Michigan Senate Bill SB0426

Michigan 2025-2026 Regular Session

• Introduced: 6/17/25
• Refer: 6/17/25

Caption

Individual income tax: other; employment withholdings redirected from the state to certain community colleges for the new jobs training program; clarify application to professional employer organizations. Amends secs. 703, 705 & 711 of 1967 PA 281 (MCL 206.703 et seq.). TIE BAR WITH: SB 0425'25

Impact

The impact of this bill on state law is significant as it updates existing tax withholding procedures to reflect modern employment practices and clarify provisions that may have been ambiguous. This amendment is particularly focused on flow-through entities and their obligations to withhold tax on behalf of their members. By establishing clear guidelines for tax withholding in relation to payments made for new job positions—especially those created under agreements with community colleges—the bill aims to enhance the state’s ability to manage tax revenue while supporting employment initiatives.

Summary

Senate Bill 0426 aims to amend the Income Tax Act of 1967, specifically targeting the provisions related to tax withholding for individuals receiving pension or annuity payments. The bill clarifies the responsibilities of entities disbursing these payments, ensuring that they apply the appropriate withholding rates to applicable portions of these payments, while also accounting for personal and dependency exemptions. This legislative change is designed to streamline the tax withholding process for employers and ensure compliance with state tax laws, especially for professional employer organizations involved in handling multiple clients' payroll.

Contention

While the bill has the potential to increase efficiency and compliance in tax withholding, there are concerns among certain stakeholders regarding the financial burden it may impose on businesses, especially smaller entities. Critics argue that the requirement for precise withholding based on varying job types and income sources could lead to increased administrative costs and complexity. Additionally, the interaction with community college funding introduces a layer of contention, as stakeholders may debate the efficacy of redirecting tax withholdings in support of educational programs versus other use cases for tax revenue.