Michigan Developments
Eric Rule,
Director of Governmental Affairs

Slow until November, then lame-duck session
After a quiet summer and a fall that will be occupied primarily with campaigning, the Michigan

Legislature is not likely to produce many decisions before the lame-duck session that will run from the November 4 election to the end of the year.

Legislators met infrequently this summer, canceling their Wednesday sessions in August due to a failure to find agreement on several issues, including the alternative energy controversy.

After returning on September 9 for three weeks to finish up some budget loose ends and a few other issues, many legislators will hit the campaign trail until November’s election.

How lame duck goes will depend on the results of that election. Legislators who lose the election will scramble to finish projects important to them before leaving their posts.

If the Democrats maintain or pick up seats in the election, dramatic action may be less likely. But there are several issues the business community can expect some action on, even if bills don’t make it to final passage.

MBT reform tops MRA’s fall agenda
Among the issues that may see movement in lame duck are the alternative energy bill (tie-barred to a bill which would eliminate electric choice—a move that MRA opposes), an identity theft package, a Blue Cross Blue Shield reform package, and the main focus of MRA’s

Governmental Affairs team: legislation to remove sales tax from the definition of gross receipts for purposes of the Michigan Business Tax. Inclusion of sales tax in gross receipts unfairly penalizes retailers for being a conduit for the state’s tax collection system.

Before the summer break the House passed an MBT reform bill, but Democrats burdened it by tie-barring it to legislation on several issues that business groups oppose.

MRA wants both Republicans and Democrats to see the issue as a matter of fairness. Republicans must find a way to get an acceptable version passed, but there must also be cooperation from Democrats on sticking points like the tie bars. There appears to be enough interest on both sides and enough issues to trade to achieve the reform the business community needs.

Electronics recycling targets manufacturers
There is some potential for action on electronics recycling, an issue that will likely become increasingly important as the problem of electronics waste grows and gains media attention.

Senate Republicans reportedly have a draft form of a bill that would put responsibility for electronics recycling on manufacturers, rather than a retailer take-back program as had been proposed. MRA opposes a retailer take-back program.

Even a manufacturer-centered solution, however, has details that affect retailers. These include determining how retailers would report sales—necessary for determining manufacturers’ responsibilities—in a way that doesn’t risk proprietary sales data. MRA will advocate for legislation that is fair and not unnecessarily burdensome to retailers.

Bottle deposit complexities continue
Two bottle deposit issues—preventing fraudulent redemption and expanding the current bill to include non-carbonated beverages—concern MRA greatly because of the implications for cost and labor that will inevitably fall to retailers.

Senate Bills 821 and 822, sponsored by Sen. Ron Jelinek (R-Three Oaks), address fraudulent redemption of out-of-state containers and may be passed this fall. But the money retailers will have to spend to comply with the law (installing upgraded reverse vending machine technology) would have to be recouped in some way, and the details on how are still being worked out.

Any reduction in fraudulent redemption would result in savings to the state—specifically, more money in its unclaimed bottle deposit fund. MRA believes those funds are the logical and most equitable source of funding for the anti-fraud program.

The effort to expand the bottle bill to include water bottles and other non-carbonated beverages complicates this issue. The Michigan United Conservation Club—the leader of the expansion effort—has decided to piggyback its efforts on the fraudulent redemption issue.

Business groups are wary of this move, and MRA especially opposes expansion because of the high burden it would place on Michigan’s retailers.

Update from Washington
James Goldberg,
MRA Washington Counsel

IRS to monitor credit card transaction totals
Congress rarely misses an opportunity to attach unrelated provisions to major bills. And this summer’s housing rescue package is no exception.

Buried in the massive bill is a provision that will require processors of credit and debit card payments to report annual gross receipts to the Internal Revenue Service for all but the smallest merchants, beginning in 2011.

All payment processors will be required to file a Form 1099 showing payments sent to the merchants for all retailers with more than $20,000 in gross annual sales and more than 200 transactions in a year.

Congressional tax estimators predict that the new reporting requirement will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years.

The law is intended to help the government close the so-called “tax gap”—the money that taxpayers owe but never pay, estimated by the IRS to be $290 billion in 2001. It will work not only by helping flag some businesses for audits (those who appear to be underreporting income), but by encouraging businesses to report income accurately.

Payments accepted through third-party network transactions such as PayPal and Google Checkout will also be reported to the IRS, according to an analysis by the Electronic Transactions Association.

The growth of such online sites as eBay has sparked an entire new generation of online sellers, many of whom may be confused about IRS reporting requirements.

The new law requires reporting only of the “gross amount of reportable transactions” per merchant, once per year—that is, the total dollar amount, not the details of every transaction.

The new requirement is only applicable to reporting of income for federal tax purposes. It has no connection to the issue of online sellers collecting state and local sales taxes, an issue that MRA has been pushing for several years.

Border crossing information to be retained
Ever wonder what the federal government does with the information captured when an individual—whether U.S. citizen or not—enters this country?

Under a new Border Crossing Information System announced recently by the Customs and Border Protection agency, all such information will be retained in a database for 15 years and could be shared with other government agencies (state, local or foreign) where the agency believes the information would assist enforcement of civil or criminal laws or regulations.

In announcing the new records retention system, the agency said that information could also be shared with non-governmental third parties during the course of a law enforcement investigation, and with appropriate government agencies if the information is relevant and necessary to the agency’s decision concerning hiring of an individual or issuance of a security clearance, license, contract, grant or other benefit.

Privacy protection advocates have indicated strong opposition to the new system, but the agency’s announcement seeking public comment was viewed only as perfunctory.

GSA pushing ‘E-Verify’ on federal contractors
The Consumer Product Safety Act amendments recently signed by President Bush will require all manufacturers of children’s products to place permanent or distinguishing marks on the product or packaging, to the extent practicable, that will enable the manufacturer to determine the location and date of production, cohort information (batch, run number, etc.) and any other information that will allow the manufacturer to identify the specific source of the product.

Product labeling or packaging must also allow the ultimate consumer to ascertain the name of the manufacturer or private labeler, as well as the location and date of production and cohort information.

Though retailers do not have any responsibilities under the new law, the clear packaging and labeling requirements are expected to assist merchants in removing from their shelves products which are subject to recall or safety concerns.

The new law defines a “children’s product” as one designed or intended primarily for children 12 years of age or younger, taking into account any statement by manufacturers or retailers about intended use and whether the product is commonly recognized by consumers as being intended for use by a child 12 years of age or younger.