Renaissance Zones to Pay Income Tax

If you have any Renaissance Zones in your community, you need to know that as of January 1, 2012, residents and businesses in renaissance zones will be responsible to pay the 4.35% income tax. It has recently come to light that 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. 

While the Governor and Legislature said that they were eliminating business tax credits and making the business tax clean, there was no indication at the time that those in renaissance zones would lose their exemption as well (especially residences). The Snyder Administration has said that individuals living in these zones were not considered to have a contractual agreement with the state, and any promises made by the locals were not binding to the state. As such, these people will now have to pay the new tax once it is effective. The Legislature has indicated that this was the intent of the Legislature as well.

Please alert your residents and businesses in any renaissance zones of this, and please direct any concerns to their legislator and the Governor’s office.  Some legislators have indicated concern over this and have said that they did not know these income tax credits were eliminated. There is the possibility of legislation to fix this to be introduced, but the likelihood of its passage is not very good.

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.