Credits 1. How should a taxpayer calculate the renaissance zone credit for purposes of the MBT and CIT comparative liability calculation of the MBT election?
A taxpayer under the MBT election will calculate all certificated credits, including the renaissance zone credit, in accordance with the provisions of the MBT. The renaissance zone credit is calculated under MCL 208.1433. The renaissance zone credit continues under the MBT election as a certificated credit only for taxpayers with a development agreement or a qualified collaborative agreement executed or entered into before January 1, 2012. MCL 208.1107(1)(f). A taxpayer with one of these qualifying renaissance zone credits may make the election for its first tax year ending after December 31, 2011, to file and pay under the MBT. MCL 208.1500.
A taxpayer making the MBT election calculates liability as:
(1) the taxpayer’s MBT liability after application of all credits, deductions, and exemptions and any carryforward of any unused credit as prescribed in the MBT, or;
(2) the taxpayer’s liability computed under the CIT, after application of all credits, deductions, and exemptions under the CIT, less the amount of the taxpayer’s certificated credits, including any unused carryforward of a certificated credit, that the taxpayer was allowed to claim for the tax year under the MBT. MCL 208.1500(4).
A taxpayer calculates all credits available to it, including the renaissance zone credit, in accordance with the provisions of the MBT, for step one of the calculation. In step two of the calculation, the taxpayer calculates its CIT liability, as though it were subject to that tax, and then reduces that liability by the amount of certificated credits that the taxpayer was allowed to use in step one. Both steps of the calculation utilize the certificated credit amount available to the taxpayer as calculated in accordance with the MBT.
Example: Consider a taxpayer with MBT liability before credits of $500 and CIT liability before credits of $750. The taxpayer entered into a qualified collaborative agreement for a renaissance zone credit before January 1, 2012. Using MCL 208.1433, the taxpayer calculates available renaissance zone credit of $1,000. For part (1) of the calculation, the taxpayer will apply $500 of the certificated credit amount to the $500 liability, resulting in an MBT liability of zero. For part (2) of the calculation, the taxpayer will apply $500 of credit (the amount the taxpayer was allowed to claim when calculating its MBT liability in step one) to the CIT liability of $750, resulting in a CIT liability after credit of $250. Because the taxpayer must pay the higher of calculations (1) and (2), the taxpayer’s tax liability for the tax year is $250. The taxpayer then carries forward $500 in credit (the remaining amount of the certificated credit after determining liability).