Legislative Update: Legislation Pending at State Capitol Would Have Dramatic Impact on Heavy Construction Industry
Gas Tax Increase
Despite record-setting gas prices and devastating state budget shortfalls, MITA continues to promote a $1 billion increase in transportation funding in the Legislature. MITA has been pressing legislators to fix the transportation shortfall at the same time that they address the problems with next year’s budget.
In a rarely-used procedural move, last week the House Democrats gave official notice to discharge the gas tax increase, diesel tax and vehicle registration fees from committee. This maneuver would allow an immediate vote on the bills on the House floor.
Although seemingly good news for proponents of increased transportation funding, the funding proposals were being used as a pawn in the partisan wranglings to balance the overall budget and such a vote would have forced tentative legislators to oppose the funding package. MITA lobbied hard to avoid the premature vote and those efforts have been successful thus far.
Despite the very difficult circumstances, MITA continues to press policymakers to fix the transportation funding system at the same time they are tackling the other tough fiscal issues of the day.
Diversion of Road Dollars to Secretary of State
Bills working their way through the Legislature would divert MTF dollars to the Secretary of State’s office once again. Senate Bills 210 and 211 along with House Bill 4275 would allow a two-year continuation on taking special collection fees out of the MTF and sending them directly to the Secretary of State’s office. Because these are considered “administrative collection fees”, there is no requirement that they be used for transportation. However, MITA was able to fight for a change to allow only a one-year extension rather than the originally-proposed two years, insisting that now is the time to address the issue of diverting road dollars to other departments.
In an encouraging development, House Transportation Committee members made it clear that they want a better accounting from the department on how the money is being spent and questioned whether it is appropriate to continually divert transportation money away from their originally-intended purposes. MITA intends on asking the state to get rid of the $10 million interdepartmental grant to the SOS as part of the overall transportation-funding package.
A New Michigan Business Tax
The Michigan House and Senate continue to work on changes to the proposed Michigan Business Tax. MITA has been working diligently behind the scenes to create a plan most beneficial to the heavy construction industry.
Chief among the victories to date was a significant reduction in the Personal Property Tax (PPT). This was due in part to a couple years of effort to convince legislators that PPT relief was as equally important as relief from the Single Business Tax.
In addition to PPT relief, MITA has been lobbying hard to end the proposed double taxation on S corporations and LLCs. Under the originally-introduced version of the House MBT proposal, partners and shareholders continued to be liable for personal income taxes on profits as well as being required to pay a business income tax rate of 6.95 percent. MITA’s effort has thus far eliminated this double taxation element of the plan.
MITA also worked to create a new compensation credit for money paid to subcontractors. Unfortunately these efforts have been unsuccessful to date because legislators felt that such a credit would be duplicative, as the subcontractors themselves were already receiving a compensation credit for their employees. Under the new law, money going to subcontractors would be taxed similarly to how they were under the old SBT.
Finally, MITA have been working in conjunction with the Associated General Contractors (AGC) to get a bonding credit to offset the proposed net worth tax. Bonding companies often require contractors to maintain an abnormally high net worth in order to back up their bond risk. In very recent developments, a proposal has been offered which would replace the net worth tax with a gross receipts tax.
MITA has posted a number of requests to members on the web site in recent months in order to evaluate which proposed plans are best for the industry. All of the feedback is appreciated as it has allowed your staff to strongly represent your interests in the legislative process. MITA still needs to hear from you, particularly in regards to the gross receipts issue.
State Retirees Working for Contractors
State of Michigan retirees who are reemployed by the state directly or indirectly, would have their retirement benefits suspended, under legislation passing House committee last week. This legislation is part of a larger package of bills looking at ways to save money in the state retirement system amidst the state’s financial crisis.
According to House Bill 4800, former state employees, including those who are now reemployed through contractual arrangements with other parties, would have their retirement benefits suspended during the period of reemployment.
Life Cycle Costs
A bill pending in the state Senate would allow the state to use data for equivalent designs from other states in trying to determine historic project maintenance, repair and resurfacing schedules on pavement projects for which there is no actual historic information from Michigan. Senate Bill 494 would require the data to be gathered from states with similar climates, soil structures and vehicle traffic.
The legislation is sponsored by Sen. Jud Gilbert and is currently pending in the Senate Transportation Committee.
If you have any questions, please contact Mike Nystrom, Vice President of Government & Public Relations at mikenystrom@mi-ita.com or Keith Ledbetter, Director of Legislative Affairs at keithledbetter@mi-ita.com, or call the MITA office at (517) 347-8336. MITA will keep you updated as these and other issues work their way through the legislative process.
