C19. How will unused carryforward credits under the Single Business Tax Act (SBTA), the application of which is limited to tax years 2008 and 2009 under the Michigan Business Tax Act (MBTA), be treated for fiscal year taxpayers?
Section 401 of the MBTA provides that except as specifically provided for in the MBTA, any unused carryforward of any credit under the SBTA may be applied against MBT tax liability only for the tax years 2008 and 2009, and any unused carryforward after 2009 is extinguished. MCL 208.1401. The MBTA defines "tax year", in pertinent part, as
the calendar year, or the fiscal year ending during the calendar year, upon the basis of which the tax base of a taxpayer is computed under this act. If a return is made for a fractional part of a year, tax year means the period for which the return is made. Except for the first return required by this act, a taxpayer's tax year is for the same period as is covered by its federal income tax return. MCL 208.1117(4).
Thus, for a fiscal year taxpayer, the MBT 2008 tax year runs from January 1, 2008 to the end of the month in calendar year 2008 that constitutes the end of the taxpayer's fiscal year. The taxpayer's 2009 tax year is the taxpayer's 12-month fiscal year ending during calendar year 2009.
Therefore, for a taxpayer who files pursuant to a fiscal year, the unused carryforward of any SBT credit applies against the taxpayer's MBT tax liability for the tax year running from January 1, 2008 to the end of the month in calendar year 2008 that ends the taxpayer's fiscal year. Any remaining unused SBT carryforward credit would be applied to the taxpayer's MBT tax liability for the taxpayer's 12-month fiscal year ending during calendar year 2009. Any still remaining unused SBT carryforward credit beyond the end of the taxpayer's 12-month fiscal year ending during calendar year 2009 would be extinguished.
Example: A taxpayer has a 12-month fiscal year that begins October 1st and ends September 30th. The taxpayer files a short period SBT final return for the period from October 1, 2007 through December 31, 2007, with the taxpayer retaining an unused SBT carryforward credit in the amount of $1,000.00, after determining the final SBT tax liability. The taxpayer's 2008 tax year, its first under the MBTA, runs from January 1, 2008 through September 30, 2008. The taxpayer has an MBT tax liability of $500.00 before application of the unused SBT carryforward credit. Applying the $1,000.00 unused SBT carryforward credit against the $500.00 MBT tax liability results in a remaining unused SBT carryforward credit of $500.00.
For the 2009 tax year, which runs from October 1, 2008 through September 30, 2009, the taxpayer has an MBT tax liability of $400.00, before application of the unused SBT credit carried forward from the 2008 MBT year. Applying the $500.00 remaining unused SBT carryforward credit against the taxpayer's $400.00 MBT tax liability results in a residual unused SBT carryforward credit of $100.00. Under MCL 208.1401, the remaining $100.00 of unused SBT carryforward credit would be extinguished.