Skip to main content

Credits 6.The calculation of liability under the MBT requires a taxpayer to compare its MBT liability to a liability based on its CIT. How does a UBG perform this calculation? Must the comparison calculation include all members of the group, in

Yes. MCL 208.1500(4) states that “a taxpayer’s tax liability under this act” shall be the greater of

(1) the taxpayer’s MBT liability “after application of all credits, deductions, and exemptions and any carryforward of any unused credit as prescribed in this act”, or;
(2) the taxpayer’s liability computed under the CIT, after application of all credits, deductions, and exemptions under the CIT, as if the taxpayer were subject to 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 208.1117(5) defines “taxpayer” to include a UBG. The definition of unitary business group in the MBT is unchanged. Further, 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). Thus, all members of the UBG must be included in the calculation of liability under MCL 208.1500.

Example: Assume a UBG with three members, one of which is a partnership and has a renaissance zone credit of $1,000. The group, meaning all three members, calculates its MBT liability under method (1) above to be $500 before application of the renaissance zone credit. This means the group may use $500 of credit for an MBT liability of zero. Then, the group performs the CIT calculation under method (2) and reaches a CIT liability of $750 before credit. From calculation (1) we know that the group may use $500 of credit. Therefore, the hypothetical CIT liability of the group is reduced to $250. Calculation (2) produces the higher liability. The group will pay this amount.