Insurance Companies and Financial Institutions

Insurance Companies

Insurance companies will pay a premiums tax instead of the corporate income tax. The premiums tax is calculated at 1.25% of gross direct premiums written on property or risk located in Michigan. Insurance companies are permitted certain exclusions from the tax base and a limited number of insurance-specific credits.

Foreign insurance companies are subject to the retaliatory tax.

Annual returns are due before March 2 after the end of the tax year. The tax year of an insurance company is the calendar year.

Financial Institutions

Financial institutions are taxed at .29% of net capital in lieu of the corporate income tax. Net capital is the institution's equity capital minus the average daily book value of U.S. and Michigan obligations calculated over a period of 5 tax years. The financial tax base is apportioned using the gross business factor.

A financial institution has nexus with Michigan if it 1) is physically present in the state for more than one day, 2) actively solicits sales in Michigan and has gross receipts of $350,000 or more sourced to Michigan, or 3) has an ownership or beneficial interest in a flow-through entity directly, or indirectly through 1 or more flow-through entities, which has substantial nexus in this state.

Financial institutions may be part of a unitary business group.