Corporate income tax: rate; pay ratio surcharge for certain corporations; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 684.
Impact
The implementation of this surcharge has significant implications for state tax revenue and corporate practices. By imposing a financial penalty on companies with high executive-to-median employee pay ratios, the bill seeks to deter extreme disparities in compensation within corporations. Proponents of the bill argue that it will promote equity in corporate pay practices, potentially reducing income inequality and leading to a more sustainable economic environment. However, it also represents an increased regulatory burden on businesses, requiring them to accurately report their pay ratios and potentially leading to higher operational costs.
Summary
House Bill 5396 proposes an amendment to the 1967 Income Tax Act (MCL 206.1 to 206.847) by introducing a new section, 684, that establishes an annual surcharge for certain corporate taxpayers based on their disclosed pay ratios. This surcharge is set to take effect for tax years starting on or after October 1, 2024. The surcharge percentage varies according to the pay ratio, ranging from 0% for a ratio of 50 to 1 or less, to as high as 50% for ratios of 500 to 1 or more. The bill aims to encourage corporations to maintain reasonable pay ratios in their compensation structures.
Contention
Notable points of contention surrounding HB 5396 stem from concerns about its impact on corporate behavior and state economic competitiveness. Critics may argue that the surcharge could discourage businesses from operating in Michigan or lead to job losses if companies seek to relocate to states with more favorable tax conditions. Furthermore, there are questions about the fairness and practicality of relying on SEC pay ratio disclosures, as well as concerns that such measures may not effectively address the underlying issues of income inequality.
Corporate income tax: flow-through entities; treatment of certain limited liability companies as a corporation; provide for. Amends secs. 12, 607, 699, 701, 805 & 845 of 1967 PA 281 (MCL 206.12 et seq.) & adds sec. 339.
Corporate franchise tax provisions modified, additional tax imposed on corporations with high principal executive officer to median worker pay ratios, and companies disqualified from receiving state subsidies and grants.
Corporate income tax: credits; research and development credit for certain employers; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 677 & repeals sec. 716 of 1967 PA 281 (MCL 206.716).
Corporations with high principal executive officer additional tax imposed to median worker pay ratios, and companies disqualified from receiving state subsidies and grants.
Corporate income tax: rate; increasing of rate and revising the distribution of revenue collected; provide for. Amends secs. 623 & 695 of 1967 PA 281 (MCL 206.623 & 206.695).