Public Act 145 of 2007, which repealed the Use Tax on Services and replaced the revenue with a Michigan Business Tax (MBT) surcharge, also corrected a major problem in the original legislation.  The definition of "person" in the MBT includes an individual, estate, trust and a partnership.  The definition of "business activity" in the MBT did not include any exclusion for investment activities not carried on in a trade of business.  Consequently, estates, trusts and family limited partnerships were subject to the Michigan Business Tax on investment income.

Public Act 145 of 2007 amended the definition of "business income" and also added an exclusion to "gross receipts" for an individual, estate, trust or partnership organized exclusively for estate or gift planning purposes.  "Business income" and "gross receipts" is limited to that part of federal taxable income or amounts received from transactions, activities, and sources in the regular course of the taxpayer’s trade or business.

The amendments are helpful, however, they do not address investment activities of an individual or entity NOT organized exclusively for estate or gift planning purposes.  Furthermore, investment activities as well as casual sales and isolated transactions while engaged in a trade or business activity would continue to be subject to the MBT.