The Michigan Senate this week took their turn in considering the bill to exempt residents in renaissance zones from paying the the 4.35% income tax as of January 1, 2012, . As previously reported, 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.
Sen. Dave Hildenbrand introduced SB 748 to address this issue (as did Rep. Holly Hughes, who introduced HB 5122 which passed committee previously). SB 748, as introduced, 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. The bill would allow a taxpayer to deduct income, dividends, capital gains, and on-line or instant lottery winnings, if the taxpayer were a resident of a renaissance zone for 183 consecutive days and his or her gross income did not exceed $1.0 million, and the renaissance zone had been designated before January 1, 2012.
Several developers have 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 on the House bill that would allow for anyone in an existing renaissnace zone as of January 1, 2012 to continue to receive the exemption, but this was not in the Senate bill and is not supported by the Department of Treasury.
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.
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