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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Friday, December 31 2010

Transit Oriented Development Added to Tax Increment Finance Authority Act

Public Act 245 2010, effective December 14, 2010 has amended the Tax Increment Finance Authority Act, which permits the capture of property tax revenue from incremental increases in property values, to include transit-oriented development and transit-oriented facilities in the activities allowed for economic development. 

"Transit-oriented development" means infrastructure improvements located within a half mile of a transit station or transit-oriented facility that promotes transit ridership or passenger rail use. "Transit-oriented facility" means a facility that houses a transit station and that promotes transit ridership or passenger rail use.

 

Posted by: Ed kisscorni AT 09:40 am   |  Permalink   |  0 Comments  |  Email
Friday, December 31 2010

Michigan Personal Income Tax Developments for Tax Year 2010 

The Michigan Department of Treasury has addressed various personal income tax developments for tax year 2010. The annual mailing of tax instruction booklets is severely limited; however, all forms and instructions are available online.

The developments highlighted include the following:

  • There is an amnesty program available from May 15 through June 30 in 2011.

  • The tax rate for 2010 is 4.35%.

  • The 2010 personal exemption allowance is $3,600, and the special exemption allowance is $2,300.

  • The 2010 exemption amount for qualified disabled veterans is $300.

  • Pension benefits included in adjusted gross income may be deducted up to a maximum of $45,120 for single filers or $90,240 for joint filers.

  • Senior citizens age 65 or above may deduct a portion of the interest, dividends, and capital gains included in adjusted gross income up to a maximum of $10,058 for single filers or $20,115 for joint filers.

  • If military members are serving in a combat zone on April 18, 2011, then they will have 180 days after leaving the combat zone to file a tax return without interest and penalty.

  • The standard allowances and income ceilings for the home heating credit are provided.

Taxpayers are reminded that they have until April 18, 2011, to file or amend 2006 tax year returns.

Posted by: Ed Kisscorni AT 09:07 am   |  Permalink   |  0 Comments  |  Email
Thursday, December 30 2010

Taxpayers' Property Tax Claims Within the Jurisdiction of the Michigan Tax Tribunal

In McCormick v. City of Petoskey, Michigan Court of Appeals, No. 293278, December 21, 2010, the taxpayers' claims fell within the exclusive jurisdiction of the Michigan Tax Tribunal because the nature of their claims constituted an attempt to obtain a reduction in their local property taxes despite the taxpayers having couched their complaint in terms of a different legal theory.

The taxpayers argued that the trial court erred in concluding that it lacked jurisdiction to hear their claims because the taxpayers' complaint raised issues of statutory interpretation, constitutional issues, and contractual issues independent of property tax law.  However, jurisdiction was determined not by how the taxpayers phrased their complaint, but by the relief sought and the underlying basis of the action.

In this case, the taxpayers challenged the level of services they received in contrast to the amount of taxes being assessed. This essentially constituted a challenge to the validity of the assessment under the property tax laws.

Posted by: Ed Kisscorni AT 12:22 pm   |  Permalink   |  0 Comments  |  Email
Thursday, December 30 2010

Estate Tax Rebuttable Presumption Enacted for Wills, Trusts, and Beneficiary Designations

Public Act 224 of 2010, effective December 10, 2010, which is applicable retroactive to January 1, 2010 enacts legislation that creates a rebuttable presumption that a will, trust, or beneficiary designation by a decedent who died after December 31, 2009, and before January 1, 2011, refers to the federal estate tax and federal generation-skipping transfer tax laws that apply to estates of decedents who died on December 31, 2009. The will, trust, or beneficiary designation must either contain a formula referring to any section of the Internal Revenue Code of 1986 relating to the federal estate tax or generation-skipping transfer tax or to certain specified terms or measure a share of a trust, estate, or beneficiary designation by the amount that can pass free of the federal estate tax or generation-skipping transfer tax. The presumption does not apply to a will, trust, or beneficiary designation that is executed or amended after December 31, 2009, or that displays an intent to use a different rule if the decedent dies on a date on which there is no then-applicable federal estate tax or generation-skipping transfer tax.

Posted by: Ed Kisscorni AT 10:22 am   |  Permalink   |  0 Comments  |  Email
Thursday, December 30 2010

Basis for Deferral of Delinquent Property Tax Fees Is Expanded

Public Act 311 of 2010, effective December 21, 2010, provides for Michigan property taxes paid before May 1 in the first year of delinquency for the principal residence of a senior citizen, veteran, widow, or certain disabled persons, a county board of commissioners may waive the county property tax administration fee and specified interest, fees, or penalties if a claim for the homestead property tax credit was made in the preceding tax year. The claimant must also reside at the same principal residence that was claimed in the immediately preceding tax year.

Posted by: Ed Kisscorni AT 10:19 am   |  Permalink   |  0 Comments  |  Email
Wednesday, December 29 2010

Sales Tax Refund Permitted for Tax Paid on Earth-Moving Equipment Core Charge

Public Act 333 of 2010 allows a person who paid Michigan sales tax on a core charge related to a recycling fee, deposit, or disposal fee for a component or part for heavy earth-moving equipment is eligible for a refund from the Department of Treasury. The refund will equal the amount of sales tax paid.

 

Posted by: AT 12:17 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, December 29 2010

Adopted Tax Limitation Effective in 2010

Public Act 335 of 2010, effective December 21, 2010, has amended a Michigan property tax limitation provision to specify that, if a tax limitation election was held on August 3, 2010, the adopted limitations are first effective in 2010.  The applicable provision stipulates that, except as otherwise provided, if a tax limitation election is held after April 1 in any year, the adopted limitations first take effect in the following year. The legislation makes an exception for limitations adopted at an election held on August 3, 2010.

Property Tax Notices To Be Mailed at Least 14 Days Before Board of Review Meeting

Public Act 332 of 2010 provides that beginning December 21, 2010, local Michigan property tax assessors are required to mail notices of an increase in state equalized value or taxable value at least 14 days, rather than at least 10 days, before the meeting of a board of review.

Purchase Price of Transferred Property is Presumptive True Cash Value

Public Act 340 of 2010, for purposes of keeping local Michigan property taxes affordable for low-income families who buy homes from charitable organizations, the purchase price paid in a transfer of eligible nonprofit housing property from a charitable nonprofit housing organization to a low-income person that occurs after December 31, 2010, will be the presumptive true cash value of the property transferred. In the year following the year in which the transfer takes place and each subsequent year, the taxable value of the eligible nonprofit housing property must be adjusted as provided in the applicable property tax assessment provision. Under that provision, the taxable value of a parcel of property is the lesser of its current state equalized valuation or its taxable value in the preceding year minus any losses, multiplied by the lesser of 1.05 or the inflation rate, plus all additions. Upon a transfer of ownership, the property's taxable value for the year following the year of transfer is the property's state equalized valuation for the calendar year following the transfer.

A "charitable nonprofit housing organization" is a charitable nonprofit organization whose primary purpose is the construction or renovation of residential housing for conveyance to a low-income person.

An "eligible nonprofit housing property" is property owned by a charitable nonprofit housing organization that intends to transfer ownership of the property to a low-income person after construction or renovation of the property is completed.

A "low-income person" is a person with a family income of not more than 60% of the statewide median gross income who is eligible to participate in the charitable nonprofit housing organization's program based on criteria established by the organization.

Posted by: Ed Kisscorni AT 12:12 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, December 28 2010

Michigan Business Tax Film Production Credit Reporting Requirements Expanded

Public Act 312 of 2010, effective December 21, 2010, expands the reporting requirements for the film production credit that may be claimed against the Michigan business tax.  If the expenses qualify as qualified personnel expenses or direct production expenses for purposes of claiming the credit, then that information is not considered part of the commercial and financial operations of the taxpayer.  

Accordingly, such information may be disclosed under a Freedom of Information Act request.  In addition, on January 15 and July 15 of each year, the Michigan Film Office is required to make available a detailed semiannual report on its website.  The Michigan Film Office is also required to include additional information in its annual report.

Finally, the Michigan Film Office is required to send a copy of each postproduction certificate of completion to certain government officials and the Department of Treasury is required to report annually regarding the amount of refunds given for the credit.

Posted by: Ed Kisscorni AT 12:02 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, December 28 2010

Michigan Personal Income Tax Checkoff for Girl Scouts Added For 2011

Public Act 346 of 2010 applicable to the 2011 tax year and beyond provides that Michigan personal income taxpayers may contribute a portion of their refund, or increase their tax liability, to the girl scouts of Michigan fund created under the Girl Scouts of Michigan Fund Act.

Posted by: Ed Kisscorni AT 11:55 am   |  Permalink   |  0 Comments  |  Email
Tuesday, December 28 2010

Appeal Is Timely Filed Using A Designated Delivery Service

In Grimm v. Department of Treasury, Michigan Court of Appeals, No. 293457, December 16, 2010, the Michigan Court of Appeals held that an appeal filed by a corporate officer for a final assessment of personal income withholding taxes was timely filed when the appeal was delivered to a designated delivery service within 35 days, as required by statute.  The applicable statute allows taxpayers to invoke the Tax Tribunal's jurisdiction by filing a written petition within 35 days after a final determination.  A petition is timely filed if it is given to a designated delivery service for delivery on or before the expiration of that time period and the petition is delivered by the designated delivery service.  Reasoning that the petition does not need to be delivered by the deadline date, the court determined that the petition was timely even though the Tax Tribunal did not receive it until 36 days after the final determination.

The lower court also ordered dismissal because the taxpayer did not identify the assessment numbers being appealed within 21 days. When considering the sanction of dismissal, the trial court should have carefully considered the factors involved and all available options to decide what sanction was just and proper in the context of the case. The court reasoned that the Department of Treasury was not prejudiced and it could determine the assessment numbers corresponding to the tax periods.  Furthermore, the taxpayer did not have a history of refusing to abide by court orders or deliberately delaying proceedings.  Accordingly, the sanction of dismissal was an abuse of discretion.

 

Posted by: Ed Kisscorni AT 11:42 am   |  Permalink   |  0 Comments  |  Email
Friday, December 17 2010

Property Classification Appeals Slow Down  - Legislative Solution?

The following update on the status of property classification appeals is provided by Mark Hilpert, former State Tax Comission member and currently with Honnigman in Lansing.  However, earlier this week, the incoming state Treasurer and current Speaker of the House, Andy Dillion said that a legislative solution may be worked out in the next few months.

As part of the enactment of the Michigan Business Tax (MBT) package in 2007, special tax benefits were provided for industrial and commercial personal property.  Generally, the property tax rate for commercial personal property was reduced by 12 mills and the rate on industrial personal property was reduced by 24 mills.  In addition, the remaining taxes paid on industrial personal property are eligible for a 35% refundable MBT credit.  Due to the tax and revenue implications, the classification of business property has now become very important.

Local assessors establish the classification of the parcels of real and personal property each year, and taxpayers can appeal that classification to the State Tax Commission (STC).  The Michigan Department of Treasury (the Department) may also appeal a classification to the Michigan Tax Tribunal before December 31st of the year under appeal.  At the end of 2009 the Department had filed over 10,000 appeals and had announced it was planning to file another 10,000 cases for 2010.  Most of these cases involve real estate parcels classed as industrial that the Department claims should have been classified as commercial.

In the last several weeks, the Tax Tribunal has begun hearing the first of these 2009 cases.  After a relatively few cases had been heard the Department appears to be having difficulty satisfying their burden of proof.  Possibly as a result of the findings in these early cases, the STC and the Department have decided to withdraw all their pending appeals that are currently before the Tax Tribunal.  The STC has instead indicated that it will order classification changes [from industrial to commercial] under its authority to "seize" local assessment rolls. 

To date, the Attorney General's office has only requested that the cases that have been scheduled for a hearing be adjourned and it is still possible that they will not move to withdraw the thousands of remaining cases.  However, if motions to withdraw are filed, taxpayers will have the right to respond and oppose the motion, if they so choose.  Depending on the facts of the particular case, it may be preferable for your client to move forward and get a decision from the Tax Tribunal, rather than to try to appeal an order from the STC that resulted from their seizure of the local assessment roll.

Posted by: Ed Kisscorni AT 09:28 am   |  Permalink   |  0 Comments  |  Email
Thursday, December 09 2010

MBT Business Income:  The Self-Employed health Insurance Deduction and the 1/2 Self Employed Tax Deduction

 

Following is an excellent discussion of two common questions relating the deduction for self-employed health insurance and the deduction for self-employment income.  These comments were provided by Joe Tomczyk.

 

Can the self-employed health insurance deduction and SE tax deduction taken on Page 1 of the 1040 be subtracted from the Schedule C income to get to business income for MBT for an individual with Schedule C earnings from self-employment?

 

            Is the net earnings from self-employment deduction 92.35% of the self-employment earnings, rather than 100% of self-employment earnings (discounting on this issue either way whether or not there is a return on capital)? 

 

Business Income:  For a self-employed individual, it is a unique set of deductions to consider in arriving at "Business Income" as defined in the MBT (MCL 208.1105(2)).  Michigan statute specifically refers to "federal taxable income derived from business activity."  From the language of the Internal Revenue Code, both self employed health insurance premiums and SE tax deduction fit the definition of "federal taxable income derived from business activity."  The unique twist is that neither item is deducted on the Federal Schedule C.  Rather they are both deducted on the Federal 1040, line 27 (1/2 Self Employee Tax) and line 29 (Self-employed health insurance deduction).  Therefore, it is probable that a number of sole proprietors might have missed these two deductions in arriving at MBT "Business Income."

 

In order to identify "federal taxable income derived from business activity," one needs to look at IRC sections 61 (Gross Income), 62 (Adjusted Gross Income), and 63 (Taxable Income). The MBT definition refers to "Taxable Income" (Section 63). However, Sections 61 and 62 are referenced in Section 63, and, therefore, related. 

 

The self-employed health insurance deduction is allowed by IRC section 162(l)(1).  This section identifies deductible trade or business expenses allowable in arriving at federal "adjusted gross income" (IRC section 62).  It is subject to certain limitations and is reported on federal schedule 1040, line 29.  Therefore, it should be an allowable deduction in arriving at MBT "Business Income."

 

The of SE Tax deduction if allowed under IRC section 164(f).  That section specifically stated that this deduction "shall be treated as attributable to a trade of business carried on the by the taxpayer."  It is taken on Federal schedule 1040, line 27.  Therefore, it should be an allowable deduction in arriving at MBT "Business Income."

 

From a practical standpoint, neither deduction provides substantial MBT relief.

 

Self Employed Health Insurance:  Assume that a sole proprietor pays $2,000 a month ($24,000 a year) for health coverage of the proprietor and family.  Also assume that the sole proprietor had SE earnings of $110,000 (Note: the health insurance deduction is limited to the premium paid less the deduction for SE tax). 

 

Self Employment tax is made up of two parts: 

         Old-age, survivors, and disability insurance (OASDI):  This is taxed at a rate of 12.4% on the first $106,800 (for 2009 and 2010).

         Medicare:  2.9% on all income

 

Assuming an effective MBT tax rate of 2% (including surcharge) and a Michigan apportionment factor of 0%, the tax reduction for the health insurance premium is $315.67, calculated as follows:

 

Health Insurance Premiums

$24,000.00

Less of SE Tax Deduction ((106,800*.124) + (110,000*.029))*.5

 

(8,216.60)

Federal Health Insurance Premium Deduction

 

$15,783.40

Effective MBT rate

2.0%

MBT Reduction

$315.67

 

The Self-Employment Tax Deduction:   Assume that a sole-proprietor has SE income of $1,000,000.00 for the year.  Also, assume a MBT effective tax rate of 2.0% and a Michigan apportionment percentage of 0%.  The MBT savings would be $422.43, calculated as follows:

 

OASDI (106,800 * .124)

$13,243.20

Medicare (1,000,000 * .029)

29,00.00

Total SE Tax

$42,243.20

SE Tax Deduction

$21,121.60

Effective MBT rate

2.0%

MBT Reduction

$422.43

 

 

Another consideration that I did not address was the effect on the deduction allowed under MCL 208.1201(2)(h) regarding "self employment income" to a sole proprietor.  By combining both reductions (1/2 of the self employment tax and the Internal Revenue Code 1402 earnings from self employment), you could end up with a negative business income tax base for MBT.

Posted by: Ed Kisscorni AT 10:19 am   |  Permalink   |  2 Comments  |  Email
Thursday, December 02 2010

Federally Disregarded Entities Required to File Michigan Business Tax Returns

The Michigan Department of Treasury has issued a notice stating that disregarded entities for federal tax purposes are required to file Michigan business tax (MBT) returns. For all open tax periods, a person that is a federally disregarded entity, including a single member limited liability company or a QSub, must either file a separate MBT return or file as a member of a unitary business group by June 30, 2011. A person disregarded for federal tax purposes that filed as a sole proprietor, branch, or division of its owner for MBT purposes is considered a non-filer under the statute of limitations.

A taxpayer that previously filed an MBT return that included one or more previously disregarded entities, including a unitary business group, must amend its returns for all open periods, even if the tax liability is the same. These returns are also due June 30, 2011. Interest will be due on deficiencies. However, the failure-to-file penalty will be waived until June 30. A previously disregarded entity is required to register with the department if it has no federal employer identification number (FEIN) or Michigan Treasury assigned number (TR). Taxpayers are required to attach pro forma federal returns.

Posted by: Ed Kisscorni AT 09:57 am   |  Permalink   |  0 Comments  |  Email

 

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