Michigan Senate passes business tax savings billJune 24, 2021
The Michigan Senate approved a plan 29-6 aiming to reduce federal tax burdens on Michigan small businesses.
“This plan will help level an unfair playing field between large and small businesses,” Rep. Mark Tisdel, R-Rochester Hills, said in a statement. “Michigan small businesses will be able to opt into an alternate state tax structure to maximize their federal tax deduction — all without reducing state revenue.”
House Bill 4288 would allow S corporations, partnerships, and LLCs — known as flow-through entities — to maximize the state and local tax (SALT) deduction on their federal tax returns.
While larger C corporations file their business income taxes as entities, flow-through entities file at the individual owner level. A 2017 federal tax code change capped individual SALT deductions at $10,000, which disadvantaged small flow-through entities because large businesses can claim an uncapped deduction.
The Federal Internal Revenue Service reported receiving approximately 144,000 S-corporation returns and about 105,000 partnership returns from Michigan in tax year 2019.
HB 4288 aims to allow flow-through entities to pay a new flow-through entity tax. A business that opted in to the new tax would be eligible for a more significant SALT deduction at the federal level without changing their overall state and local tax burden.
“This plan is a win for Michigan small businesses, which in turn is a win for our entire state,” Tisdel said. “Small businesses will be able to use their tax savings to expand and invest right here in Michigan, where they can continue to create good jobs and boost our state’s economy.”
The House previously approved the bill in an 88-18 vote. The bill will advance to Gov. Gretchen Whitmer’s desk.
This article was originally posted on Michigan Senate passes business tax savings bill