Non-Manufacturing Firms Urged
To Prepare For MBT

GRAND RAPIDS — Warehouse-based logistics companies at an association meeting here last week heard conflicting opinions about the impact of the new Michigan Business Tax, from a state employee and from a tax expert at a major accounting firm.

The state employee, Ron Moffett of the Michigan Economic Development Corp., told the members of the International Warehouse Logistics Association that the new MBT is intended to be "revenue neutral," meaning it is not supposed to result in more business tax revenue collected than the old Single Business Tax. However, he said it won't be clear if that really is the case until after the tax takes effect in January.

Moffett said seven out of 10 companies in Michigan will not pay more tax under the MBT than they would have under the Single Business Tax.

The law will ease the former SBT tax burden on manufacturing companies, but some non-manufacturing industries will clearly pay more, particularly financial institutions and insurance companies, among others. Moffett noted that insurance industry taxes in Michigan "were among the lowest in the nation" and will still be near the bottom, comparing Michigan to all other states.

In response to a question from an IWLA member, Moffett said he believes the warehouse-based logistics companies will be among the businesses paying the same or less under the new MBT.

Lisa Pohl of the Grand Rapids office of Crowe Chizek and Co. LLC disagreed. An attorney and a tax expert, Pohl said some of her clients may have to pay four times as much in Michigan business taxes. As for the warehouse-based logistics industry, the MBT "won't be revenue neutral for you," she told the IWLA meeting.

"Overall, I would think the tax for everyone in this room is probably going to increase," she added.

The new MBT will be enacted Jan. 1, but both Pohl and Moffett said they expect some changes to be made in the law. Moffett said there are already several proposed amendments to the law facing the legislature due to the discovery of "some unintended consequences." One is a trucking industry concern that some of its out-of-state customers may be taxed by Michigan, due to language in the law regarding non-Michigan businesses that have a "physical presence" in Michigan

Pohl said the new MBT will be "a field day for accountants and attorneys because there is so much gray," or ambiguity, in the language of the law. She said after the IWLA meeting that many companies in Michigan should start now to estimate what their MBT liability will be "so that they aren't surprised at the end of the year."