Snyder signs tax fix bill to avert $1B hole in budget

Gary Heinlein
Detroit News Lansing Bureau

Lansing — Gov. Rick Snyder signed into a law Friday a bill designed to close a loophole in Michigan’s former business tax that could have made the state liable for more than $1 billion in tax refunds to out-of-state corporations.

Lawmakers and Snyder said the legislation, hastily passed by the House and Senate in two days this week, clarifies the 2007-approved Michigan Business Tax and will prevent other firms from using the glitch that will result in a $6.3-million rebate to IBM for the 2008 and 2009 tax years.

Clarifying the original intent of the Michigan Business Tax Act will ensure “Michigan businesses are not penalized for investing in the state” and “is a common-sense solution encouraging companies to continue investing and creating jobs in Michigan,” Snyder said.

The new law will eliminate a loophole created by a 1970 statute that would have given some out-of-state companies a lower tax liability under the Michigan Business Tax than similar Michigan companies, Snyder said.

The Michigan Business Tax was replaced in 2011 by a simpler Snyder administration-backed business tax based mostly on company profits.

But in July, the state Supreme Court ruled the Michigan Business Tax was an income tax under an agreement called the Multistate Tax Compact. The ruling meant IBM could calculate its taxes through an apportionment factor that entitled it to a $6.3-million greater refund than the state allowed for 2008 and 2009, the justices said.

The high court is being asked to reconsider its decision, but lawmakers said precautionary action was needed in case the court doesn’t reconsider and change the ruling.

Cases involving 135 companies from Colgate-Palmolive to Google have been pending against the state. Treasury officials said thousands of firms could file claims. They estimated the liability as high as $1.098 billion, or 10 percent of the state’s General Fund, which supports most government operations.

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