Michigan Developments
Eric Rule,
Director of Governmental Affairs

Security-breach legislation stalls in committee
A bill requiring retailers and financial institutions to alert customers when a security breach occurs did not move in the Senate Judiciary Committee due to some legislators’ concerns it was watered down.

MRA and numerous other business and credit groups have been working with the bill’s sponsor, Sen. Shirley Johnson (R-Royal Oak), for months on ways to bring the legislation, Senate Bill 309, into compliance with measures passed in other states.

The groups’ goal has been to prevent multi-state businesses from facing a piecemeal approach to the issue. Their changes apparently stalled the bill in committee after several lawmakers expressed concerns that the changes weakened the bill.

Committee members were most critical of a change stating that businesses must only notify customers if they believed the consumers’ security was at risk. The change was implemented in order to prevent companies from having to send out notices for breaches that wouldn’t result in a greater risk of fraud for the consumer.

No vote was taken on the bill, and committee chair Sen. Alan Cropsey (R-DeWitt) will likely withhold the bill from further action until various concerns have been addressed.

SBT elimination proposal moves closer to ballot
Oakland County Executive L. Brooks Patterson is one big step closer to putting a Single Business Tax (SBT) elimination proposal on the state ballot. He submitted 372,604 signatures seeking to move the current sunset on the SBT from December 31, 2009, to December 31, 2007.

To put the issue on the ballot, Patterson needs 254,000 valid signatures. Under Michigan law, such an initiative gives the legislature 40 days after the Secretary of State certifies the signatures to approve the measure. If the legislature does not vote on the initiative or defeats it, the measure automatically goes to state voters in November.

In related news, House Majority Floor Leader Chris Ward (R-Brighton) indicated he plans to introduce legislation replacing the SBT with a fee-for-licensure structure. Under his plan, businesses would pay a yearly fee to receive a license to do business in the state, with the fee based on the firm’s annual sales. Estimates show the proposal translating into a 25-percent business tax cut and a $500 million loss in state revenue. However, the Granholm administration has made it clear it will only accept a replacement that is revenue-neutral.

Speaker of the House Craig DeRoche (R-Novi) cautioned that attention should be focused on members of the Joint House and Senate Committee on SBT Tax Restructuring—of which Ward is not a member—for proposals that have the greatest chance of being endorsed by his caucus.

Kleine confirmed as new treasurer
The Senate confirmed Bob Kleine as state treasurer. Kleine was appointed by Gov. Granholm to succeed Jay Rising, who left to join the Detroit Medical Center.

Kleine was instrumental in crafting the Single Business Tax (SBT) decades ago and is intimately familiar with its workings. This knowledge was viewed as helpful to confirmation, because replacing the SBT is a major priority of the legislature.

Kleine’s confirmation was much less rocky than those of other recent Granholm appointees. He received praise from both Senate Majority Leader Ken Sikkema (R-Wyoming) and Senate Minority Leader Bob Emerson (D-Flint).

’Omnibus’ budget bill addresses ergonomics
In late May, House Republicans passed their omnibus budget bill devoid of Democratic amendments. However, included in the GOP amendments to the budget bill was an issue important to retail—a measure preventing the Department of Labor and Economic Growth from drawing up ergonomic standards for businesses.

Although Democrats argued that such standards would save businesses money in the long run, Rep. Rick Jones (R-Grand Ledge) said that requiring ergonomic standards would be an unnecessary burden for businesses. California is the only state that has implemented state-specific ergonomics rules.

The Granholm administration has been considering offering ergonomic rules for over a year, and Republicans and business groups such as MRA have been attempting to thwart this costly and burdensome requirement.

The omnibus budget bill is now under consideration in the Senate.

Update from Washington
James Goldberg,
MRA Washington Counsel

Another postal rate hike on the horizon
The U.S. Postal Service, having raised rates 13 times in 32 years, is at it again. It is asking the independent Postal Rate Commission to raise the cost of a first-class stamp to 42 cents. If approved, the rate increase would not occur before May 2007.

At the same time, the Postal Service is considering issuance of a new “forever” stamp to deal with future rate increases. The stamps would cost the same as a first-class stamp and would act as a hedge against future rate increases and end the frustrating search for 2- or 3-cent stamps that usually follow a price increase.

The “forever” stamps, if issued, could be purchased at the then-current rate for first class mail and used at any point in the future to mail a letter, no matter what the then-current cost of postage.

The first-class rate hike proposal will undoubtedly be accompanied by a proposal to increase rates in all other mailing categories.

’Lame duck’ session could incude immigration
Odds are growing that there will be a “lame duck” session following this fall’s mid-term elections.

One of the items that might be held over for post-election consideration is the controversial immigration bill, which proposes to strengthen border enforcement while somehow dealing with the estimated 12 million undocumented individuals who live and work in this country.

House Speaker Dennis Hastert has stated that no legislation will go to the chamber floor unless it has a “majority within the majority”—that is, unless he’s sure that a majority of the Republicans will vote for it. That’s uncertain now because the Senate version of the bill is far more generous to undocumented workers than many in the House would want.

Another difference between the two versions lies in the treatment of companies that employ illegal immigrants. The House bill contains a strong enforcement provision, requiring all employers to verify the employment status of not only new workers, but also all existing employees, adding much stronger penalties for employing undocumented individuals.

The Senate bill is less harsh on employers and would expand a current Department of Homeland Security pilot project, which would enable employers to tap into a DHS database to verify a prospective employee’s eligibility.

MRA’s Washington Office is closely watching the progress of the immigration legislation to be sure that employers are not subject to harsh penalties for good faith efforts to check status of prospective workers.

It is also working on legislation to expand and simplify the H-2B visa process, which allows the hiring of seasonal workers from outside the U.S.

Tax committees look at LIFO
Having discovered that the oil industry makes use of the LIFO (last-in, first-out) system of inventory accounting, congressional tax writers may be poised to take away the use of that system.

The trouble is that many retailers also use the LIFO system to deal with inventory cost issues in a period of rising prices, so any changes in the allowance of LIFO could hit these retailers where it hurts most—in their year-end tax bills.

MRA’s Washington Office is making contact with members of the House Ways & Means and Senate Finance committees to explain the importance of the LIFO system to the retail industry. It will also push for expansion of shorter depreciation periods for store improvements to those retailers who own their stores; lessees received a break on the amortization period for leasehold improvements last year.

States eye Massachusetts health plan
State legislatures across the country, including Michigan, are reviewing a recently adopted Massachusetts law that takes an innovative approach to health insurance. It requires all individuals residing in the state to have health coverage in much the same way that all drivers are required to carry automobile insurance.

Employers of 11 or more workers will have to provide health care coverage and make a “fair and reasonable” contribution (an as-yet-undefined term) toward its cost or they would have to pay approximately $295 per employee per year into a fund to be administered by the state.

All eyes will be on Massachusetts to see if the second so-called “Massachusetts Miracle” comes to pass.

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