revenue projected from the new 6 percent tax on many services, which presumably would then be repealed.
    • Referred to the House Tax Policy Committee on October 31, 2007.
      • Reported in the House on November 8, 2007, with the recommendation that the substitute (H-1) be adopted and that the bill then pass.
    • Substitute offered in the House on November 8, 2007, to replace the previous version of the bill with one that imposes a Michigan Business Tax surtax, as desribed in the House-passed bill. For more details see House Fiscal Agency analysis. The substitute passed by voice vote in the House on November 8, 2007.
    • Amendment offered by Rep. Kimberly Meltzer (R) on November 8, 2007, to repeal the service tax but not impose a Michigan Business Tax surcharge. The amendment failed by voice vote in the House on November 8, 2007.
  2. Passed 58 to 47 in the House on November 8, 2007, to impose a 32.9 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. After the 2008 tax year the surcharge would be 27.3 percent. The rate was determined by the desire to take in $614 million to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009. Small businesses (gross sales below $10 million and earnings below $475,000) would be exempt, and there would be a $2 million surcharge cap on the amount of surcharge imposed on any particular company, so the the full surcharge rate would only be imposed on medium size firms.
    Who Voted "Yes" and Who Voted "No"

  3. Moved to reconsider by Rep. Kathy Angerer (D) on November 8, 2007, the vote by which the House passed the bill. Note: Rep. Emmons missed the first vote, and voted "no" on the second. The motion passed by voice vote in the House on November 8, 2007.
  4. Received in the House on November 8, 2007, to impose a 32.9 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. After the 2008 tax year the surcharge would be 27.3 percent. The rate was determined by the desire to raise $614 million to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009; small businesses (gross sales below $10 million and earnings below $475,000) would be exempt, and there would be a $2 million surcharge cap on any a particular company, so the the full surcharge rate would only be imposed on medium size firms. Passed 58 to 48 in the House on November 8, 2007.
    Who Voted "Yes" and Who Voted "No"

  5. Received in the Senate on November 20, 2007.
    • Referred to the Senate on November 20, 2007.
    • Substitute offered in the Senate on November 20, 2007, to replace the previous version of the bill with one that imposes a 13.85 percent Michigan Business Tax surtax, as opposed to the 32.9 percent rate in the House-passed bill, and makes other changes. See Senate-passed bill. The substitute passed 20 to 16 in the Senate on November 20, 2007.
      Who Voted "Yes" and Who Voted "No"

    • Motion by Sen. Alan L. Cropsey (R) on November 20, 2007, that the previous question be ordered. The motion passed 20 to 16 in the Senate on November 20, 2007.
      Who Voted "Yes" and Who Voted "No"

    • Substitute offered by Sen. Michael Prusi (D) on November 20, 2007, to increase the cap on the amount of surchage imposed on any one company to $3.5 million. The substitute failed 16 to 20 in the Senate on November 20, 2007.
      Who Voted "Yes" and Who Voted "No"

  6. Passed 20 to 16 in the Senate on November 20, 2007, to impose a 13.85 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. The surcharge will take in approximately $560 million annually, replacing most of the $614 million to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009 and 2010. There would be a $7.5 million cap on the amount of surcharge imposed on any particular company. A $219.4 million “windfall” the state expects from the transition from the old Single Business Tax to the new MBT would be used to reduce the surcharge rate; supposedly this money would otherwise go into the rainy day fund (although current revenue projections already fall short of desired spending in the next year). The surcharge would end after 2010. The bill also slightly eases officer and owner compensaton limits on firms qualifying for a lower small business MBT rate, and directs any MBT revenue increases to reducing the surtax.
    Who Voted "Yes" and Who Voted "No"

  7. Motion by Sen. Alan L. Cropsey (R) on November 20, 2007, to give the bill immediate effect. The motion failed 20 to 16 in the Senate on November 20, 2007.
    Who Voted "Yes" and Who Voted "No"

  8. Received in the House on November 20, 2007.
    • Amendment offered by Rep. Kenneth Horn (R) on November 28, 2007, to give businesses a tax credit equal to the amount they spent preparing to comply with the new 6 percent tax on many services the bill is intended to eliminate. The amendment passed by voice vote in the House on November 28, 2007.
    • Amendment offered by Rep. Steve Tobocman (D) on November 28, 2007, to tie-bar the bill to House Bill 5295, meaning this bill cannot become law unless that one does also. HB 5295 would impose new regulations on mortgage lenders. The amendment passed by voice vote in the House on November 28, 2007.
    • Substitute offered by Rep. Daniel Acciavatti (R) on November 28, 2007, to replace the previous version of the bill with one that authorizes new business tax credits for Michigan International Speedway and for the costs incurred by retailers complying with the bottle deposit law, and slightly expands eligibility for an alternative small business tax rate by relaxing certain executive and owner compensation caps. This substitute does not contain any surcharge. This substitute was adopted but then made moot when another substitute containing a surcharge was subsequently adopted. The substitute passed by voice vote in the House on November 28, 2007.
    • Amendment offered by Rep. Daniel Acciavatti (R) on November 28, 2007, to repeal the new 6 percent tax on many services, and not replace the revenue it would have taken in. Although the amendment was gaveled through on a voice vote, it was moot because minutes later the substitute version of the bill it amended was itself replaced by a substitute containing a business tax surcharge taking in all the money the service tax would have. The amendment passed by voice vote in the House on November 28, 2007.
    • Substitute offered by Rep. Paul Condino (D) on November 28, 2007, to impose a 25.7 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. The surcharge will take in enough from firms doing business in Michigan to replace all of the $614 million the service tax would have imposed to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009 and 2010. There would be a $4.75 million cap on the amount of surcharge imposed on any particular company. The surcharge would be permanent, and after 2008 the rate would be 23.4 percent. The substitute passed by voice vote in the House on November 28, 2007.
  9. Passed 57 to 44 in the House on November 28, 2007, to impose a 25.7 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. The surcharge will take in enough from firms doing business in Michigan to replace all of the $614 million the service tax would have imposed to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009 and 2010. There would be a $4.75 million cap on the amount of surcharge imposed on any particular company. The surcharge would be permanent, and after 2008 the rate would be 23.4 percent.
    Who Voted "Yes" and Who Voted "No"

  10. Received in the Senate on November 28, 2007, to concur with the House-passed version of the bill, which has a surcharge than the Senate-passed version which takes in all the revenue the service tax would have taken. Failed 13 to 22 in the Senate on November 28, 2007.
    Who Voted "Yes" and Who Voted "No"

  11. Received in the Senate on December 1, 2007.
    • Motion by Sen. Alan L. Cropsey (R) on December 1, 2007, to reconsider the vote by which the House substitute was not concurred in. The motion passed by voice vote in the Senate on December 1, 2007.
    • Substitute offered by Sen. Jud Gilbert (R) on December 1, 2007, to replace the previous version of the bill with one that establishes a 21.99 percent surtax, and also makes various revisions to the Michigan Business Tax, including classifying income earned by a trust, and payments by theaters for the rental of films. The substitute passed by voice vote in the Senate on December 1, 2007.
    • Amendment offered by Sen. Jud Gilbert (R) on December 1, 2007. The amendment passed by voice vote in the Senate on December 1, 2007.
  12. Passed 33 to 4 in the Senate on December 1, 2007, to impose a 21.99 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. The surcharge will take in enough from firms doing business in Michigan to replace all of the $614 million the service tax would have imposed to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009 and 2010. There would be a $6 million cap on the amount of surcharge imposed on any particular company. Around half of the $219.4 million “windfall” the state expects from the transition from the old SBT to the new MBT would be used to reduce the surcharge rate. The surcharge would end as of 2017 if aggregate personal income in the state had increased in the previous three years. If personal income was still falling, the higher business tax rate would remain.
    Who Voted "Yes" and Who Voted "No"

  13. Received in the House on December 1, 2007.
  14. Passed 66 to 42 in the House on December 1, 2007, to impose a 21.99 percent surcharge on businesses subject to the Michigan Business Tax, and repeal the new 6 percent tax on many services. The surcharge will take in enough from firms doing business in Michigan to replace all of the $614 million the service tax would have imposed to avoid spending cuts in Fiscal Year 2008, and $750 million in 2009 and 2010. There would be a $6 million cap on the amount of surcharge imposed on any particular company. Around half of the $219.4 million “windfall” the state expects from the transition from the old SBT to the new MBT would be used to reduce the surcharge rate. The surcharge would end as of 2017 if aggregate personal income in the state had increased in the previous three years. If personal income was still falling, the higher business tax rate would remain.
    Who Voted "Yes" and Who Voted "No"

  15. Signed by Gov. Jennifer Granholm on December 1, 2007, the repeal of the 6 percent tax on many services passed on Oct. 1, 2007, which went into effect 16 hours before this gubernatorial signature, and imposition of a new 21.99 business tax surcharge.

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