LANSING – A package of Republican-sponsored bills intended to encourage new start-up businesses – particularly high tech firms – has been modified to deal with some objections from the Granholm administration, though not modified enough to get the administration’s full support.
The package was approved Wednesday by the House Tax Policy Committee with just a smattering of opposition from Democrats who otherwise took no position.
The bills (HB 5331, HB 5341, HB 5345, HB 5342, HB 5343, HB 5335, SB 863, SB 865, SB 867, SB 872 and SB 875) provide credits against and exemptions from the single business tax and property taxes for five years to new small businesses that are not yet profitable.
The changes adopted before the package was sent to the full House included a requirement that the Michigan Economic Development Corporation annually certify start-up companies and tighten the definition of eligible firms to get at those that are truly new start-ups and to better guard against spinning off portions of a business in order to obtain the credit. Other changes: making the tax benefits applicable beginning in the 2005 tax year and allowing communities to decide to opt out of the special tax break provisions.
Proponents continue to say the package would cost the state about $1 million in foregone revenue, though Treasury officials said a more likely number is $2 million from the SBT and around $16 million if all communities statewide participate.
MEDC officials said a key concern is the potential of the package to undermine Smart Zone programs that rely on property tax revenue to support infrastructure improvements – such as fiber optic networks, conference centers and business incubation services – in areas designated for clusters of high-tech and research facilities.
Another concern cited by Scott Schrager of the Department of Treasury was the link of a total property tax exemption to qualifications established in the single business tax, noting that any relief would be delayed two years after a business becomes eligible. And he was critical of provisions that continue the tax relief for five years regardless of any change in circumstances by a business.
“There are aspects of the package we would like to support,” Mr. Schrager said in expressing a willingness to continue working on the package. “It is much better than it was.”
Rep. James Koetje (R-Walker) maintains the package is a necessary component of Michigan’s economic development tools. “I’m very concerned about jobs now and in the future. I look at this as an opportunity to advance opportunities in the future,” he said.
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