Taxes - B27. Under the Michigan Business Tax Act (MBTA) will a taxpayer receive a deduction for the modified gross receipts tax paid when calculating the business income tax base?

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B27. Under the Michigan Business Tax Act (MBTA) will a taxpayer receive a deduction for the modified gross receipts tax paid when calculating the business income tax base?

No. While any modified gross receipts tax paid pursuant to the MBTA would generally be a deduction used to arrive at federal taxable income, the starting point for the calculation of the business income tax base, section 201(2)(b) expressly provides an add back for these types of taxes to the extent deducted to arrive at federal taxable income. Specifically, MCL 208.1201(2)(b) states:

"Add taxes on or measured by net income and the tax imposed under this act to the extent the taxes were deducted in arriving at federal taxable income".

Therefore, any modified gross receipts tax paid pursuant to section 203 of the MBTA may not be deducted when computing the business income tax base under section 201.