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| N12. Under the MBT nexus standards for the modified gross receipts tax, is owning a partnership interest considered physical presence in Michigan? The partnership owns rental real property in Michigan. |
No. If the person has no business activity or physical presence in Michigan
outside of the partnership interest, the person would not have nexus with
Michigan.
If the person is part of a unitary group that includes the partnership, the
person's business activity would be included in the unitary group's combined MBT
return.
Under section 200 of the MBT, MCL 208.1200, a taxpayer has nexus with Michigan
if the taxpayer has a physical presence in Michigan for a period of more than 1
day during the tax year or actively solicits sales in Michigan and has Michigan
sourced gross receipts of $350,000 or more. Section 117(5) defines "taxpayer" to
mean "a person or a unitary business group liable for tax, interest of penalty
under this act [MBT]." Person is defined at MCL 208.1113(3) to include
individuals and various types of business entities, and a unitary business group
is defined as a group of United States persons that meet certain control and
relationship tests specified in MCL 208.1117.
A partnership that owns real property in Michigan for more than 1 day clearly
has established physical presence in Michigan under section 200 of the MBT act.
However, a person with no business activity or property in Michigan other than
an ownership interest in this partnership will have no physical presence in
Michigan. And if the person and partnership do not constitute a unitary group
under MCL 208.1117 the person will not be subject to MBT.
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