Michigan Business Tax FAQ List of Topics
- Statement on December 2008 MBT Act changes and amendments to the FAQ's
- Important Note:
- A01. (Answer rescinded, replaced by A22) Will taxpayers need to calculate the business income and modified gross receipts separately and pay 85% of…
- Tax liability of the act is imposed on two components; federal taxable income derived from business activity and modified gross receipts. These two components form the basis for tax liability. Estimated tax payments are governed under Section 501. If the sum of the estimated payments equals at least 85% of the liability and the amount of each estimated payment reasonably approximates the tax liability incurred during the quarter for which the estimate is made, interest will not be assessed. Therefore, while a calculation must be made for each component in order to determine tax liability, only one estimated payment of 85% of that liability need be remitted. There is no requirement to remit an estimated payment for each separate tax liability component.
- A41. What method must a fiscal year taxpayer with an MBT election use to file returns for its tax year ending in 2012?
All MBT taxpayers must file a final MBT return for the tax year ending on December 31, 2011, including a fiscal year taxpayer with a certificated credit who elects to continue to be taxed under the Michigan Business Tax Act.
MCL 208.1117(4) directs that a taxpayer with a fiscal tax year ending after December 31, 2011 is considered to have 2 separate tax years. The first tax year is the fractional part of the fiscal tax year before January 1, 2012, and the second tax year is the fractional part of the fiscal tax year after December 31, 2011.
This means that it will be necessary for each fiscal year filer that makes the MBT election to file two short year returns.
A fiscal year taxpayer that has a certificated credit and elects to remain taxed under the MBTA must use the same method, annual or actual, to compute its MBT for each short period return for each respective portion of the same fiscal year. See MCL 208.1503(3).
Thus, if the taxpayer selects the annual method to compute its MBT for the short period from the beginning of the taxpayer's fiscal year through December 31, 2011, then the taxpayer must select the annual method to compute its MBT for the short period from January 1, 2012, to the end of the taxpayer's fiscal year.
- A40. What method must a fiscal year taxpayer that will no longer be a taxpayer under the MBT or CIT after December 31, 2011, use to calculate its final MBT return?
- The actual method. That is, the tax must be computed using an accounting method that reflects the actual tax basis attributable to the period.
- A39. How is the book-tax deduction, provided at MCL 208.1201(2)(i), calculated?
The deduction is determined by:
1) Calculate the difference between the value of all assets on the books of a taxpayer for the first fiscal period ending after July 12, 2007 and the federal tax basis for those same assets for the same period. (For a UBG, compute for each member entity individually. The group will file one combined Form 4593, entering the result for each member of the group separately).
2) Calculate the amount needed to offset the net deferred tax liability of the taxpayer which results from the imposition of the business income tax, at a rate of 4.95%, and the modified gross receipts tax, at a rate of .8%, calculated for the first fiscal period ending after July 12, 2007.
3) Take the lesser of the result of (1) or (2).
4) For the 2015 through 2019 tax years apply 4%, for the 2020 through 2024 tax years apply 6%, and for the 2025 through 2029 tax years apply 10% to the result of step (3).
5) Subtract the result of step (4) from business income in appropriate tax year.
Example 1: Company A reviews all assets on its books as of its first fiscal period which ends after July 12, 2007 and which includes the enactment date of the MBT. The book value of these assets is then compared to the federal tax basis of the same assets for the same period. The difference between the assets is calculated at $5,000. Company A calculates its net deferred liability in accordance with GAAP for this same period at $7,000. Company A reports a $5,000 book-tax difference to the Department on Form 4593 with its first MBT return. Beginning in the 2015 tax year, Company A may take 4% of the $5,000, (the lesser of the book-tax or net deferred tax liability) or $200, as a deduction to business income. Beginning in the 2020 tax year Company A may take 6%, or $300 as a deduction, and beginning in the 2025 tax year the deduction will equal 10% or $500.
Example 2: Entities A, B and C, members of a unitary business group individually calculate their book-tax difference based on their own books and records for the appropriate fiscal period. The UBG files one Form 4593 with its initial MBT return. Entity A reports a book-tax difference of $500, B reports $1,000 and C reports $2,000. The net deferred tax liability is calculated for the group in accordance with GAAP at $3,000. Beginning in the 2015 tax year the UBG will begin to take a percentage of $3,000, which is the lesser of the net deferred tax liability of the group and the combined book tax difference of the three group members.