Legislature Unveils MBT Details – Heavy Construction Industry Still Hit Hard with New Tax Increases

Today the Legislature finally released details of the proposed new Michigan Business Tax (MBT).

MITA has been working non-stop since the framework of the proposal became public less than two weeks ago. It became apparent that contractors would face dramatic new tax increases as a result of the gross receipts tax.

MITA members responded strongly to the call to contact their legislators. That, combined with an intense lobbying effort from MITA, has been successful in getting the industry’s voice heard. Unfortunately, the legislation as published today does not yet include a subcontract deduction for the road building and underground industry and most smaller subcontractor services. It includes only a deduction for general contractors.

Page 12 of the legislation addresses the issue of subcontractor deductions. Under the bill as written, it exempts subcontractor costs for SIC code 15 but not 16 and 17 where the road building and underground industries are included. MITA believes this was unintentional and we are working to get the language amended. We are also working to include a deduction for the cost of materials. We believe both of these changes are critical. Even though legislators have vowed to “fix the contractor problem”, as of this afternoon the policymakers have not agreed to include these changes in the bill.

Beyond the subcontractor deduction issue, legislators have addressed the issue of double taxation for partnerships and LLCs. The legislation would also provide Personal Property Tax relief to the heavy construction industry, although not as dramatic as the savings for industrial and manufacturing facilities.

For companies that are doing an analysis of how the new MBT would affect them, please forward your comments to MITA so that your input can be part of the MBT deliberations. A vote is currently scheduled for Thursday so the industry’s concerns must be addressed in the next 24 hours or the heavy construction industry could face a massive tax increase. Any feedback must be provided before 3pm on Wednesday to ensure your concerns are part of the final decision meeting tomorrow afternoon. Please continue to contact legislators to make them aware that the “contractor problem” is not yet fixed.

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.