Legislative Update

from Government Relations

October 7, 2008

MBT Surcharge Phase out and Double Taxation Prohibition Pass Senate

Two legislative priorities of the Chamber and Alliance that impact Michigan’s tax policy passed the Senate last week.  The first would expedite the phase out the burdensome 22 percent surcharge on the Michigan Business Tax (MBT) over three years.  Senate Bill 1242 passed the Senate with a bi-partisan vote of 26-12, with Sens. Allen, McManus and Stamas voting in support.  Currently, the surcharge is slated be imposed until 2017, while the bill would eliminate the added tax by 2011.  The bill is estimated to save Michigan companies $212 million in 2009, with savings increasing to almost $700 million by final year of the three year phase-out.

The surcharge came about last fall as part of a compromise to repeal the ill-conceived tax on services.  The agreement to impose the surcharge was intended to be a short term fix for the budget and not a long term revenue generator for the State.  Elimination of the surcharge has been a top priority of the Chamber and the Regional Chamber Alliance.  

The second important piece of legislation would prohibit the application of a tax on a tax in the MBT.  Senate Bill 1038 would prohibit the MBT from being calculated and assessed on taxes collected by Michigan businesses as part of the gross receipts calculation.  The bill also passed in a bi-partisan manner with a 27-11 vote.  Those businesses paying the MBT surcharge would actually be paying a tax on a tax on a tax, which emphasizes the need for passage of the legislation. 

The House will need to adopt both of these pieces of legislation before the end of the year for them to take effect.  The Chamber supports both of these initiatives.  Stay tuned for opportunities to communicate support of the legislation to House members.  The bills can be viewed at www.mileg.org.

Film Credits Cap Vote on Hold

A scheduled Senate vote to be held last week was put on hold until after the election in the lame duck session that would have put a cap of $50 million on credits for film production in a year.

Since the legislation was adopted not even a year ago, Michigan has been on the top of the list for film production and investment incentives in the country.  The imposition of a cap as contained in Senate Bill 1535 would have a detrimental effect on the economic benefits Michigan is seeing from these incentives.  Northern Michigan has seen a number of films already shot in the area with others in the works, along with a production studio planned in Leelanau County.  Much of this investment would quickly dry up with the passage of SB 1535.

The Chamber and the Alliance supported the original film incentive package and continue to stand by it through active opposition to SB 1535 while under consideration by the Senate.  These efforts paid off as the bill was pulled from the agenda for lack of support as Sens. Allen, Birkholz and Cropsey were opposed to capping these incentives.  The bill can be viewed at www.mileg.org.

Energy Bills Signed Into Law

On Monday, the Governor signed the much debated energy policy bills, House Bill 5524, Senate Bill 213, which changes Michigan’s electrical choice law, and creates a renewable portfolio standard (RPS) for the state, respectively.  The Chamber worked with legislators and energy providers in supporting the compromise bills.

The new laws will require Michigan electric suppliers to provide a certain percentage of power to its customers from alternative energy sources, such as wind, solar, water, or biomass, starting with a 10% level by 2015.  Northern Michigan has a number of projects in the works that would either provide power from alternative sources or manufacture parts and equipment to support the energy industry, creating a number of jobs in the region.

In addition, the laws would create stability in the electric market for the major power carriers, allowing them to build baseload power plants in Michigan and provide sustainable power sources for the long term.  Otherwise, companies would likely have to go to the open power market to buy energy from other sources not based in Michigan.