Credits 5. If a member of a UBG has a qualifying certificated credit and elects to continue filing under the MBT in order to use the credit, does that election require any flow-through entities that would be included in the UBG to file a

Yes. Under section MCL 208.1117(5)(b), beginning January 1, 2012, taxpayer means:

A person or unitary business group that has been approved to receive, has received, or has been assigned a certificated credit and that elected under section 680 of the income tax act of 1967, 1967 PA 281, MCL 206.680, to file a return and pay the tax imposed under [the MBT], if any.

This same section further provides:

If a person or unitary business group that elects under section 680 of the income tax act of 1967, 1967 PA 281, MCL 206.680, to file a return and pay the tax imposed under this act is part of a unitary business group as defined under [the MBT], the unitary business group as defined under [the MBT] shall file the return and pay the tax, if any, under [the MBT].

Additionally, MCL 208.1500(1) and (2) state that if a person awarded a certificated credit “is a member of a unitary business group, the unitary business group, and not the member, shall file a return and pay the tax, if any, under [the MBT] and claim the certificated credit.” Finally, the statute explicitly provides that all members of a unitary business group making the election must be included on the combined return. MCL 208.1500(1). These sections make clear that if any member of the group has a certificated credit it wishes to use then the group must make the election as a whole to continue to be subject to the MBT. The election will be made by the designated member on behalf of the group.

In short, the group is not electing only to participate in the credit portion of the MBT, but is electing to be an MBT taxpayer with all that entails.

Example: For the 2011 tax year UBG A has three members; member one is a corporation and is the designated member, member two is an S-Corporation and member three is an LLC taxed as a partnership. On December 1, 2011, member one is awarded a qualifying renaissance zone credit. In order to use that credit, member one must file an MBT return for the group’s first tax year ending after December 31, 2011. Assuming no change in ownership or control for this example, members one, two and three must be included on that MBT return.