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| U41. With respect to a unitary business group, what is the liability of the individual entities that make up the group for payment of the tax? If payment is not made, which member will be charged with penalties and interest? |
The business income and modified gross receipts taxes, both components of the
Michigan Business Tax (MBT), are levied upon each 'taxpayer" that has nexus with
(or business activity in) Michigan. MCL 208.1201; 208.1203. The MBT Act defines
a "taxpayer" as "a person or a unitary business group liable for a tax,
interest, or penalty under this act." MCL 208.1117(5). A unitary business group
is defined as two or more U.S. persons, including entities (but excluding
foreign operating entities), one or which owns or controls, directly or
indirectly, more than 50% of the ownership interests with voting or similar
rights of the other U.S. persons, and whose business activities or operations
either (i) result in a flow of value between the unitary business group members,
or (ii) are integrated with, dependent upon, or contribute to each other. MCL
208.1117(6). A taxpayer that is a unitary business group is required to "file a
combined return that includes each United States person, other than a foreign
operating entity, that is included in the unitary business group." MCL 208.1511.
The MBT Act does not specifically state which member of a unitary business group
must actually file the return or remit any tax that is owed. The Department has
determined that the members of a unitary business group must elect a designated
member who has nexus with Michigan to serve as the group's agent with respect to
the Department. Thus, the Department will look to the designated member to file
the group's combined return and remit estimates and annual payments. (See FAQ
U23.) Although the designated member is responsible for filing the return and
remitting payments, any MBT liability belongs to the "taxpayer" - i.e., the
unitary business group - and not merely to the designated member. Accordingly,
if the group's MBT liability is not paid, the Department may look to each member
of the unitary business group that has nexus with Michigan to collect the
entirety of the tax that is due, as well as any penalties and interest that may
be assessed. In other words, assuming nexus, each member of a unitary business
group is jointly and severally liable for any MBT assessment, and the Department
may pursue any or all such members to satisfy the entirety of the assessment.
Joint and several liability means that all members of the unitary business group
with nexus with Michigan are collectively and individually liable for the full
amount of the group's tax liability.
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