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Posted on 12.02.2015 Under Legislative

Monthly Legislative Report for MAT

Judy Augenstein, ask Legislative Consultant

November 2015

Road Funding Done: After more than two years of effort and controversy, story the Michigan
House and Senate passed a road funding plan on November 4, web 2015. The Governor has
indicated that he will sign the legislation. The $1.2 billion plan is a 50/50 mix of $600
million in new revenue in the form of pump tax and registration fee increases and $600
million in future earmarks of the state’s general fund revenue.

While the plan still increases registration fees and fuel prices at the pump, it is a far
cry from the original proposals that sought to more than double registration fees and the
pump tax on fuel. The National Federation of Independent Business (NFIB) was the only
business group that opposed efforts to raise more than $1.6 billion in road funding
through tax hikes and registration fees alone. Small business owners recognize the need
for good roads and adequate funding but this is a difficult time for tax and fee
increases on Michigan small business job providers. While these tax increases are
disappointing, lawmakers did listen to the concerns of small business and the plan they
passed dedicated a substantial portion of future general fund revenue to road
construction and maintenance in order to avoid funding the roads with hikes in the gas
tax and vehicle registration alone.

The plan includes $200 million in tax relief via expansion of the Homestead Property Tax
credit. An income tax rollback formula is also included in the proposal. The income tax
rollback would occur when general fund revenue growth exceeds the rate of inflation times
1.425. The rollback does not go into effect until January 1, 2023 and it is questionable
if it would ever go into effect as a future legislature could change the terms of the cut
before 2023.

The gasoline tax will increase by 7.3 cents per gallon and diesel taxes would increase to
be on par with gasoline taxes (an 11.3 cent increase per gallon) beginning January 1,
2017. Registration fees would increase by 20 percent on passenger vehicles and trucks
also beginning January 1, 2017. The earmarking of general fund revenue to roads would
phase-in over the next five years.

Prevailing Wage Restart: Petition Drive Falls Short – New Drive Planned: On October 27,
2015, 388,000 signatures were turned in to the Board of State Canvassers for the
initiative petition to repeal the state’s prevailing wage law – an avenue that does not
require the Governor’s signature to become law (he would veto it otherwise). However, the
vendor hired to collect and process the signature petitions did not remove duplicate
signatures as part of the validation process prior to handing them over to the Board of
State Canvassers (BSC) for review.

Under Michigan law, when there are duplicate signatures, all of those signatures are
thrown out including the original. The validation process was supposed to remove the
duplicates so that the original signatures would still count in the final tally toward
meeting the required signature count. Because this was not done, the Bureau of Elections
recommended the Board of State Canvassers (BSC) not approve the petition for
certification as there were only 229,629 valid signatures after the duplicates were
removed. The Board of State Canvassers needs to verify that 252,523 signatures are valid
before it can be sent to the Legislature for further action.

Plans are being made to start over on collecting signatures for a ballot initiative by
the end of November or early December 2015. The deadline to get a legislative initiative
to the state for consideration is June 1, 2016. Ballot committees get 180 days, or
roughly six months, to collect signatures, and six months would be April 2016. The Bureau
of Elections and Board of State Canvassers validation process would then take at least
two months and if the signatures and petitions are approved, the Legislature would
consider the measure for 40 session days. If no action is taken or it’s rejected, it
would then go to a vote of the people at the next general election in November 2016.
Stay tuned for further developments.

Franchise Protections Pass Senate: On the last session day before the Thanksgiving break
(November 10, 2015) the Michigan Senate passed two bills that would clarify the
relationship between franchisor and franchisee employees. Senate Bills 492 sponsored by
Senator Jack Brandenburg (R-8) and 493 sponsored by John Proos (R-21) amend the Franchise
Act and the Workers Disability Act to clarify that franchisors and franchisees are treated
as separate businesses under Michigan law.

This legislation is necessary because of a recent ruling by the federal NLRB (National
Labor Relations Board) that expanded the definition of a ‘joint employer’ to make a
franchisor responsible for a franchisee’s employees even in areas where they do not
exercise direct control over employees of the franchisee. The bottom line is that the
NLRB actions were encouraged by the Obama administration in order to make it easier for
big labor unions to strike and organize franchise business employees and small
independent businesses.

On August 27, 2015 the National Labor Relations Board (NLRB) issued a ruling concerning
franchise arrangements. The agency issued a radical reconstruction of the “joint employer
rule” which has been settled law for decades. In its ruling the NLRB expanded the
definition to include both indirect, direct, and even potential, unexercised control over
employees in a joint employer determination. Previous to this ruling, franchisors and
franchisees were considered to be separate businesses and were joint employers only when
they shared direct control over the terms and conditions of employment for the same
employees.

The Michigan Senate is taking action to be sure that, in matters of state law, the ruling
by the NLRB will not affect the traditional and correct interpretation of the employer
and employee relationship that has governed franchise law in our state for decades.

Federal legislation has also been introduced in Congress to nullify the actions of the
NLRB. The “Protecting Local Business Opportunity Act” HR 3459 is sponsored by U.S.
Representative John Kline from Minnesota. Michigan Congressmen John Moolenaar, Tim
Walberg, Bill Huizenga and Mike Bishop are all co-sponsors of the bill. In the U.S.
Senate an identical bill, S.2015, is sponsored by Senator Lamar Alexander from Tennessee.
Also, companion House Bills 4901 sponsored by Representative Joe Graves (R-51) and 4902
sponsored by Representative Daniela Garcia (R-90) have also been introduced. More bills
will be forthcoming as other state laws are examined to determine if the clarification is
necessary.

Civil Asset Forfeiture Bills Signed Into law: This legislation was signed into law
(Public Act 153 of 2015) on October 20th by Governor Snyder. The bills will make it more
difficult for government to confiscate private property and they passed both chambers
with strong bi-partisan support. The reform package includes new reporting provisions to
track “civil asset forfeiture” seizures and also raises the standard of proof for seizing
assets from a “preponderance of the evidence” to a “clear and convincing” standard. We
will be asking our members on the 2016 State Ballot for their position on further reforms
that would require a criminal conviction before any private property could be seized.

Loser Pays in Rule Disputes Bills in the Hopper: We have been working on Senate bills 189
and 190, sponsored by Senators Tom Casperson (38th District) and David Robertson (14th
District), that would require a state agency to pay the legal costs of the prevailing
party when that state agency loses a lawsuit involving a regulatory issue.

New Issue: “Dark Store” Property Tax Valuations: This is an emerging issue that is
gaining traction and will involve changes to Michigan’s General Property Tax Act. Here is
a summary of the issue:

Many “big box” retail stores have been successful in lowering their local property taxes
by appealing their current tax assessments under a “dark store” valuation approach. This
approach uses an assessment based on comparable big box properties that are often vacated
and empty rather than the approach used by most local governments of valuation based on
the cost of construction – less depreciation. This dark store approach has been upheld in
most appealed cases by the courts and the tax tribunals. These appealed cases have
reduced local property tax revenues by about $74 million since 2013. The supporting
concern is that local governments may come after small business to make up the revenue
shortfalls. The opposing concern is that local governments will use the tax changes
directed at big box stores against small business as well.

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