On Wednesday, Gov. Rick Snyder signed into law sweeping tax reforms. Whether you were for or against them, they will become effective on January 1, 2012. And now, our business community can adjust and plan for the future after assessing how the changes will impact their bottom line.
As for business start up and attraction, we now have a simple, predictable and more competitive corporate income tax to market.
Under this new structure, C-Corporations will be taxed at 6 percent on federal taxable income apportioned to Michigan.
Individuals, partnerships, LLCs, etc. will have income flow to their personal income tax at the rate of 4.35 percent. This rate is scheduled to decline to 4.25 percent in 2013. The latter currently pays both the Michigan Business Tax (MBT) and individual income tax.
The Michigan Economic Development Corporation (MEDC) estimates that this change will reduce business taxes by an estimated 86 percent with the hope of encouraging new investment in our state. According to the Tax Foundation, this will jump Michigan's corporate tax ranking from 48th to 22nd.
Currently, approximately 136,000 businesses pay the MBT. The Department of Treasury estimates that only 41,000 businesses will pay the replacement 6 percent tax. It has been said that this is the first time in decades that Michigan business owners will be able to calculate their taxes on the back of an envelope.
Some things will also remain the same with the new tax structure. They include:
The property tax system will retain all exemptions and abatement programs
Commercial and industrial property rehabilitation incentives
Property tax exemptions for inventory, special tooling and pollution control equipment
Sales tax exemptions for industrial machinery and equipment, pollution control equipment and energy used in manufacturing
Renaissance Zones with development agreements in place prior to Jan. 1, 2012
If you are in the process of creating a business plan or considering an expansion, the staff at the LSCP is happy to help you determine how the new tax structure will benefit your bottom line.
Maybe these changes create the additional funding you need to increase your staff, product line, service offerings? Of course, we recommend you speak to your accountant or financial advisor for specific tax expertise.
The MEDC was also provided $175 million for business attraction, assistance and economic gardening programs. Economic gardening is defined by the Edward Lowe Foundation as "a philosophy that embraces strategies to grow existing businesses in a community, region or state." The dollars are broken down to be used in four main categories:
$100 million for attraction and economic gardening
$25 million for business acceleration
$25 million to support the film and digital media industry
$25 million to support the Pure Michigan promotion program
As details begin to emerge from Lansing, on these programs, the budget, etc. the LSCP will keep you in tune. Follow our updates on our RSS feed, Twitter, Facebook, Linkedin or blog.
They can all be accessed by logging on to www.marquette.org.
Editor's note: Amy Clickner is CEO?of the Lake Superior Community Partnership. Her weekly column will address topics of interest to the local business community.