A unitary business group is comprised of two or more U.S. persons that
satisfy both a control test and one of two relationship tests. MCL 208.1117(6).
There is no annual date on which members must meet the requirements of a unitary
business group to be a unitary business group. Rather, a person becomes a member
of a unitary business group whenever both the control test and one of the two
relationship tests are met and remains a member of that unitary business group
so long as the control test and one of the two relationship tests continue to be
met. Conversely, a member of a unitary business group that fails either the
control test or the relationship tests may no longer be included in the unitary
business group.
Control Test. The control test is satisfied when one person owns or controls,
directly or indirectly, more than 50% of the ownership interest with voting or
comparable rights of the other person or persons. Changes in ownership or
control may result in one or more persons joining or dropping from a unitary
business group. The date of changes to the unitary business group due to the
control test is determined by identifying the transactions that result in
relevant ownership or control changes.
Relationship Tests. The relationship test is satisfied when related persons have
business activities or operations that (1) result in a flow of value between or
among persons in the group, or (2) are integrated with, are dependent upon, or
contribute to each other. Flow of value is established when members of the group
demonstrate one or more of functional integration, centralized management, and
economies of scale. Members are integrated with, are dependent upon, or
contribute to each other under many of the same circumstances that establish
flow of value. For example, related persons may meet one or both relationship
tests if there is a flow of goods and services between them. However, the fact
that transactions between the persons do not occur daily does not mean the
persons drop in and out of unitary status. If the relationship tests are
satisfied during the tax year, the group will generally only subsequently fail
such tests if there are substantial changes to operations or management. Thus,
the Department will presume that one or both relationship tests are established
for the entire tax year - and each subsequent year - if one or both are
satisfied at any point during the tax year. The unitary business group or member
in question may rebut such presumption by proving that the relationship test was
met - or failed - as of a specific date.
Finally, any person that becomes a member of a unitary business group or ceases
to be a member of a unitary business group during that member's tax year must
file as part of the combined return for that portion of the member's tax year
during which the member was part of the unitary business group. For example,
Taxpayer ABC is a unitary business group comprised of three corporations:
Corporation A, the designated member with a calendar tax year, and Corporations
B and C with fiscal years ending March 31 and September 30 respectively.
Taxpayer ABC's tax year is that of its designated member. Thus, Taxpayer ABC's
tax year ends December 31, its annual return is due April 30, and that annual
return must include the tax years of Corporations B and C ending March 31 and
September 30. If Corporation C ceased to be a member of Taxpayer ABC on July 31,
Corporation C must include October 1- July 31 on Taxpayer ABC's annual return,
but file as a separate taxpayer - or as part of a new unitary taxpayer - for the
period August 1 - September 30.
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