Governor Granholm Passes SBT Legislation
SALT Tax Alert, January 3, 2006

Single business tax ("SBT") legislation to create tax credits primarily to benefit manufacturers and to change the SBT apportionment factor was signed by Governor Jennifer Granholm just before the holidays.

Industrial Personal Property Tax Credit
A refundable SBT credit equal to 15 percent of Michigan property taxes paid on industrial personal property is established for tax years beginning on or after January 1, 2006 and before January 1, 2010 (i.e., tax years 2006 through 2009). The credit is generally based on property taxes levied after December 31, 2005 and is available to companies whether or not they are required to file an SBT return. To qualify for the credit, a personal property tax return must be timely filed with the local taxing jurisdiction.

Transferred Jobs Personal Property Tax Credit
The Single Business Tax Act is amended to provide taxpayers that transfer manufacturing or high technology jobs from another state or country to Michigan with a refundable SBT credit equal to 100 percent of Michigan personal property taxes paid related to property directly supporting the transferred jobs. The credit is only available for the first year property taxes are paid related to the qualifying property and can only be claimed for taxes paid in tax year 2007, 2008, or 2009.

Sales Factor Weight Increase - All Taxpayers
For tax years 2006 and 2007, the SBT apportionment factor is changed to weight the sales factor 92.5% and the property and payroll factors 3.75% each. For tax years after 2007, the apportionment factor is further revised to weight the sales factor 95% and the property and payroll factors 2.5% each. The changes represent an increase to the 90% sales factor weight applicable for tax year 2005. The special apportionment formulas for transportation services, financial institutions and insurance carriers remain the same.

Sales Factor - Spun Off Corporations
The Single Business Tax Act is amended to extend for four years a provision allowing a "spun off" corporation to exclude sales made to its immediately preceding former parent corporation when calculating its sales factor. Because of the Michigan capital investment and employment requirements, the provision is applicable to a limited number of taxpayers (e.g., Delphi and Visteon).