Personal Property Tax (PPT): The new laws address this obsolete, burdensome tax by eliminating the tax on small taxpayers and phasing it out on manufacturing personal property while protecting local units of government that rely on the PPT. Manufacturers are particularly harmed by the PPT because they rely on expensive tools and equipment, which are subject to PPT, for their operations. Large manufacturers were one of the few groups that did not receive tax relief under the new Corporate Income Tax.
Under the laws, a phase-out of the tax on manufacturing personal property begins in 2016 and all manufacturing personal property will be exempt starting in 2023. Small taxpayers will be exempt from the tax starting in 2014. The changes recognize the vital role that strong communities and schools play in Michigan’s future by providing reimbursement rates to local units of 100 percent for police, fire, jail and ambulance revenue losses and a minimum of 80 percent to reliant local units for everything else. It also holds schools harmless and fully covers school debt.
A portion of the state use tax currently going to the General fund will be dedicated to reimburse impacted local units. The use tax will continue to be capped at 6 percent. The change in the Use Tax will be “revenue neutral” and will not increase total state and local taxes levied in Michigan. The levy will require statewide voter approval in August 2014 before taking effect.
Bill sponsors are Sen. Jack Brandenburg (Senate Bill 1065), Sen. Bruce Caswell (SBs 1066-67), Sen. Dave Robertson (SB 1068), Sen. Dave Hildenbrand (SB 1069), Sen. Mike Nofs (SBs 1070-71) and Rep. Jud Gilbert (House Bills 6022-26).
Severance Tax:This six-bill package brings more certainty to the tax structure for mineral extraction, benefitting both companies and communities. The prior system included property tax, corporate income tax, sales tax and use tax.
The new laws include a 2.75 percent severance tax on the gross mineral value of specified nonferrous metallic minerals, such as copper and nickel. The severance tax replaces the existing array of taxes with a structure that is more simple, fair and efficient. For mines that previously paid property tax on the ore body, a property tax credit will be provided against the severance tax once the mine begins production. The credit will not impact local revenues.
The severance tax will be collected by local units of government with 65 percent of the revenue retained by impacted counties, townships, school districts, intermediate school districts and the School Aid Fund. The remaining 35 percent will go into a rural development fund to support long-term economic development opportunities.
The new tax structure will ease upfront costs for mines, which won’t have to pay taxes until they start extracting minerals. The old property tax system created a barrier to entry for companies, creating tax liabilities even before mining had begun. In addition, the property tax was based on the estimated value of the ore body, not actual mining revenues. The severance tax will make areas such as the Upper Peninsula more attractive for business development and provides communities with a dedicated revenue stream, generating cash flow and allowing U.P. counties and townships to retain their share first.
HBs 6007-12 are sponsored by Rep. Matt Huuki.
Regulatory Reform: These changes bring needed updates to the state’s workplace safety regulations to help make Michigan more inviting to job providers while still ensuring appropriate safety protections.
SB 1335, sponsored by Sen. Tonya Schuitmaker, ensures that Michigan workplace safety rules will exceed federal standards only when there are circumstances unique to Michigan that require going beyond federal standards, or when a broad consensus of union and non-union employers and employees agree that a standard is necessary.
HB 5922, sponsored by Rep. Jon Bumstead, reduces a needless layer of government by eliminating the General Industry Safety Standards Commission. The commission’s rulemaking authority was transferred to the Department of Licensing and Regulatory Affairs (LARA) director in 1996, so the commission no longer serves its original purpose. HB 5922 reduces the size of government and saves tax dollars without compromising worker safety.
The governor intends to sign related bills when they are presented. They are SB 1336, sponsored by Sen. Patrick Colbeck, which eliminates the Occupational Health Standards Commission; and HB 5917, sponsored by Rep. Joe Graves, which eliminates the Construction Safety Standards Commission. Both commissions had their rulemaking authority transferred to the LARA director in 1996. Following elimination of the standards commissions, LARA and the Michigan Occupational Safety and Health Administration will continue to regularly engage with stakeholders to ensure worker safety.