MITA MBT Proposed Changes

There have been numerous discussions regarding the dramatic tax increases that would be placed on contractors by the new Michigan Business Tax (MBT).

However, a number of key legislative leaders have expressed their willingness to “fix the contractor problem”. Unfortunately, as currently written, the issues still remain unresolved and thus, very concerning to the heavy construction industry.

The primary area of concern is in wording on page 12 subsection 6 (e) of the legislation. MITA proposes to change the language in the following way:

“For a person included in major groups 15, 16 and 17 under the standard industrial classification code as compiled by the United States department of labor that does not qualify for a credit under section 417, services and materials purchased for a construction project under a contract specific to that project.”

MITA also believes that a grandfather clause must be included in this legislation for bona fide contracts if contracts or bids were entered into prior to the effective date of this legislation. Language, which addresses the problem, is presented below and has been used in previous tax law changes here in Michigan.

“The tax levied by this amendatory act shall not apply to bona fide contracts under the provisions of the act if the contracts were entered into and bids were made and accepted before the effective date of this act.”

If you have any questions regarding this document, please contact Mike Nystrom at (517) 896-1493.