Bill to Fix Renaissance Zone and Income Tax Issue Passes Committee

As previously reported, residents and businesses in renaissance zones will be responsible to pay the 4.35% income tax as of January 1, 2012, . The legislation to eliminate the Michigan Business Tax and instead tax businesses as part of the Corporate Income Tax also eliminated the exemptions for renaissance zones that were in the income tax.  As such, any taxpayer (business or resident) in a renaissance zone will have to pay the 4.35% state income tax as of January 1, 2012 if they do not have a signed contract with the MEDC. 

Rep. Holly Hughes introduced HB 5122 in order to rectify this problem.  As introduced, that bill would allow residents living in renaissance zones before January 1, 2012 to continue to be eligible for the renaissance zone exemption under the Income Tax Act.  In committee, several developers complained that they have projects in progress that were already approved by the MEDC and the locals, and that these projects should receive the exemption as well.  An amendment was passed that would allow for anyone in an existing renaissnace zone as of January 1, 2012 to continue to receive the exemption.  This language is not supported by the Department of Treasury, though, and is expected to be changed on the House floor. 

Also, SB 748 was scheduled to be considered in committee but the committee was cancelled due to Senate session.  This bill is the same as HB 5122, as introduced.  I expect that one or both of these bill will move through the Legisalature and be enacted in some form before the end of the year.

Andy Schor is the Assistant Director of State Affairs for the Michigan Municipal League. Contact him at (517) 908-0300 or by email at aschor@mml.org.