No. The MBT is comprised of the business income tax and the modified gross receipts tax. MCL 208.1201; MCL 208.1203. The business income tax taxes "that part of federal taxable income derived from business activity." MCL 208.1105(2). The modified gross receipts tax is levied on a taxpayer's gross receipts less purchases from other firms, a defined term. MCL 208.1203(3). The deduction for net earnings from self employment is taken from the business income tax base and does not affect the modified gross receipts tax base. Further, the deduction is not an exemption from the business income tax base. MCL 208.1201(2)(h) permits a deduction, to the extent included in federal taxable income, for

net earnings from self-employment as defined under section 1402 of the internal revenue code of the taxpayer or a partner or limited liability company member of the taxpayer except to the extent that those net earnings represent a reasonable return on capital. [Emphasis added].

IRC 1402 defines net earnings from self employment to generally mean the net income and distributive share of an individual or a member of a partnership. This definition excludes several items of gross income. IRC 1402(a). For example, dividends on stock, interest on bonds, and gain on the sale of a capital asset or sale of property are all excluded from the definition of net earnings from self employment. IRC 1402(a). Each of these items, excluded by definition, will not be part of the net earnings from self employment deduction and will, thus, remain taxable in the business income tax base to the extent included in federal taxable income from business activity.

Finally, the net earnings from self employment deduction does not allow an individual, partner or limited liability company member to deduct amounts that represent a return of capital. These amounts remain taxable in the business income tax base.