The new Michigan tax reform bills signed into law on May 26, 2011 will dramatically change the way Michigan sourced oil and gas income is taxed. Historically, the industry fought and was successful in eliminating the gross wellhead value of Michigan oil and gas production from Michigan income tax income at both the business and individual levels. This elimination was allowed under the basis that this income had been previously subject to Michigan severance tax, resulting in a double taxation effect for Michigan producers.
Under the new law, both oil and gas gross income as well as related production expenses are required to be included in the calculation of the amount allowable for exclusion. Dennis Bogard, Plante Moran's oil and gas industry leader, participated as a panel expert at the September 15 Michigan Oil and Gas Association’s Seminar, alongside and for the benefit of industry leaders. Though the full impact of the change will continue to be monitored, owners of Michigan oil and gas production should be aware of the law change effective January 1, 2012.