Michigan Developments
Eric Rule,
Director of Governmental Affairs

Legislative progress in 2005

MRA won several outright victories in 2005 and played successful defense on many other issues—working to hold back or get more suitable terms on legislation the retail community opposed but couldn’t stop.

On several issues, including violent video games, regulation of cold medications used by “meth cookers” and electronics recycling, MRA helped negotiate common-sense solutions that are more consumer- and business-friendly than proposed alternatives.

Key victories included:

• Schools starting after Labor Day: A big victory was the passage of a bill that makes schools wait until after Labor Day to open their doors, thereby boosting end-of-summer tourism. MRA and other business groups coordinated a comprehensive grassroots lobbying strategy that led to the issue’s first-ever passage from any chamber of the legislature. That strong support ultimately persuaded Gov. Jennifer Granholm to sign the bill.

• SUTA dumping: Another win was the enactment of a law banning the unfair practice of State Unemployment Tax Act (SUTA) dumping—whereby some companies avoid paying their fair share in unemployment taxes. MRA would have liked to see the bill go farther in regulating Professional Employment Organizations, but is pleased at the bill’s passage and the provision that requires that the issue be revisited periodically to check its effectiveness.

• Direct shipment of wine: Last fall it looked as though the bill that would bring Michigan law in line with a Supreme Court ruling on direct shipment of wine would hurt both Michigan wineries and retailers by ending or severely restricting all direct shipments. MRA formed a coalition with wineries and restaurant owners to fight this version. In the end, a revised bill, sponsored by Sen. Michelle McManus (R-Traverse City) and signed into law in December, retains the rights of retailers and restaurants regarding wine shipments.

• Pricing modernization: A bill sponsored by Rep. Dave Hildenbrand (R-Lowell) to modernize pricing requirements moved out of the House Commerce Committee—the first time an item-pricing bill has done so in many years of attempts. It is being prepared for final passage in the House, and MRA is working on moving it forward early in 2006.

Challenges for 2006

A number of issues MRA worked on in 2005 will see more action in 2006. The areas most likely to see legislation of interest to retailers in 2006 include:

• Water legacy: A package of bills to regulate water withdrawals and diversions, sponsored by Sen. Patty Birkholz (R-Saugatuck), passed in the Senate in December and is expected to move through the House in early 2006. These bills—on which MRA has spent considerable effort—would affect golf course owners, nursery/landscaping businesses and any business that uses large amounts of water.

• Recycling: Possible expansion of the bottle bill would severely impact some retailers; specific alternative measures to increase Michigan’s overall recycling rate may be preferable.

• Gift cards: Attempts to restrict retailers’ rights are already in the works.

• Municipal competition: Municipalities are competing with private enterprise, and many argue that the rules they follow may give them an unfair advantage. MRA supports legislation that would level the playing field.

The simplest way to become involved in helping MRA with its legislative agenda is with a donation to the MRA PAC. Contact MRA’s Kathy Wilson at 800.366.3699 or kwilson@retailers.com to contribute.

Update from Washington
James Goldberg,
MRA Washington Counsel

Tell employees their real job costs

All employers know that they must provide a W-2 form to all employees showing how much income they received and how much was withheld for federal and state taxes as well as Social Security and Medicare payments.

Many employers take this annual requirement a step further, however, and use the occasion to communicate the total cost of keeping an individual on the payroll.

In other words, they not only tell the worker how much he or she earned in salary, but the employer cost for unemployment insurance and workers’ compensation coverage for the employee, plus the employer share of such discretionary benefits as health insurance, retirement plans and leave days.

There is no “approved” or required format for making such disclosures, but it’s something that MRA members may want to consider to show employees their total compensation package and not merely the salary portion.

Telephone excise tax under challenge

A loose, unlikely alliance of large companies, war protesters and long-distance telecommunications companies is exerting increased pressure on the Internal Revenue Service for continuing to enforce the telephone service excise tax in light of mounting consensus among federal appeals courts that the tax does not apply to some flat-rate services.

Some 20 telecom service providers sent a letter to the Treasury department urging the government to stop litigating the issue. Shortly thereafter, the influential U.S. Court of Appeals for the District of Columbia Circuit held that the excise tax does not apply to phone services billed on a flat per-minute basis.

The tax has existed almost continuously since its enactment in 1898 to help fund the Spanish-American War. While the tax rate has fluctuated over the years to as much as 15 percent, it has held steady at 3 percent since 1983.

At issue in the court challenges is the definition of “toll telephone service” to which the tax is applied. The Act defines it as “service for which charges are levied based on the distance and elapsed time of each call.”

The IRS argues that this definition also applies to flat-rate long distance services, which are common today, even though those services are not based on both the distance and duration of a call.

A Congressional Budget Office projection estimated that the tax brings in roughly $1.6 billion annually, which many argue wouldn’t be missed. The IRS, however, continues to fight refund claims, which the government estimated could top $9 billion when looking at several years’ worth of claims.

Unfortunately, the cost of litigation precludes most individuals and small businesses from fighting the tax. However, MRA’s Washington Office is exploring with other retail industry groups the feasibility of seeking legislative redress to resolve this issue.

Immigration battle moves to Senate

Immigration reform is shaping up to be one of the major Senate legislative battles of 2006. Calls to protect the country’s borders against illegal entry are competing with calls to reform and enlarge a guest-worker program that would benefit many seasonal employers in Michigan and elsewhere.

One provision in the House-passed Border Protection, Antiterrorism and Illegal Immigration Control Act of 2005 (H.R. 4437) would require all employers of any size to comply with a government-run electronic/telephone verification system to ensure that all employees are authorized to work.

For many years employers have been required to check identification and work authorization documents for all new employees and record them on Form I-9. But current law does not require employers to do anything more than review documents and record ID numbers on the federal form.

The House-passed bill would require that, before hiring anyone, the employer check the individual’s Social Security number against a national database and refuse to hire any person whose number is faulty. In addition, employers would have to check existing employees’ Social Security numbers against the national database.

Not surprisingly, the business community strongly opposes this provision in the legislation.

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