NATURAL RESOURCES AND
ENVIRONMENTAL PROTECTION ACT (EXCERPT)
Act 451 of 1994
324.36109 Credit against state income tax or state single business tax.
Sec.
36109.
(1) An owner of farmland
and related buildings subject to 1 or more development rights agreements under
section 36104 or agricultural conservation easements or purchases of
development rights under section 36111b or 36206 who is required or eligible to
file a return as an individual or a claimant under the state income tax act may
claim a credit against the state income tax liability for the amount by which
the property taxes on the land and structures used in the farming operation,
including the homestead, restricted by the development rights agreements,
agricultural conservation easements, or purchases of development rights exceed
3.5% of the household income as defined in section 508 of the income tax act of
1967, 1967 PA 281, MCL 206.508, excluding a deduction if
taken under section 613 of the internal revenue code of 1986, 26 USC 613.
For the purposes of this section, all of the following apply:
(a) A partner in a
partnership is considered an owner of farmland and related buildings owned by
the partnership and covered by a development rights agreement, agricultural
conservation easement, or purchase of development rights. A partner is
considered to pay a proportion of the property taxes on that property equal to
the partner's share of ownership of capital or distributive share of ordinary
income as reported by the partnership to the internal revenue service or, if
the partnership is not required to report that information to the internal
revenue service, as provided in the partnership agreement or, if there is no
written partnership agreement, a statement signed by all the partners. A
partner claiming a credit under this section based upon the partnership
agreement or a statement shall file a copy of the agreement or statement with
his or her income tax return. If the agreement or statement is not filed, the
department of treasury shall deny the credit. All partners in a partnership
claiming the credit allowed under this section shall compute the credit using
the same basis for the apportionment of the property taxes.
(b) A shareholder of a
corporation that has filed a proper election under subchapter S of chapter 1 of
subtitle A of the internal revenue code of 1986, 26 USC 1361 to 1379, is
considered an owner of farmland and related buildings covered by a development
rights agreement that are owned by the corporation. A shareholder is considered
to pay a proportion of the property taxes on that property equal to the
shareholder's percentage of stock ownership for the tax year as reported by the
corporation to the internal revenue service. Except as provided in subsection
(8), this subdivision applies to tax years beginning after 1987.
(c) Except as otherwise
provided in this subdivision, an individual in possession of property for life
under a life estate with remainder to another person or holding property under
a life lease is considered the owner of that property if it is farmland and
related buildings covered by a development rights agreement. Beginning January
1, 1986, if an individual in possession of property for life under a life
estate with remainder to another person or holding property under a life lease
enters into a written agreement with the person holding the remainder interest
in that land and the written agreement apportions the property taxes in the
same manner as revenue and expenses, the life lease or life estate holder and
the person holding the remainder interest may claim the credit under this act
as it is apportioned to them under the written agreement upon filing a copy of
the written agreement with the return.
(d) If a trust holds
farmland and related buildings covered by a development rights agreement and an
individual is treated under subpart E of subchapter J of subchapter A of
chapter 1 of the internal revenue code of 1986, 26 USC 671 to 679, as the owner
of that portion of the trust that includes the farmland and related buildings,
that individual is considered the owner of that property.
(e) An individual who is
the sole beneficiary of a trust that is the result of the death of that
individual's spouse is considered the owner of farmland and related buildings
covered by a development rights agreement and held by the trust if the trust
conforms to all of the following:
(i) One hundred percent
of the trust income is distributed to the beneficiary in the tax year in which
the trust receives the income.
(ii) The trust terms do
not provide that any portion of the trust is to be paid, set aside, or
otherwise used in a manner that would qualify for the deduction allowed by
section 642(c) of the internal revenue code of 1986, 26 USC 642.
(f) A member in a limited
liability company is considered an owner of farmland and related buildings
covered by a development rights agreement that are owned by the limited
liability company. A member is considered to pay a proportion of the property
taxes on that property equal to the member's share of ownership or distributive
share of ordinary income as reported by the limited liability company to the
internal revenue service.
(2) An owner of farmland
and related buildings subject to 1 or more development rights agreements under
section 36104 or agricultural conservation easements or purchases of
development rights under section 36111b or 36206 to whom subsection (1) does
not apply may claim a credit under the former single business tax act, 1975 PA
228, or the Michigan business tax act, 2007 PA 36, MCL 208.1101 to 208.1601,
for the amount by which the property taxes on the land and structures used in
farming operations restricted by the development rights agreements,
agricultural conservation easements, or purchases of development rights exceed
3.5% of the adjusted business income of the owner as defined in section 36 of
the former single business tax act, 1975 PA 228, or the business income tax
base of the owner as defined in section 201 of the Michigan business tax act,
2007 PA 36, MCL 208.1201, plus compensation to shareholders not included in
adjusted business income or the business income tax base, excluding any
deductions if taken under section 613 of the internal revenue code of 1986, 26
USC 613. When calculating adjusted business income for tax years beginning
before 1987, federal taxable income shall not be less than zero for the
purposes of this subsection only. A participant is not eligible to claim a
credit and refund against the former single business tax act, 1975 PA 228, or
the Michigan business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, unless the
participant demonstrates that the participant's agricultural gross receipts of
the farming operation exceed 5 times the property taxes on the land for each of
3 out of the 5 tax years immediately preceding the year in which the credit is
claimed. This eligibility requirement does not apply to those participants who
executed farmland development rights agreements under this part before
(3) If the farmland and
related buildings covered by a development rights agreement under section 36104
or an agricultural conservation easement or purchase of development rights
under section 36111b or 36206 are owned by more than 1 owner, each owner is
allowed to claim a credit under this section based upon that owner's share of
the property tax payable on the farmland and related buildings. The department
of treasury shall consider the property tax equally apportioned among the
owners unless a written agreement signed by all the owners is filed with the
return, which agreement apportions the property taxes in the same manner as all
other items of revenue and expense. If the property taxes are considered
equally apportioned, a husband and wife shall be considered 1 owner, and a
person with respect to whom a deduction under section 151 of the internal
revenue code of 1986, 26 USC 151, is allowable to another owner of the property
shall not be considered an owner.
(4) A beneficiary of an
estate or trust to which subsection (1) does not apply is entitled to the same
percentage of the credit provided in this section as that person's percentage
of all other distributions by the estate or trust.
(5) If the allowable
amount of the credit claimed exceeds the state income tax or the state business
tax otherwise due for the tax year or if there is no state income tax or the state
business tax due for the tax year, the amount of the claim not used as an
offset against the state income tax or the state business tax, after
examination and review, shall be approved for payment to the claimant pursuant
to 1941 PA 122, MCL 205.1 to 205.31. The total credit allowable under this part
and chapter 9 of the income tax act of 1967, 1967 PA 281, MCL 206.501 to
206.532, or the former single business tax act, 1975 PA 228, or the Michigan
business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, shall not exceed the
total property tax due and payable by the claimant in that year. The amount the
credit exceeds the property tax due and payable shall be deducted from the
credit claimed under this part.
(6) For purposes of
audit, review, determination, appeals, hearings, notices, assessments, and
administration relating to the credit program provided by this section, the
state income tax act, 1967 PA 281, MCL 206.1 to 206.36, the former single
business tax act, 1975 PA 228, or the Michigan business tax act, 2007 PA 36,
MCL 208.1101 to 208.1601, applies according to which tax the credit is claimed
against. If an individual is allowed to claim a credit under subsection (1)
based upon property owned or held by a partnership, S corporation, or trust,
the department of treasury may require that the individual furnish to the
department a copy of a tax return, or portion of a tax return, and supporting
schedules that the partnership, S corporation, or trust files under the
internal revenue code.
(7) The department of
treasury shall account separately for payments under this part and not combine
them with other credit programs. A payment made to a claimant for a credit
claimed under this part shall be issued by 1 or more warrants made out to the
county treasurer in each county in which the claimant's property is located and
the claimant, unless the claimant specifies on the return that a copy of the
receipt showing payment of the property taxes that became a lien in the year
for which the credit is claimed, or that became a lien in the year before the
year for which the credit is claimed, is attached to the income tax or business
tax return filed by the claimant. If the claimant specifies that a copy of the
receipt is attached to the return, the payment shall be made directly to the
claimant. A warrant made out to a claimant and a county treasurer shall be used
first to pay delinquent property taxes, interest, penalties, and fees on
property restricted by the development rights agreement. If the warrant exceeds
the amount of delinquent taxes, interest, penalties, and fees, the county
treasurer shall remit the excess to the claimant. If a claimant falsely
specifies that the receipt showing payment of the property taxes is attached to
the return and if the property taxes on the land subject to that development
rights agreement were not paid before the return was filed, all future payments
to that claimant of credits claimed under this act attributable to that
development rights agreement may be made payable to the county treasurer of the
county in which the property subject to the development rights agreement is
located and to that claimant.
(8) For property taxes
levied after 1987, a person that was an S corporation and had entered into a
development rights agreement before January 1, 1989, and paid property taxes on
that property, may claim the credit allowed by this section as an owner
eligible under subsection (2). A subchapter S corporation claiming a credit as
permitted by this subsection for taxes levied in 1988 through 1990 shall claim
the credit by filing an amended return under the single business tax act, 1975
PA 228, MCL 208.1 to 208.145. If a subchapter S corporation files an amended
return as permitted by this subsection and if a shareholder of the subchapter S
corporation claimed a credit under subsection (1)(b)
for the same property taxes, the shareholder shall file an amended return under
the state income tax act. A subchapter S corporation is not entitled to a
credit under this subsection until all of its shareholders file the amended
returns required by this subsection. The department of treasury shall first
apply a credit due to a subchapter S corporation under this subsection to repay
credits claimed under this section by the subchapter S corporation's shareholders
for property taxes levied in 1988 through 1990 and shall refund any remaining
credit to the S corporation. Interest or penalty is not due or payable on an
income tax liability resulting from an amended return required by this
subsection. A subchapter S corporation electing to claim a credit as an owner
eligible under subsection (2) shall not claim a credit under subsection (1) for
property taxes levied after 1987.
History: Add. 1995, Act 59, Imd. Eff.
Popular Name: Act 451
Popular Name: Farmland and Open Space
Popular Name: NREPA