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Volume 6 : Issue 4 |
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New International Trade Crossing Planned
Officials from the United States, Canada, and the state of Michigan ended long-running speculation on Friday, June 15, when they made a much-anticipated announcement - that Detroit and Windsor will become linked through the construction of a new international bridge crossing. The project will be funded by the Canadian government and is expected to take 4-5 years to construct.
The bridge will be built two miles downstream from the existing Ambassador Bridge, over the Detroit River. Proponents of the $2.1 billion bridge plan believe the second bridge span will generate jobs in the short-term, while decreasing bridge congestion and improving trade between the two nations in the long term.
This announcement appears to deal a significant blow to the hopes of existing Ambassador Bridge owner Manuel Moroun, who had hoped to pressure Governor Rick Snyder and the state of Michigan into placing the issue up for vote on a statewide ballot.
In conjunction with the announcement, the Snyder administration released a 15-point summary of the agreement for the new bridge, tentatively called the New International Trade Crossing (NITC). The highlights are as follows:
- Michigan will not be obligated to pay any of the costs related to the NITC, and no state appropriations will be required. The Canadian government will bear the entire cost, including the cost of obtaining property via eminent domain on the U.S. side.
- Only Canada will have the right to charge tolls, which will take place on the Canadian side of the crossing. This will help reimburse the Canadian government for footing the cost of the project.
- A six-member International Authority, with three members from each nation, will oversee the competitive procurement process for construction of the NITC.
According to the Michigan Infrastructure and Transportation Association (MITA), the size of the construction effort would exceed the cost of construction of Comerica Park and Ford Field combined. MITA also cited a study from the Center of Automotive Research (CAR) showing that the project is expected to employ 5,000-6,000 workers for each of the four years that the bridge project is scheduled to take.
While it is a politically likelihood that a Canadian firm will serve as general contractor - since Canada is financing the project - it is expected that the economic effect on this side of the border will extend to work crews, steel fabricators, design firms, engineers, and others along the spectrum of the construction industry.
For more information on this topic please contact a member of our construction team in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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CIT Era Begins
Effective January 1, 2012, the Michigan Business Tax (MBT) is repealed and has been replaced by the Michigan Corporate Income Tax (CIT). Flow-through entities that are taxed as S corporations, limited liability companies, or partnerships will not be subject to the new CIT. However, such flow-through entities may be subject to member/shareholder withholding requirements.
CIT basics
The CIT is levied on corporations with nexus in Michigan at a 6% rate, after allocation or apportionment. Any C corporation with "business activity" is subject to the tax, including a C corporation that has ownership in a flow-through entity that meets the business activity test. While the definition of business activity is broad, the protections of Public Law 86-272 apply, which prevent the imposition of an income tax on companies whose contacts with a state are limited to the solicitation of orders.
The CIT borrows certain concepts and dollar thresholds from its predecessors, the Single Business Tax (SBT) and the MBT. One such borrowed concept is the filing threshold. C corporations with less than $350,000 in allocated or apportioned gross receipts, or $100 or less in annual tax liability, are not required to file a CIT return or pay the tax.
The income tax base is calculated in a similar fashion to the business income tax base from the MBT. Business activity continues to be apportioned using only a sales factor, to which the 6% tax rate is then applied.
Under the CIT, the significant list of refundable and nonrefundable credits has been virtually eliminated. The only credit that was retained is the Small Business Alternative Credit, which is largely unchanged from the MBT era. Having an officer or shareholder that exceeds $180,000 of compensation (including his/her share of allocated business income) will continue to result in total disqualification from the Small Business Alternative Credit.
Required withholding
Corporations with more than a nominal amount of tax due will pay estimates quarterly, as they did in the MBT era. What requires additional attention is the requirement for three categories of persons to pay quarterly withholding, which is new for 2012. The requirement to withhold is based upon the members/shareholders of the entity.
The three categories are:
- Non-resident individual members - Every flow-through entity in Michigan must withhold 4.35% of the distributive share of taxable income on behalf of every non-resident individual or trust, after allocation or apportionment.
- Corporate members - A flow-through entity with business activity in Michigan that expects to have more than $200,000 of apportioned or allocated business income for a tax year must withhold 6% of the distributive share of income for each corporate member.
- Flow-through entities - Flow-through entities with business activity in Michigan, which have the aforementioned expectation of $200,000+ of apportioned or allocated business income, must withhold on the distributive share of each member that is a flow-through entity. The percentage withheld is dependent upon the ultimate taxpayer of the distributive share of business income.
If the reporting entity (Company A) has an owner that is another flow-through entity (Company B), and it can identify through the ownership chain that Company B is ultimately owned by nonresident individual(s), Company A can withhold on Company B's share of income at the 4.35% individual rate. If Company A can identify that Company B is owned by resident individual(s), no withholding is required.
If Company B is owned by a C corporation, or if Company A does not have definite knowledge that Company B is owned by resident or non-resident individual(s), Company A must withhold at the 6% corporate rate.
Flow-through withholding returns and payments are due quarterly. There is also an annual reconciliation due on February 28 of the subsequent year for calendar-year entities, whereupon the company will attribute all of its withholding payments to the Employer Identification Numbers and/or Social Security Numbers of its owners.
The application of the CIT law, and its withholding requirements, is definitely new and potentially complex, depending upon the situation. Please contact your UHY professional to discuss the implications on your business.
For more information on this topic please contact a member of our construction team in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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State Income Taxes Simplified for Mobile Workforce
The House of Representatives has passed a bill that would aid employees and businesses in complying with taxation outside their home states. H.R. 1864, Mobile Workforce State Income Tax Simplification Act of 2011, creates a 30-day minimum requirement that employees would have to exceed when working in a nonresident state before becoming subject to that states' income tax withholding laws.
Presently, states have an array of standards regarding the requirements for employees to file personal income tax returns while working temporarily outside of their resident state, as well as for employers to withhold income tax on those employees traveling for work. Consequently, in some states, if a contractor is engaged to perform project work outside its resident state, each employee may have to file an income tax return in that state, even if the employee worked just one day during the year. Other states may not require income tax withholding until the employee has worked a minimum period in that nonresident state.
This diversity in state income tax laws causes confusion amongst employees and employers, as they attempt to comply with each state's requirements. The Mobile Workforce Act provides a uniform, impartial standard for governing employee state income tax withholdings. The new law would provide that employees who perform employment duties in a nonresident state for more than 30 days during a calendar year are subject to state income tax in that state. In addition, employers would be required to withhold tax on those employees. The law would not apply to well-known groups of taxpayers such as professional entertainers, professional athletes, and certain other public figures.
Many Michigan-based contractors have won project work in other states, and have found that an unfortunate side effect of pursuing those jobs is the administrative and tax burden that is involved. The aforementioned legislation would allow contractors to undertake short-term jobs in other states without meeting the threshold required for employee income tax reporting in those states. Michigan contractors are currently protected from employee withholding requirements in the states of Ohio, Kentucky, Indiana, Illinois, Wisconsin, and Minnesota under an existing reciprocity agreement.
Despite its passage by the House on May 15, 2012, the bill's future is uncertain at this time as the Senate has not yet introduced this legislation. Its passage in the House has been warmly received by various business leaders and tax-compliance industry advocate groups.
For more information on this topic please feel free to contact a team member in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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Save the Date!
Please join UHY LLP for our Annual Construction Outlook that will be held in the Farmington Hills office conference center. Join us to learn more about industry trends, bonding update and the latest financial and tax developments.
Tuesday, October 23, 2012
7:00 AM-10:15 AM EST
CPE credit will be offered. Pre-registration for this complimentary event is required. Multiple registrations are welcome. Please contact Courtney Gray via email cgray@uhy-us.com or phone 586-843-2533 to register. Formal invitation to follow.
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Construction Industry Insight
Our team of experts is organized across the country by industry, which provides clients with the best-in-category knowledge gained from working with similar clients in their industry or service specialty.
Our construction expertise includes: - In-depth knowledge of the construction industry
- Knowledge of the surety market
- Leadership and participation in rule-setting
- Clients with a wide range of construction activities (general contractors, heavy highway, underground, casino, and bridge); sizes range from start-ups to $1billion in annual revenue.
For more information please contact a member of our construction team in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040. Back to top |
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Published by UHY LLP News.
Copyright � 2011 UHY LLP. All rights reserved.
Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY Advisors and/or UHY LLP (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
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