Bill to Amend Michigan Business Tax for Construction Firms Inches Forward

On April 17, 2008, a bill to fix the Michigan Business Tax for construction contractors moved closer to passing the Michigan Senate. S. B. 1217 was placed on order of third reading with substitute S-1.

S.B. 1217 would amend Section 113(6)(e) of the Michigan Business Tax (MBT) Act (MCL 208.1113) to include in the definition of "purchases from other firms", for certain builders and contractors, direct material costs for a construction project under a contract specific to that project.

The MBT currently imposes a modified gross receipts tax on every contractor with nexus in the State. The tax is imposed on the modified gross receipts tax base, after allocation or apportionment to the State at a rate of 0.8%. The tax base is a taxpayer's gross receipts less purchases from other firms before apportionment.
The definition of "purchases from other firms" includes payments to subcontractors for a construction project under a contract specific to that project. Under the bill, "purchases from other firms" would also include direct material costs for a construction project under a contract specific to that project. "Direct material costs" would mean the amounts paid for materials that are deductible on the taxpayer's Federal income tax return as purchases under the cost of goods sold.

To track the progress of S.B. 1217, you can follow the bill on the Michigan Legislature's website here, or contact Bart Carrigan or Damian Hill with AGC of Michigan, who are following S.B. 1217 closely on behalf of the construction community.