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| TAX OUTLINE |
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| TAX DESCRIPTIONS |
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| UNIFORM CITY INCOME |
LEGAL CITATION: |
M.C.L. 141.501 et seq.; 1964 PA 284; Sec. 7, Art. 9, state Constitution |
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| YEAR ADOPTED: |
Uniform state law adopted in 1964. Individual cities adopted by ordinance in various years, subject to referendum upon petition of voters. |
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| BASIS OF TAX: |
A direct tax on income (residents); a direct tax on earnings (nonresidents). |
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| MEASURE OF TAX (BASE): |
(1) Compensation, net profits, investments and other income of city residents; (2) Income earned in the city by nonresidents; (3) Corporate income earned in the city (allocation based on property, sales, payroll). Personal exemption allowed by United States internal revenue code, except that by ordinance a city may adopt an exemption of not less than $600. A resident is allowed credit for income taxes paid to another city as a nonresident. A resident may deduct certain income earned, capital gains, and lottery winnings received while a resident of a renaissance zone and a business may deduct income attributable to business activity in a renaissance zone. |
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| RATE: |
Generally, 1% on residents and corporations; 0.5% on income of nonresidents earned in imposing city. The nonresident rate cannot exceed one-half of the resident rate.
The city council in cities over 750,000 (Detroit) may impose rates of up to 2.5% on residents, 1.0% on corporations, 1.25% on nonresidents. Rates will be further reduced until the rates reach 2.0% and 1.0% respectively (see box). (The rate actually appearing on income tax forms each calendar year is the average rate from before and after July 1 of that year.)
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Detroit Income Tax Rate Cuts
Public Act 500 of 1998 provided for reductions of the city personal income tax rate for resident and non-resident taxpayers in Detroit. Beginning with tax rates of 3.0% on residents and 1.5% on non-residents in 1999, the law provides that the tax rates are to be reduced by one-tenth of a percentage point per year for residents and one-twentieth of a percentage point per year for non-residents. The reductions occur each year for a ten-year period until the new rates are 2.0% and 1.0% respectively, providing certain unfavorable financial conditions related to the city, as defined in the law, do not occur. The conditions suspending the rate reductions must include any three of the following: (1) two consecutive years of withdrawals from the city's budget stabilization fund or exhaustion of the fund balance; (2) a year-to-year decline in income tax revenue, after adjusting for inflation, of more than 5%; (3) a city unemployment rate of 10% or higher; or (4) a provision which compares the growth ratio of the city's taxable value with the comparable statewide figure and computes a ratio which must fall below .80 (in order for the ratio to fall below .80 with the state taxable value holding constant, the city's taxable value would have to decline 20%.
The reductions were part of an agreement related to major changes in the state revenue sharing formula contained in PA 532 of 1998. On a full-year basis, each one-tenth of percentage point of reduced rate results in a reduction in revenue of about $12 million in current dollars or about a $120 million total drop in revenues, ignoring growth in the tax base.
These conditions were met in the years 2003, 2004, 2005, and 2006, causing Detroit to suspend the tax rate reduction and pushing back the schedule to reach a 2.0% rate on residents until 2014 or later.
Public Act 209 of 2007 amended the Uniform City Income Tax Act to delay, for 2008 and 2009, the reductions in the city personal income tax rates as required under the Act. Public Act 209 requires the income tax rates (resident and non-resident) for 2008 and 2009 to remain the same as they were for 2007, 2.5% and 1.25%, respectively.
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The city council in certain cities under 750,000 (Highland Park, Saginaw, and Grand Rapids) may impose rates of up to 2% on residents and corporations and 1% on nonresidents.
Rates over 1% on residents and corporations, and a city income tax imposed for the first time after January 1, 1995, must be approved by voters.
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| ADMINISTRATION: |
Administrator designated by the city. Collected by city treasurer. |
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| REPORT AND PAYMENT: |
Due April 30 (when tax year ends December 31). Quarterly estimates and payments due April 30, June 30, September 30, and January 31. Withholding required. |
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| DISPOSITION: |
General fund of the city. |
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| 2007 COLLECTIONS: |
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Year |
Tax Rates |
2007 Net |
| City |
Adopted |
Resident |
Corporation |
Nonresident |
Collections |
| Albion |
1972 |
1.0% |
1.0% |
0.5% |
$1,166,212 |
| Battle Creek |
1967 |
1.0 |
1.0 |
0.5 |
12,986,601 |
| Big Rapids |
1970 |
1.0 |
1.0 |
0.5 |
1,744,354 |
| Detroit |
1962 |
2.5 |
1.3 |
1.25 |
288,602,801 |
| Flint |
1965 |
1.0 |
1.0 |
0.5 |
18,287,407 |
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| Grand Rapids |
1967 |
1.3 |
1.3 |
0.65 |
55,825,629 |
| Grayling |
1972 |
1.0 |
1.0 |
0.5 |
450,793 |
| Hamtramck |
1962 |
1.0 |
1.0 |
0.5 |
1,539,310 |
| Highland Park |
1966 |
2.0 |
2.0 |
1.0 |
2,456,977 |
| Hudson |
1971 |
1.0 |
1.0 |
0.5 |
347,979 |
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| Ionia |
1994 |
1.0 |
1.0 |
0.5 |
1,524,869 |
| Jackson |
1970 |
1.0 |
1.0 |
0.5 |
6,988,033 |
| Lansing |
1968 |
1.0 |
1.0 |
0.5 |
28,498,221 |
| Lapeer |
1967 |
1.0 |
1.0 |
0.5 |
2,269,755 |
| Muskegon |
1993 |
1.0 |
1.0 |
0.5 |
7,547,679 |
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| Muskegon Heights |
1990 |
1.0 |
1.0 |
0.5 |
861,412 |
| Pontiac |
1968 |
1.0 |
1.0 |
0.5 |
12,392,508 |
| Port Huron |
1969 |
1.0 |
1.0 |
0.5 |
6,680,196 |
| Portland |
1969 |
1.0 |
1.0 |
0.5 |
635,111 |
| Saginaw |
1965 |
1.5 |
1.5 |
0.75 |
13,134,033 |
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| Springfield |
1989 |
1.0 |
1.0 |
0.5 |
745,954 |
| Walker |
1988 |
1.0 |
1.0 |
0.5 |
7,825,845 |
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| TOTAL |
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$472,514,678 |
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| Uniform City Income Tax Law Changes |
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Last Updated July 21, 2008
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