Michigan lawmakers examine bills on tax credits, income tax requirements, more
(The Center Square) – The Michigan House of Representatives Tax Advisory Committee heard testimony Wednesday on a series of pending bills before the Legislature.
On the docket were bills to extend brownfield tax credits for multiphase buildings projects in Detroit; waive state sales taxes on automotive manufacturers’ rebates; and ban city income tax requirements for nonresidents.
Senate Bill 437, which passed the Senate on Tuesday, is sponsored by Sens. Wayne Schmidt, R-Traverse City, and Marshall Bullock, D-Detroit. Both Bullock and Schmidt testified before the House committee.
Also on hand to testify in favor of the bill was Emery Matthews, founder and managing principal of Real Estate Interests LLC. Matthews’ company has been engaged in a property development in north Detroit, which was approved for tax credits in 2011, but has been delayed in part because of the COVID-19 pandemic as well as state and local restrictions put in place to combat the virus.
SB 437 would extend the time period to complete multiphase projects requiring brownfield remediation in Detroit and preapproved for a tax credit by the Michigan Economic Growth Authority on June 10, 2011. The bill would shift the completion date for projects beyond the current 10 years to September 2023.
The bill was approved by the committee, with Rep. Steve Johnson, R-Wayland, voting against it. Johnson argued the construction delays for the Detroit property were due to repeated changes in the structure and intended use of the development.
House Bill 4939, sponsored by Rep. John Damoose, R-Harbor Springs, and HB 4940, sponsored by Rep. Joe Tate, D-Detroit, would amend the General Sales Tax Act and the Use Tax Act, respectively, to exempt manufacturer rebates on cars and trucks from the sales price (in the Sales Tax Act) or purchase price (in the Use Tax Act), beginning January 1, 2022.
Both the GST and UTA support the state’s School Aid Fund. The bills would require purchasers of vehicles to report the amount of their respective rebates to the State Treasury Department, which would calculate the tax revenue lost from the final sales cost of the vehicle after application of a manufacturers’ rebate. The bills would further require the Treasury Department reimburse the School Aid Fund for the difference.
Although Treasury Department representative Aaron Keel registered his disapproval of the bills, Rep. Padma Kuppa, D-Troy, asked whether other states currently taxed the full value of vehicle purchases before rebates were applied.
Kurt Berryman, governmental relations officer with the Automotive Dealers Association, said “it seems about half of the states” in the U.S. tax rebates.
“This bill is about the customer,” Berry man said. “We all know the customer bears the sales and use tax in Michigan. So this is a tax cut that goes directly at the point of sale into the consumers’ pocket, the purchasers of autos.”
The final bill discussed by the Committee was House Bill 4513, sponsored by Rep. Pam Hornberger, R-Chesterfield Township. The bill would prohibit cities that withhold income tax from collecting taxes from nonresidents. Additionally, the bill would prohibit employers from withholding city income taxes from employees who do not reside in the city imposing the tax.
Currently, 24 cities in the state collect income taxes. Hornberger noted collection of city income taxes from nonresidents is akin to “taxation without representation.”
Chris Hackbarth, Michigan Municipal League’s director of State and Federal Affairs, said cities that impose income taxes could incur a tremendous economic shortfall if, like Big Rapids, a large proportion of the city consists of nontaxable property such as Ferris State University.
A House fiscal analysis estimates passage of the bill could result in a $200 million revenue loss for the 24 cities per year.
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