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Michigan Business Tax

M36. The definition of "modified gross receipts tax base" makes no provision for a negative modified gross receipts tax base. Will Treasury administratively allow a carryforward of a negative modified gross receipts tax base?

No. A modified gross receipts tax calculated as a negative is zeroed out for purposes of determining MBT tax liability for a tax year. The MBTA does not permit a carryforward of a negative modified gross receipts tax into subsequent tax years, nor does it permit a calculated negative modified gross receipts tax to offset a positive business income tax base for a tax year (see FAQ M15).

While the MBTA imposes tax computed on a modified gross receipts tax base (MCL 208.1203) and on a separate business income tax base (MCL 208.1201), the tax calculated from the two tax bases is combined to determine a single MBT tax liability for a given tax year. An arithmetically derived negative modified gross receipts tax amount for a taxpayer in a given tax year would be deemed a modified gross receipts tax of zero for the tax year. The modified gross receipts tax of zero would be added to the taxpayer's calculated business income tax for the tax year to determine the taxpayer's MBT tax liability for the tax year, after allocation and apportionment and before surcharge and calculation of credits. Therefore, the MBTA neither contemplates nor permits a carryforward of a negative modified gross receipts tax. Likewise, the MBTA does not permit an arithmetically derived negative modified gross receipts tax to offset a positive business income tax when calculating MBT tax liability for a given tax year.

Although a negative modified gross receipts tax base may not be carried forward to later tax years, the MBTA does permit business income losses to be carried forward. MCL 208.1201(4)) expressly permits a taxpayer to carry forward a negative business loss after allocation or apportionment into the tax year immediately following the loss year as an offset to the allocated or apportioned business income tax base for the immediately succeeding tax year. Such losses may be carried forward up to 10 years following the loss year or until the loss is used up, whichever comes first. Any loss remaining after the 10 year carryforward period will expire unused.