Michigan and Disregarded Entities: Relief From Kmart Case Legislation????
Michigan introduces Kmart legislative "fix" language in the House of Representatives.
On Wednesday, the Michigan House Tax Policy Committee unanimously passed a bill that would reverse the Kmart notice and prevent retroactive state filings. They expect a vote by the full House next Tuesday (3/16).
It is believed that the full House and Senate will pass the bill, but the legislative process is unpredictable. With that said, organizations involved in pushing the legislation believe this bill will ultimately pass.
The next few days will be crucial for this bill. Even if the bill does pass there could be legal challenges to the bill as it retroactively denies refund claims that could be made under the Kmart court case, and attempts to make retroactive law changes which might not withstand legal challenges.
A Michigan Court of Claims case last year ruled a law written in 2007 to apply retroactively back to 2002 and for all opens years, was not valid. The decision was based on a U.S. Supreme Court case which stated retroactive law changes could only have a modest period of retroactivity. In this case, the legislation is attempting to fix something going back to 1997, which would appear not to be a "modest period."
The Michigan Association of Certified Public Accountants (MACPA) and other organizations have been involved in pushing for this legislative "fix" to the Kmart case legislation 'burden."
If this legislation passes, companies that filed a Michigan Single Business Tax (SBT) return which included a disregarded entity, will not be required or allowed to file an amended return or original return (for the disregarded entity) for prior tax years. This would definitely reduce the compliance cost, but may or may not reduce a company's tax cost depending on the situation.
Stay tuned for more. For all current and future updates, go to MICHIGAN.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.