Corporate Income Tax
Credits 11. Can a taxpayer use data from its MBT tax periods in calculating the loss adjustment for purposes of determining eligibility for the small business alternative credit under MCL 206.671?
Yes, the Department will allow the use of a "loss adjustment" from a period prior to the start of the CIT for purposes of determining qualification for the small business alternative credit under MCL 206.671. In computing eligibility for the credit, the CIT defines "loss adjustment" to mean, in relevant part, "the amount by which adjusted business income was less than zero in any of the 5 tax years immediately preceding the tax year for which eligibility for the credit under this section is being determined." MCL 206.671(10)(f). Therefore, a taxpayer may utilize data for the respective tax years under the MBT to calculate eligibility for the credit for CIT tax years. A taxpayer may only use a loss adjustment amount from a year in which it qualified for the credit.
In the case of a unitary business group, members of the group may contribute separate year loss adjustment history which may be applied against the credit disqualifiers on a "first-in- first-out" basis. However, the UBG is prohibited from using a loss adjustment from a year in which the members and/or group did not qualify for the credit.