Bill would help businesses save on federal taxes
The House Committee on Tax Policy today approved a plan by state Rep. Mark Tisdel to help Michigan small businesses save on federal taxes and protect Michigan jobs.
The changes in House Bill 4288 would allow flow-through entities — S corporations, partnerships, and LLCs — to maximize the state and local tax (SALT) deduction on their federal tax returns.
“Small businesses are the backbone of our Michigan economy, and they deserve a tax code that works for them,” said Tisdel, of Rochester Hills. “This plan will allow job providers to maximize savings on their federal taxes without reducing state revenue.”
While larger C corporations file their taxes on business income on the entity level, flow-through entities file at the individual owner level. In 2017, a change to the federal tax code capped individual SALT deductions at $10,000. Businesses filing as entities can continue to claim an uncapped deduction, and small flow-through entities are placed at a disadvantage.
HB 4288 would compensate for the federal change by allowing flow-through entities to pay a flow-through entity tax. A business that opted into the flow-through tax would then be eligible for an unlimited SALT deduction on the federal level, while their state and local tax burden would be unchanged.
Tisdel serves as majority vice chair of the Committee on Tax Policy.
HB 4288 now advances to the full House of Representatives for consideration.