The Macomb County Michigan Real Estate Blog

Legislature Passes Single Business Tax Replacement

(6.29.07) Weeks of intense negotiation came to fruition last night as the Michigan legislature passed Senate Bill 94 to create the Michigan Business Tax (MBT) and replace the old Single Business Tax (SBT) that was scheduled for repeal on December 31st. The new business tax, like the existing SBT, will be imposed on businesses with annual gross receipts in excess of $350,000. The new structure is composed of a modified gross receipts tax (at a rate of 0.8%) and a business income tax (at a rate of 4.95%). The Department of Treasury estimates that the new tax will replace all $1.9 billion currently brought in by the SBT.

The Michigan Association of REALTORS® struck several victories in the creation of this new tax structure to keep taxation on real estate brokerages low. The Governor's earliest proposals brought a 900% tax increase on our industry. But, successful negotiations brought key amendments so that, at worst, we are brought back in line with the rest of the business community. These important policy points included:

• changing the tax base to eliminate taxation on "net worth"
• subtracting agent and cooperating brokerage commissions from the gross receipts base calculation
• providing "compensation credit" to a broker for all agents' commission payments at a rate of .37% (note that this is limited to 65% of that business' total tax liability)
• eliminating double taxation of profits for those brokerages organized as Limited Liability Corporations.

The new MBT passed both the Senate and the House with large majorities in each chamber. The bill is on its way to the Governor for her signature and to become law. Given the quarterly reporting requirements of many Michigan businesses at the end of June, it will most likely be signed after July 1st.

The Michigan Association of REALTORS® appreciates the hard work of all of the Senators and Representatives that made up the bi-partisan workgroup to draft this "MBT." Please stay tuned to the MAR Web site (http://www.mirealtors.com/) and MAR publications for more details and the latest information on this new form of business tax.

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