A bill that significantly alters the Michigan Business Tax (MBT) for construction firms and allows deductions of direct purchase of materials from their MBT liability, was passed in the late hours of the legislative session held June 25-26. Senate Bill 1217 (SB 1217) was signed into law on July 9th.
Earlier this year Fisher was joined by Allied Electric President Mike Powers as both presented testimony on this bill to the Senate Finance Committee. To win final legislative approval of the legislation, ABC of Michigan consulted members, CPAs and formed coalitions with business groups. “We provided materials to legislative committees, met with ranking lawmakers, distributed memos and position papers and worked tirelessly to advocate legislation to limit taxes on contractors and subcontractors,” Fisher said.
ABC of Michigan also held successful meetings with key lawmakers, Rep. Steve Bieda, chair of the House Tax Policy Committee and Sen. Nancy Cassis, chair of the Senate Finance Committee; making the case to change the MBT. Fisher said both lawmakers worked hard to move the legislation through the House and Senate.
The bill is specific to the construction industry, only, and is retroactive back to January 1, 2008.
More than 80 percent of recently surveyed commercial and industrial construction firms are seeing an increase in their tax liability under the Michigan Business Tax (MBT), according to results recently released by Associated Builders and Contractors of Michigan (ABC of Michigan). Of the 83 percent of firms that had an increase, more than half say it was greater than 50 percent, with some firms seeing tax burden hikes as high as 556 percent.
“The results of the survey confirm that the new MBT and the surcharge are hurting businesses,” ABC of Michigan President Chris Fisher said. “They pose a threat to construction jobs in Michigan at a time when the industry is already affected by a weak economy and higher material costs.”
According to the survey, which had 95 respondents from 900 surveys sent electronically to ABC of Michigan members, only 5 percent said they are finding relief under the new tax, while 11 percent either have roughly the same liability or are still unsure of the MBT’s impact. Subchapter S Corporations were most often affected (88 percent), and all business structures experienced tax increases (80 percent).
Fisher said as part of the survey, many firms provided comments on the MBT. Some companies were worried the MBT may force them to leave the state, while others were frustrated about the complexity of the new tax.
The survey also revealed that many firms with less than $18 million in gross receipts seeking liability relief from the Alternative Profits Tax (APT) were disqualified because they did not meet the other qualifications.
“The Legislature needs to repeal the surcharge and fix other flaws with the tax before it’s too late,” Fisher emphasized. “Earlier this year, a small- to medium-sized ABC of Michigan electrical contractor told the Senate Finance Committee that his business tax liability jumped from $40,000 to $240,000. Construction companies are hurting, and the need for relief is now before any further damage is done.”
In June ABC of Michigan backed legislation that promotes “Green Buildings” which passed the Michigan House of Representatives with bi-partisan support. The bill creates tax incentives for green buildings and environmentally sustainable building techniques. The legislation now moves on to the Senate for consideration.During testimony before the Michigan House of Representatives Tax Policy Committee, ABC of Michigan President Chris Fisher observed that energy costs continue to rise and sustainability issues are more and more prevalent. “We believe that now is the time for Michigan to make an important step, as other states have done, to encourage cleaner, greener buildings,” Fisher said and then went on to state, “sustainable green building practices which our members and industry have championed tirelessly and more environmentally thoughtful construction is an important step in ensuring we leave a softer carbon footprint on the landscape for future generations.”
Also championed by the Michigan Association of Home Builders, is House Bill 6148, a proposal that recognizes a green building as a resource-efficient, environmentally sensitive structure that is designed to save money, reduce waste, water, and energy usage, increase worker productivity, and create healthier environments for people to live and work in. The legislation provides credits for project owners who meet certain green building criteria while also recognizing contractors who invest in their employees by properly training them in green and sustainable building techniques.
As a member of the U.S. Green Building Council (USGBC), ABC nationally offers workshops to teach awareness, understanding and implementation of green building principles and the LEED Rating System. In Michigan, ABC chapters have partnered with community colleges and ABC member companies to be leaders in advancing green building. The ABC Western Michigan Chapter has offered six separate green building classes since September, graduating students with the skills and knowledge to be leaders in green building design and construction.