November 9, 2007
Services Tax Repeal Underway; Replacement Revenue Debated
Due to widespread opposition from business groups and the general public, legislators and Governor Granholm have agreed to repeal the tax on discretionary services passed October 1. Large demonstrations, committee hearings, and an effort to place repeal on the ballot all prompted lawmakers to reconsider what they had done at 4 a.m. in an effort to avert a government shutdown.
The major issue now is what to replace the tax with, if anything. House Republicans favor additional cuts to government and no replacement revenue. However, neither Democrats nor the governor support such a strategy.
In fact, the House passed a bill late Thursday night that seeks to replace the lost revenue with a surcharge to the Michigan Business Tax of 32.9 percent through 2008, falling to 23.7 thereafter. The surcharge would only apply to companies with revenue of $18 million and above, and the legislation sets a cap at a company’s liability at $2 million.
Large retailers in the state have expressed a willingness to go along with this plan, as it reduces their tax liability when compared to the services tax with all of its business-to-business implications. Smaller retailers, whose revenues do not exceed the $18 million threshold, will not be impacted by the surcharge.
The Senate also passed a repeal bill this week but neglected to include a replacement provision. The House will undoubtedly reject that proposal, and the issue of replacement revenue can be worked out in conference committee. The main issues of contention are likely to be making the surcharge temporary, reducing the rate, or both.
Timing is also critical. The services tax is set to take effect December 1. Lawmakers were scheduled to take an 18-day hunting and Thanksgiving break starting today, but are tentatively scheduled for the next two Tuesdays in order to wrap up this issue prior to the enactment date of the services tax.
Discussions Underway on Responsibility in Data Breaches
MRA met with Sen. Randy Richardville’s (R-Monroe) staff to discuss draft language requiring anyone responsible for a data breach to pay for the costs associated with it. Pushed by the Michigan Credit Union League, the bill states that in the event of a data security breach, any individual or business that maintains a computerized database that includes personal information about a depository institution’s customers can be the subject of a civil action to recoup costs associated with the breach. Damages may include the costs associated with:
• The cancellations or reissuance of any credit or debit cards affected by the breach;
• Closing any deposit, transaction, share draft or other accounts affected and any action to stop payments or block transactions;
• Opening or reopening any accounts affected;
• Any refund or credit made to a credit or debit cardholder to cover the cost of any unauthorized transaction related to the breach;
• Notifying any customers of the depository institution affected by the breach.
Richardville chairs the Senate Banking and Financial Institutions Committee and reportedly is interested in taking the bill up later this year. He has assured MRA he will convene a workgroup and has indicated a willingness to work with MRA on language to make the bill more palatable, possibly through an exemption for small businesses. There may be some wiggle room as well for businesses that are following the data security standards, known as PCI, required by the card associations.
Bills to Regulate Lead Content Move
A package of bills aimed at keeping toys and jewelry with lead content above 6 parts per million off store shelves is poised for final approval in the Senate. MRA secured a very important provision that states if a retail business shows due diligence in attempting to comply with the law, it is exempt from fines under the provision.
This language allowed MRA to remain neutral on the bills.
KEY BILL INTRODUCTIONS:
HB 5400, sponsored by Rep. Matthew Gillard (D-Alpena), to increase revenue from Michigan business tax cover repeal of use tax on certain services by raising certain rates.
HB 5401, sponsored by Rep. Gillard, to revise business income tax case and rate and modify the repeal date of certain use tax exemptions.
HB 5402, sponsored by Rep. Paul Condino (D-Southfield), to revise modified gross receipts tax base and rate.
HB 5405, sponsored by Rep. Gillard, to revise rate of credit for certain small businesses.
HB 5406, sponsored by Rep. Condino, to revise certain refunds based on business tax revenue and repeal certain statutory appropriations.
HB 5408, sponsored by Rep. Andy Coulouris (D-Saginaw), to revise certain tax bases, tax rates, tax credits, and refunds based on business tax revenue and to repeal certain use tax exemptions and statutory appropriations.
SB 866, sponsored by Sen. Martha Scott (D-Highland Park), to provide for requirement for insurer to not reasonably deny a claim for coverage or payment.
SB 870, sponsored by Sen. Gretchen Whitmer (D-East Lansing), to revise rate of credit for certain small businesses.
SB 871, sponsored by Sen. Michael Prusi (D-Ispheming), to revise certain refunds based on business tax revenue and repeal certain statutory appropriations.
SB 873, sponsored by Sen. Scott, to revise tax rate levied and imposed on an insurance company.
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Office at
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Michigan Retailers Association
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