The Michigan Individual Income tax and Single Business Tax both currently provide for a number of tax credits and deductions. Adding a tax credit for alternative school tuition will be relatively straightforward from the taxpayers’ perspective.
As mentioned above, the state Individual Income tax form, MI-1040, should be modified to permit an alternative school tuition credit similar to that currently permitted for college and university tuition using Schedule CT. The new or modified schedule should also allow a taxpayer to elect to claim some or all of credit against the state education property in addition to the Individual Income tax. Although the state education tax is collected locally, the most convenient way to permit a credit is through form MI-1040. Since this tax and the Individual Income tax are both state taxes, reconciling the appropriate credits is a matter of accounting. In addition, a method should be created whereby the State Education Tax may be claimed without filing an Individual Income tax return.
The Single Business Tax annual return C-8000 also includes a schedule, C-8000C (Download study file for image of form (343KB)), that is used to claim a number of tax credits for contributions to community foundations, homeless shelters, and other public contributions. Form C-8000C, shown on the following pages, should be modified to include the tuition credit. A list of students who receive tuition support, similar to the Individual Income tax Schedule CT, should also be included. The most efficient method would be to use a similar schedule for both the Individual Income tax form MI-1040 and the SBT form C-8000.
The Single Business Tax annual return should also be modified to permit businesses to claim a credit against their state education property tax. The state will be required to develop a separate form to claim credit against the State Education Tax for those businesses that do not file a Single Business Tax return.
The Legislature may wish to allow imputed state education property tax payments for renters (both residential and commercial) similar to what is provided now under the "homestead" income tax credit. In that case, 17 percent of rent is imputed to be property taxes. Such an imputed property tax under the UTTC should equal the actual prorated amount of state education property tax paid by the renter.