Gaylord/Otsego County Chamber of Commerce

Government Relations Update from Jamie Callahan

December 3, 2007

Services Tax Repealed!

The big and pretty much only news in Lansing lately has been the service tax and whether it would be repealed before becoming effective on December 1^st.On Saturday morning, the House and Senate both adopted compromise legislation that would immediately repeal the services tax and create a surcharge to a company’s Michigan Business Tax (MBT) liability.

The details of the compromise are as follows:

• Repeal the services tax
• MBT surcharge prior to credits being taken of 21.99%.
• Surcharge capped at $6M.
• Surcharge sunsets on 1/1/17 with economic triggers
• Cap on Compensation credit, ITC and R&D credit of 52%, 52% and 65%.For 2008 only, rates are 50%, 50% and 65%.
• Use $100M of one time MBT revenues.
• Revisions to MBT rebate trigger changed to more business friendly approach.

It is expected that the Legislature will pass "amnesty" legislation this week to relieve any collection obligation during the 16 hours the service tax was in effect. It must be noted that if any tax was collected during that time, it should be remitted to the state, where consumers who paid the tax would need to file for a refund with the Department of Treasury.

A special thank you goes out to all the chamber members who acted on Friday’s Action Alert and contacted our state legislative leaders.This coordinated effort with the Northwest Michigan Regional Chamber Alliance, other chambers, and organizations across the state flooded offices with calls and emails calling for the legislature to return to session and repeal this complicated tax.Those efforts made a difference and reminded legislators of the solidarity the business community has in repealing this tax.

Members will be able to view the final version of Public Act 145 (HB 5408) at www.mileg.org.

Water Bills Percolate

The latest legislation that is beginning to bubble up in House and Senate committees is the ratification of the Great Lakes – St. Lawrence River Basin Water Resources Compact.The compact is an agreement between the eight states within the Great Lakes Basin the Canadian provinces of Ontario and Quebec, and serves as the basis for legislation regulating water use and diversions of waters from the Great Lakes and connecting rivers, such as the St. Lawrence, Detroit and St. Clair Rivers.The agreement creates a resources management system that can be adopted by all the states in the Basin. Each state will need to ratify the agreement as well as consented to by Congress.

In addition to the Compact legislation, additional bills have been introduced to limit the withdrawal or diversion of water from Michigan aquifers.This issue and their corresponding bills will be very contentious as the legislation moves through the process.

The chamber will continue to monitor this legislation, as the degree of regulation will impact companies and industries across northern Michigan, including agriculture production, tourism industries such as ski slopes and golf courses, manufacturing plants, and local power generation.

The bills being considered are Senate Bills 212, 858-860 and House Bills 4343, 5065 – 5073.The bills can be viewed at the Michigan Legislature website at www.mileg.org.