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The small business alternative credit is retained from the MBT and is the only credit in the CIT. The credit is available to any taxpayer, other than insurance companies and financial institutions, with gross receipts that do not exceed $20,000,000.00 and with adjusted business income minus the loss adjustment that does not exceed $1,300,000.00 as adjusted annually for inflation and subject to certain additional disqualifiers. The taxpayer will also be disqualified if an officer or shareholder receives more than $180,000 in compensation, or if compensation plus share of business income exceeds that amount (allocated income disqualifier). A taxpayer may be able to take a reduced credit before complete disqualification.
A unitary business group may qualify for the credit, but a disqualifier or reduction percentage applies to the entire group if it applies to any one member of the group. The gross receipts and adjusted business income thresholds are those of the unitary business group and are calculated at the group level. The allocated income disqualifier is calculated for an officer or shareholder using all amounts paid or allocable to the officer or shareholder by all members of the unitary business group. The reduction percentages of the credit, which may reduce but not completely disqualify a taxpayer from the credit, are calculated in the same manner.
A taxpayer that claimed a credit under either the SBT or MBT which had a recapture provision must recapture under the CIT if the taxpayer fails to comply with the terms, conditions, or agreement pertaining to the credit or if the taxpayer sells or otherwise moves the property out of the state within 5 years after the year in which the credit was originally claimed. In the case of recapture, a percentage (or the entire amount of the credit previously claimed) will be added back to the taxpayer’s tax liability under the CIT in the tax year in which a triggering event occurs.
A taxpayer that claimed an ITC credit under the SBT or MBT will recapture under the CIT to the extent and at the rate at which the credit was used under either of the previous taxes. Recapture is required if the tangible asset for which the credit was claimed is sold, transferred out of the state or otherwise disposed of during the tax year. The recapture amount is added back to the taxpayer’s CIT liability.
A taxpayer is required to file and report recapture even if the taxpayer is under the filing thresholds (discussed under “Filing Requirements”).
A taxpayer that has been approved to receive, has received, or has been assigned a certificated credit under the MBT before January 1, 2012, but has not claimed or exhausted the credit before that date, may make an election within the taxpayer's first tax year ending after December 31, 2011, to continue paying tax under the MBT and claim that credit. The certificated credits that qualify are:
The taxpayer makes the election by filing the appropriate MBT return for the taxpayer's first tax year ending after December 31, 2011. Taxpayers making the election will pay the greater of 1) liability under the MBT minus all credits (certificated and non-certificated credits), deductions, exemptions and unused credit carryforwards, or 2) liability under the corporate income tax after application of all CIT credits, deductions and exemptions, less the amount of certificated credits including any unused carryforward of a certificated credit, that the taxpayer was allowed to claim for the tax year under the MBT. Any unused nonrefundable certificated credits may be carried forward. If the resulting liability after these calculations is a negative number, the taxpayer will receive a refund.
Special rules for claiming the credit and calculation of liability exist for taxpayers with certificated historic preservation credits or certificated brownfield credits.
If a certificated credit is awarded to a member of a unitary business group, then the group, and not the individual member, must file any necessary returns under the MBT. If the unitary business group makes the election, the return filed by the group must include all members of the group regardless of whether a member is a corporation or flow-through entity.
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