Michigan Developments
Eric Rule,
Director of Governmental Affairs

MBT complaints gathering steam
With most businesses having paid their 1st Quarter Michigan Business Tax bill last month, the sticker shock is palpable. MRA is gathering data on the increases hitting our members and is using an online survey to aid in the process. If you have not yet done so, please take our quick online survey, available at retailers.com, to provide this valuable data.

Some MBT fixes already in works
Legislation removing sales tax from the definition of gross receipts for purposes of the Michigan Business Tax (MBT) was introduced in the House. HB 5937 was introduced by Rep. Jeff Mayes (D-Bay City) to right a wrong contained in the recently enacted MBT.

The Senate passed other changes to the new tax. Senate Bill 1198 would provide entrepreneurial and small business tax credits to help relieve the pain that medium-sized businesses are feeling under the new MBT.

The bill would raise from $180,000 to $250,000 the income level of business owners whose businesses would be eligible for the tax credits. The bill’s sponsor, Sen. Nancy Cassis (R-Novi), showed how one business in her district went from $25,000 in tax liability under the SBT to $142,000 under the MBT.

SB 1198 now goes to the House, where it faces a difficult future because the Democratic majority has stressed that all tax bills must be revenue neutral.

Partial Blue Cross package passes
Two bills of the Blue Cross individual market reform bill package have passed the Senate. As passed, House Bills 5282 and 5283 do not include a high-risk pool, which is generally seen as a loss for the Blues, which pushed for such a provision.

The Senate-passed versions are much different from the House-passed versions—differences to be hashed out in a conference committee.

Two other bills—which would allow Blue Cross’ workers’ compensation insurance subsidiary, the Accident Fund, to sell other forms of insurance—were not considered. They are being held up at least until Attorney General Mike Cox’s concerns with the proposal can be explored.

Senate’s smoking ban has no exemption
In a surprise move, the Senate approved legislation to ban smoking in bars, restaurants and other indoor areas. The celebration for anti-smoking groups may be short lived, however, as the bills include a major change from the House-passed version.

At issue is an exemption for non-Indian casinos. The House bills include the exemption in order to put the three privately owned casinos in Detroit on a level playing field with the tribal casinos, which the state cannot regulate in this area. The Senate version removed the exemption, causing a major outcry from the private casinos.

The removal of the exemption could be seen as a way to get Republicans off the hot seat with the media and general public for stalling the bills, but still effectively killing them.

Energy reform package passes house
A package of bills aimed at moving the state away from electric deregulation passed the House. The package was pushed by the state’s two largest utilities, which argued they could not invest in boosting the state’s energy capacity without assurances of a return on their investment.

MRA has opposed the package, arguing that more competition, not less, will keep energy prices lower for customers. (The legislation does not affect MRA’s natural gas discount program.)

The legislation is tie-barred to bills aimed at moving the state toward an increased reliance on alternative energy sources. This tie-bar increases the chances of its success.

Momentum for the package increased when two major business groups jumped on board, citing changes to the bills that ensured their support. One change grandfathers all current electric choice customers, and another states that choice customers would not have to pay the surcharge imposed by the major utilities for new power plant construction.

The package faces a less certain future in the Senate. The governor strongly supports it and the two major utilities have retained numerous multi-client lobbying and PR firms. However, Senate Majority Leader Mike Bishop promises to take a deliberative approach.

Update from Washington
James Goldberg,
MRA Washington Counsel

House eases burden on cell phone deduction
The House has passed the Taxpayer Assistance and Simplification Act, which will ease administrative burdens on small business owners who deduct the use of cell phones for business purposes.

Under current law, a business can deduct the cost of cell phone usage by employees only if records are kept substantiating the business use of the phone, such as by keeping a log of business calls made.

The House-passed bill would eliminate the substantiation requirement, which many called outdated and cumbersome, and allow businesses merely to deduct the cost of cell phones provided to employees.

But what Congress gives, it can also take away.

Concerned about the possible misuse of tax-exempt health savings accounts (HSA), the same legislation contains a provision requiring that, in order to be excludable from income, any distribution from an HSA must be substantiated in a manner similar to that prescribed for flexible spending arrangements that are used by employers to reimburse medical expenses.

Congress approves ban on genetic discrimination
Congress has approved and sent to the White House legislation that would bar employers and insurance companies from discriminating against individuals on the basis that DNA testing shows a predisposition to disease.

First introduced 13 years ago, the bill had cleared the Senate in 2003 and 2005, but was not considered in the House until last year, when Democrats assumed control of the chamber.

The bill, which President Bush has indicated he will sign, bars employers from using genetic information in connection with hiring, firing, assignment or promotion. Insurance companies could still base their decisions on the actual presence of a disease or health condition.

Grand Hotel urges returning worker exemption
R. Daniel Musser, III, president of Michigan’s Grand Hotel, told members of the House Immigration Subcommittee recently that the “returning worker” exemption under the H-2B visa program has been one of the rare “win-win-win-win” situations—a win for American and foreign workers, a win for employers, a win for the U.S. and a win for communities served by employers hiring these individuals.

Musser was one of several businessmen who testified in support of extending the returning-worker exemption from the annual cap on H-2B visas. The exemption expired last year and legislation—which MRA supported—to make the exemption permanent failed to pass as part of a comprehensive immigration reform bill.

Musser, the third generation of his family to operate the 123-year-old landmark, briefed the subcommittee on the procedures he uses to find workers for his seasonal facility, noting that the hotel is one of 70 northern Michigan hotels and resorts that use H-2B visa holders.

Notwithstanding Musser’s pleas, Congress has shown little interest thus far in dealing with the H-2B visa issue apart from comprehensive immigration reform.

Why dry cleaning prices are going up
Prices have increased for gasoline, food and other basic commodities—and now it appears that dry cleaning prices are going up as well. The reason: a spike in the price of wire hangers.

Several years ago, a group of domestic hanger manufacturers filed a lawsuit alleging that China was “dumping” hangers on the U.S. market at below production costs. The U.S. companies won their argument, but tariffs were never increased and, one by one, the domestic companies went out of business.

In late July 2007, the one remaining U.S. manufacturer petitioned the government to resolve the issue. On March 20, 2008, the U.S. International Trade Commission determined that Chinese-made hangers were indeed being sold at less than fair market value.

The government imposed a compensatory tariff and within a few days, dry cleaners saw the price of wire hangers jump by 50-100 percent across the country.

While a few pennies per hanger may seem like a small cost increase, a national trade association representing dry cleaners said the tariffs will cost the typical small shop an additional $200-500 per week in hanger costs.