LANSING – After getting a late start on implementation, the Department of Treasury is on track to have annual Michigan Business Tax forms ready this fall, the Senate Finance Committee was told Thursday. But being able to meet all deadlines for companies to file their annual returns for the new tax will depend on the state not making any major changes to the tax’s structure this year.

Mark Haas, with the department, also told the committee that even though many businesses have complained about their tax liability under the new tax, Treasury figures continue to show that two-thirds of businesses will either pay the same or less under the MBT than they did under the now defunct Single Business Tax.

Haas also said nearly 50 percent of the state’s companies would see tax cuts of 50 percent or more. Some committee members said that the indications remain, however, that manufacturing firms would be most likely to see a tax cut than other companies.

Figures from Treasury showed that while nearly 31,000 companies would see tax increases of 100 percent or higher – raising nearly $1.8 billion under the MBT compared to $283 million under the SBT – another 55,400 companies would see tax cuts of 100 percent or more – for an aggregate negative amount of $327 million compared to the $232 million they paid under the SBT.

Haas also said that while business owners have complained about difficulties reaching Treasury staff, most executives are fairly sophisticated on tax issues and have tax preparers to help them. From the department’s standpoint, there is greater concern about the start of the earned income tax credit, which the department is not as prepared to deal with and which will involve individuals who will constantly be on the phone wanting to know where their money is.

Haas gave his presentation a week after a subcommittee of the full committee issued its report on the MBT, saying the state should look at repealing the surcharge that was added to the tax (to replace the sales tax on services) but also had to keep in mind the effect doing so would have on state revenues.

Haas said the department has been able to stay on track in terms of preparing for implementing the tax despite not having the advantage of time to prepare. In Ohio, for example, state officials there had a full year to implement their new business tax, he said, while in Michigan officials had just six months even though they had asked and hoped for 18 months to prepare.

The MBT marks the first totally new tax structure for the state in more than 20 years, he said, and virtually no one is left working in the department who helped implement the SBT and other major tax changes.

In addition, shortly before the tax took effect the Legislature and the administration of Governor Jennifer Granholm made a major change to the proposal by adding on the surcharge as it dropped the sales tax on services.

He also said the department needs to see some technical changes adopted by the Legislature to clear up some glitches.

But if the Legislature does not attempt to enact any major changes to the tax, the department should have tax forms for 2008 available in November and could start accepting returns in December.

Committee members questioned if during the first year of implementation taxpayers should be exempt from fines and penalties because of confusion over how the tax would be implemented. Haas said penalties are required under the law, but no penalty is automatically imposed since every situation is reviewed individually. In addition, he said, some 95 percent of all businesses use commercial tax software to prepare returns which should be current with state law, and in any event, tax professionals know the state’s tax law.

And thousands of businesses and executives have already used all the state’s resources in determining how the tax will affect them.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

a>>