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.