The following sections of the Uniform City Income Tax Ordinance shall be amended as follows:
(a) Section 3 is amended by defining “Department.”
(b) Section 11 is added.
Section 11. Subject to the exclusions, adjustments, exemptions and deductions herein provided, an annual tax of one percent (1%) on corporations and resident individuals and one-half of one percent (1/2%) on non-resident individuals for general revenue purposes and the purposes provided for in Section 11A is hereby imposed as an excise on income earned and received on and after the effective date of this ordinance.
(1) For the 1993 tax year and each tax year after 1993, a city that is a qualified local unit of government, as defined by the Federal Facility Exemption Act, may adopt an ordinance or resolution, or may enter into an agreement with a qualified local unit of government other than the city, to dedicate and transfer funds in an amount determined pursuant to subsection (3) solely and to the extent necessary for the purposes authorized for use of the Federal Facility Development Fund created by the Federal Facility Development Act.
(2) When a city adopts an ordinance or resolution or enters into an agreement pursuant to subsection (1), the use or transfer of any funds dedicated or to be transferred shall commence and continue until any bonds, obligations or other evidences of indebtedness for which the funds are pledged are fully paid.
(3) The amount dedicated or to be transferred by a city each year pursuant to subsection (1) shall equal the amount of withheld tax remitted by a qualified employer pursuant to Section 60 as reconciled pursuant to Section 61, for all qualified employees.
(4) As used in this section:
(A) “Qualified employee” means a person who meets both the following criteria:
(I) Is employed by a qualified employer.
(II) His or her principal workplace is a qualified facility.
(B) “Qualified facility” and “qualified local unit of government” mean those terms as defined in the Federal Facility Development Act.
(c) Section 12 shall be amended to add Reg 12.1 as follows:
Reg 12.1 A resident shareholder of a corporation electing S Corporation status under the Internal Revenue Code shall report as taxable income their proportionate share of the corporation’s income and shall be entitled to claim a tax credit for their proportionate share of the income tax paid by the S Corporation to a Michigan municipality.
(d) Section 14, Reg 14.1 shall be amended to read as follows:
Reg 14.1 Corporations are not permitted to file as so-called “tax option” corporations. Every corporation subject to the city tax must file a return and pay the tax, regardless of any option available to it under Sections 1371-1377 of the Federal Internal Revenue Code.
(e) Section 31 shall be amended to read as follows:
Section 31. An individual taxpayer in computing his or her taxable income is allowed a deduction of six hundred dollars ($600) for each personal and dependency exemption under the rules for determining exemptions and dependents as provided in the Federal Internal Revenue Code.
(f) Section 35 is added:
Section 35.
(1) Notwithstanding any other provision of this ordinance and to the extent and for the duration provided in the Michigan Renaissance Zone Act, Act No. 376 of the Public Acts of 1996, being MCLA Sections 125.2681 to 125.2696, for the 1997 tax year and each tax year after 1997, a qualified taxpayer may deduct from gross income in determining income subject to tax under this ordinance, to the extent a deduction is applicable to income subject to the tax under this ordinance, an amount equal to one (1) of the following for the specified types of taxpayers:
(A) For a qualified taxpayer as defined in subsection (12)(C)(I):
(I) Except as provided in Subparagraphs (II) and (III), income subject to the tax that is earned or received in the tax year during the period of time that the taxpayer was a qualified taxpayer.
(II) Capital gains subject to the tax that are received during the tax year during the period of time that the taxpayer was a qualified taxpayer. The deduction allowed under this subdivision shall be prorated based on the percentage of time that the asset was held by the taxpayer while the taxpayer was a qualified taxpayer.
(III) Income received by the qualified taxpayer from winning an on-line lottery game sponsored by this state but only if the date on which the drawing for that game was held is after the taxpayer became a qualified taxpayer of a Renaissance Zone and income received by the taxpayer from winning an instant lottery game sponsored by this state but only if the taxpayer was a qualified taxpayer of a Renaissance Zone on the validation date of the lottery ticket for that game.
(B) For a qualified taxpayer defined in Subsection (12)(C)(II), the amount determined pursuant to Section 14, 19, 20 to 24, or 25 of this ordinance multiplied by a fraction the numerator of which is the percentage that the average net book value of the tangible personal property owned and the real property including leasehold improvements, owned or used by the qualified taxpayer in the business and situated within the Renaissance Zone during the taxable period, is of the average net book value of all such property, including leasehold improvements, owned or used by the taxpayer in the business during the same period situated in the city plus the percentage that the total compensation paid to employees for work done or for services performed within the Renaissance Zone is of the total compensation paid to all the taxpayer’s employees within the city during the period covered by the return and the denominator of which is 2. For allocation purposes, compensation shall be computed on the cash or accrual basis in accordance with the method used in computing the entire net income of the taxpayer. Real property includes real property rented or leased by the qualified taxpayer and the value of that property is considered to be eight (8) times the annual gross rental on the property. “Gross rental on the property” means gross rental of real property as that term is defined in Section 21 of this ordinance.
(C) For a qualified taxpayer as defined in Subsection (12)(C)(III), the amount determined pursuant to Section 15 of this ordinance multiplied by a fraction the numerator of which is the percentage that the average net book value of the tangible personal property owned and the real property, including leasehold improvements, owned or used by the qualified taxpayer in the business and situated within the Renaissance Zone during the taxable period, is of the average net book value of all such property, including leasehold improvements, owned or used by the taxpayer in the business during the same period situated in the city plus the percentage that the total compensation paid to employees for work done or for services performed within the Renaissance Zone is of the total compensation paid to all the taxpayer’s employees within the city during the period covered by the return and the denominator of which is 2. For allocation purposes, compensation shall be computed on the cash or accrual basis in accordance with the method used in computing the entire net income of the taxpayer. Real property includes real property rented or leased by the qualified taxpayer and the value of that property is considered to be eight (8) times the annual gross rental on the property. “Gross rental on the property” means gross rental of real property as that term is defined in Section 21 of this ordinance.
(2) For a qualified taxpayer as defined in Subsections (12)(C)(II) and (III), any portion of income subject to tax under this ordinance derived from illegal activity conducted in a Renaissance Zone shall not be used to calculate a deduction allowed under this section. For a qualified taxpayer who is an individual, any portion of income subject to tax under this ordinance derived from illegal activity conducted anywhere shall not be used to calculate the deduction allowed under this section. For a qualified taxpayer as defined in Subsections (12)(C)(II) and (III), any portion of the taxpayer’s tax liability that is attributable to business activity related to the operation of a casino, and business activity that is associated or affiliated with the operation of a casino including, but not limited to, the operation of a parking lot, hotel, motel, or retail store, shall not be used to calculate a credit under this section. As used in this subsection, “casino” means a casino regulated by this state pursuant to the Michigan Gaming Control and Revenue Act, Initiated Law of 1996, being MCLA Sections 432.201 to 432.216.
(3) Income used to calculate a deduction under any other section of this ordinance shall not be used to calculate a deduction under this section.
(4) If a qualified taxpayer completes the residency requirements under Subsection (12)(C) before the end of the tax year in which the qualified taxpayer first resided in the Renaissance Zone, the qualified taxpayer may claim the deduction allowed under this section for that tax year. If the qualified taxpayer completes the residency requirements under Subsection (12)(C) in a tax year subsequent to the tax year in which the qualified taxpayer first resided in the Renaissance Zone, the following apply:
(A) If the qualified taxpayer completes the residency requirement in a tax year subsequent to the tax year in which the taxpayer first resided in the Renaissance Zone and before the date for filing the annual return under this ordinance for the tax year in which the taxpayer first resided in the Renaissance Zone, the taxpayer may claim the deduction allowed under this section for the tax year in which the taxpayer first resided in the Renaissance Zone.
(B) If the qualified taxpayer completes the residency requirement in a tax year subsequent to the tax year in which the taxpayer first resided in the Renaissance Zone and after the date for filing the annual return under this ordinance for the tax year in which the taxpayer first resided in the Renaissance Zone and after the date for filing the annual return under this ordinance for the tax year in which the taxpayer first resided in the Renaissance Zone, the qualified taxpayer may claim the deduction allowed under this section for the tax year in which the residency requirement is completed on the annual return for the tax year in which the residency requirement is completed and may claim the deduction for the tax year in which the qualified taxpayer first resided in the Renaissance Zone by filing an amended return for that tax year in which the qualified taxpayer first resided in the Renaissance Zone.
(5) To be eligible for the deduction under this section, a taxpayer shall file an annual return under this ordinance.
(6) A qualified taxpayer shall file a withholding form prescribed by the city with his or her employer after the date the qualified taxpayer completes the requirements under Subsection (12)(C) or, at the option of the city, for taxpayers who claim to be qualified taxpayers under Subsection (12)(C)(I), the taxpayer shall file a form prescribed by the city with the city after the date the taxpayer completes the requirements under Subsection (12)(C)(I). If the city verifies the information on the form, the city shall issue a certificate of qualification to the taxpayer which the taxpayer shall file with his or her employer. When a taxpayer who filed a form under this subsection is no longer a qualified taxpayer under Subsection (12)(C)(I), the taxpayer shall send a written notice of that change in status to the city not more than ten (10) days after the change in status occurs.
(7) If the Administrator finds that a taxpayer has claimed a deduction under this section to which he or she is not entitled, the taxpayer is subject to the interest and penalty provisions under this ordinance.
(8) The deduction allowed under this section continues through the tax year in which the Renaissance Zone designation expires.
(9) A net operating loss deduction allowed under this ordinance shall be calculated without regard to any deduction allowed under this section.
(10) If a taxpayer who was a qualified taxpayer during the tax year changes status and is not a qualified taxpayer or vice versa, income subject to tax under this ordinance shall be determined separately for income in each status.
(11) A qualified taxpayer as defined in Subsection (12)(C)(I) is a resident of a Renaissance Zone for purposes of Act No. 376 of the Public Acts of 1996. A qualified taxpayer as defined in Subsection (12)(C)(II) or (III) is located and conducts business in a Renaissance Zone for purposes of Act No. 376 of the Public Acts of 1996.
(12) As used in this section:
(A) “Conducts business activity” means doing business as defined in this ordinance.
(B) “Domicile” means a place where a person has his or her true, fixed, and permanent home and principal establishment to which, whenever absent, he or she intends to return, and domicile continues until another permanent establishment is established.
(C) “Qualified taxpayer” means one of the following:
(I) A taxpayer who is an individual, a resident of the city as determined under this ordinance, and is domiciled in an area of the city that is designated a Renaissance Zone for a period of 183 consecutive days. A taxpayer may begin calculating the 183-day period during the 183 days immediately preceding the designation of the area as a Renaissance Zone. Qualified taxpayer under this subparagraph includes the estate of an individual who was a qualified taxpayer at the time of death. After a taxpayer has completed the 183-day requirement under this subparagraph, the taxpayer is considered to have been a qualified taxpayer of that Renaissance Zone beginning from the first day used to determine if the 183-day requirement has been met.
(II) A taxpayer that is a corporation and that is located and conducts business activity in a Renaissance Zone in the city.
(III) A person who is located in and conducts business activity as an unincorporated business, profession, or other activity in a Renaissance Zone and is not a qualified taxpayer under Subparagraph (I) or (II).
(D) “Renaissance Zone” means that term as defined in Act No. 376 of the Public Acts of 1996.
(g) Section 41 is amended to provide for filing with the state and to change the deadline for filing when returns are filed with the state.
(h) Section 43 is amended by adding Subsection 4-11.
(i) Section 52 is amended by adding Section D.
(j) Section 54 is amended to provide for Renaissance Zone exemptions.
(k) Section 55 is amended by adding Subsections 2 and 3 to provide for employee’s notification to employer of residency in a Renaissance Zone.
(l) Section 60 is amended by adding Subsection 2 to provide for electronic filing with the state and to add Reg 60.1. and the section shall be further amended to read as follows:
Section 60. An employer shall file a return, furnished by or obtainable on request from the city, and pay to the city the full amount of tax withheld on or before the last day of the month following the close of each calendar quarter, except that during any calendar month other than the first month of a calendar quarter the amount withheld exceeds one hundred dollars ($100), the employer shall deposit the amount withheld with the City Treasurer before the end of the next calendar month.
Reg. 60.1 All payroll service companies that withhold and remit taxes for employers doing business or located inside of the City of Flint must remit funds electronically and submit an approved file to the City Income Tax Department.
(m) Section 61 is amended by adding Subsection 4 to provide for filing with the State when business ceases operation and shall further be amended to read as follows:
Section 61.
(1) An employer shall file a reconciliation of his quarterly returns on or before the last day of February following each calendar year in which he has withheld from an employee’s compensation. A deficiency is due when the reconciliation is filed. If the employer made monthly or quarterly or both payments in excess of the amount withheld from an employee’s compensation, the city upon proper verification shall refund the excess to the employer.
(2) In addition to the reconciliation the employer shall file an information return for each employee from whom the city income tax has been withheld and each employee subject to withholding under this ordinance, setting forth his or her name, address, social security number, the total amount of compensation paid him or her during the year, and the amount of city income tax withheld from him or her. The information return shall be a copy of the Federal W-2 form or on a form furnished or approved by the city. A copy of the information return shall be furnished to the employee.
(3) If an employer goes out of business or otherwise ceases to be an employer, reconciliation forms and the information return forms shall be filed by the date the final withholding return and payment are due.
(n) Section 62 is added and further amended by providing for filing estimated tax with State where agreement has been entered into within Subsection 1.
Section 62.
(1) A person who anticipates taxable income from which the city income tax will not be withheld with the city or the department shall file a declaration of estimated tax on a form furnished by or obtainable on request from the city or from the department if the city has entered into an agreement pursuant to Section 9 of Chapter 1. A calendar year taxpayer shall file a declaration on or before each April 30 or for the years after the 1996 tax year and for which a city has entered into an agreement with the Department of Treasury pursuant to Section 9 of Chapter 1, on or before each April 15. A taxpayer on a fiscal year basis or other accounting period shall file a declaration within four (4) months after the beginning of each fiscal year or other accounting period.
(2) If a taxpayer has not previously been required to file, the declaration shall be filed on or before the first date for making a quarterly payment that occurs after the taxpayer becomes subject to the requirement to file declaration. A taxpayer shall file a declaration for the same calendar year, fiscal year, or other accounting period that has been accepted by the federal internal revenue service for federal income tax purposes. A declaration by an individual or unincorporated entity is not required if the total estimated tax, less any credits applicable to the tax, does not exceed $100. A declaration by a corporation is not required if the total estimated tax, less any credits applicable to the tax, does not exceed $250. A declaration by or on behalf of an estate or trust is not required.
(o) Section 63 Subsection 2 is amended to provide for payment of estimated tax to state where agreement has been entered into between City and State.
(p) Section 64 is amended to provide for filing annual return with state where agreement has been entered between City and State.
(q) Section 64A(1) and (2) is amended to provide for payment of tax when business is sold or ceases to exist.
(r) Section 66 is amended to provide for rounding up or down of tax owed.
(s) Section 71 is amended to provide for deposit of tax fund collected by the State to be deposited in a City income tax trust fund.
(t) Section 73(1) is amended to provide for examination by the Department or Administrator of taxpayer records where there is reason to believe that the return does not provide sufficient information for accurate determination. Also, the amending of Subsection (2), and the addition of Subsections (3) and (4) to provide for resolution of tax disputes or provide a penalty for frivolous protests.
(u) Section 81 by deleting the section.
(v) Section 82 is added and further amended to provide for interest at the adjusted price rates and by adding Subsections 3, 4, and 5 to provide separate penalties for neglect, intentional disregard and fraud.
Section 82.
(1) All taxes imposed in a taxable year before the 1992 taxable year on a taxpayer and money withheld by an employer under this ordinance and remaining unpaid after the taxes or money withheld are due bear interest from the due date at the rate of 1/2 of 1% per month until paid. For the 1992 taxable year and each taxable year after 1992, all taxes imposed on a taxpayer and money withheld by an employer under this ordinance and remaining unpaid after the taxes or money withheld are due bear interest from the due date at the current monthly rate of 1 percentage point above the adjusted prime rate per annum per month until the tax or money is paid. The term “adjusted prime rate” means the average predominant prime rate quoted by not less than three commercial banks to large businesses, as determined by the Department of Treasury. The adjusted prime rate is to be based on the average prime rate charged by not less than three commercial banks during the 12-month period ending on September 30. One percentage point shall be added to the adjusted prime rate, and the resulting sum shall be divided by 12 to establish the current monthly interest rate. The resulting current monthly interest rate based on the 12-month period ending September 30 will become effective on January 1 of the following year.
(2) A person failing to file a return, pay the tax, or to remit withholding when due, is liable, in addition to the interest, to a penalty of 1% of the amount of the unpaid tax for each month or fraction of a month, not to exceed a total penalty of 25% of the unpaid tax. If a return is filed or remittance is paid after the time specified and it is shown to the satisfaction of the city that the failure was due to reasonable cause and not to willful neglect, the penalty shall be waived by the Administrator. If the total interest or interest and penalty to be assessed is less than $2, the Administrator shall instead assess $2.
(w) Section 84(1) is amended to provide for proposed assessment for tax years which there is no agreement to collect between the state and city.
(x) Section 85 is added.
(1) After the hearing the Administrator shall issue a final assessment setting forth the total amount found due in the proposed assessment and any adjustment he may have made as a result of the protest. The final assessment shall be served in the same manner as a proposed assessment. Proof of mailing of the final assessment is prima facie evidence of a receipt thereof by the addressee.
Rule 85.1
In those cases where the City Income Tax Administrator, after issuing a final assessment to a taxpayer but before a civil or criminal action for collection is brought, is satisfied that the amount of the final assessment is an overstatement of the taxpayer’s liability, the Administrator shall issue a revised final assessment reducing the amount of the final assessment. The Administrator shall issue such a revised assessment only if: 1) the amount determined to be due from the taxpayer is less than the amount of the final assessment; 2) the taxpayer agrees with the Administrator’s revised determination of the amount due; 3) the taxpayer’s records adequately document the Administrator’s revised determination of the amount due; 4) the Administrator is satisfied that, had the taxpayer made such information available before the issuance of a final assessment, the proposed assessment would have been revised to reflect the revised determination of the amount due; and 5) the time for any appeal under the income tax ordinance has expired. In those cases where the Income Tax Administrator is reviewing a final assessment under the circumstances listed above, a review cost, which shall be established from time to time by resolution of the City Council, kept on file by the City Clerk, and contained in Appendix A of the City Code, shall be added to the final assessment. This cost shall be comprised of postage, employee wages and paper costs expended by the Treasury Division which would have not been expended had the taxpayer provided information and returns as prescribed in this income tax ordinance.
(y) Section 86 is amended to allow the Department to issue a demand for payment.
(z) Section 87 is amended by adding Subsection 2 to provide for tax warrants where collection of tax is in jeopardy by departure from the city or hiding assets and further amended to read as follows:
Section 87. If the city believes that collection of the tax withheld from an employee’s compensation as imposed under this ordinance will be jeopardized by delay, the city, whether or not the time otherwise prescribed by the ordinance for making the return and paying or depositing the tax has expired, shall immediately assess the tax and interest and additions provided by the ordinance. The tax, interest and additions thereupon shall become immediately due and payable and the city shall make an immediate notice and demand for payment, notwithstanding the fact that the withheld tax is not due under the ordinance until the last day of the month following the end of the calendar month or quarter.
(aa) Section 87(1) is amended to provide for notice and demand for payment for withholding by Tax Administrator or Department.
(bb) Section 89 is amended by allowing four years to request a refund.
(cc) Section 92 is amended to provide for notice to the State Department of Treasury for appeals.
(dd) Section 94(1) is amended by restating of same, and adding Subsections 2 and 3 to provide for appeals from decision of Tax Tribunals to be made to State Court of Appeals and to provide a 90-day period to appeal a decision of the Tax Administrator or department.
(ee) Section 95 is amended to provide for payment of decision to refund from City Income Tax Trust Fund where agreement to collect is entered into between state and city.
(Ord. 2241, passed 12-7-1970; Ord. 2355, passed 8-21-1972 ; Ord. 2940, passed 2-11-1985; Ord. 3070, passed 9-12-1988; Ord. 3222, passed 11-9-1992; Ord. 3262, passed 12-13-1993; Ord. 3351, passed 7-14-1997; Ord. 3391, passed 12-16-1998; Ord. 3406, passed 2-8-1999; Ord. 3792, passed 3-14-2011)
Statutory reference:
City Income Tax Act, see MCLA 141.501 et seq., 141.601 et seq.