|Michigan Business Tax|
|U53. In applying the agricultural exemption contained in the Michigan Business Tax Act (MBTA) at MCL 208.1207(1)(d) to a unitary business group (UBG), is the primary activity test to qualify for the exemption performed at the member entity level or group-wide level?|
The primary activity test, which is the determination whether an entity's farm activity exceeds its non-farm activity to qualify as a person whose primary activity is the production of agricultural goods, is performed at the member entity level in a UBG.
Section 207(1)(d) contains the same language as the section that supplied the agricultural exemption in the Single Business Tax Act (SBTA), MCL 208.35(1)(h). Section 207(1) directs that:
As the language granting the agricultural exemption in the MBTA repeats the section granting the agricultural exemption in the SBTA, guidance can be obtained from Revenue Administrative Bulletin (RAB) 1989-47, which
explained the exemption for the Single Business Tax. RAB 1989-47 directs that, "The agricultural production exemption is not an exemption for the person, but is an exemption for the activity of producing agricultural goods." In a UBG, the
activity of producing agricultural goods is conducted at the member-entity level. Thus, the primary activity test is performed at the member-entity level.