Treasury is reviewing the recently enacted tax law changes, including the new Marijuana Wholesale Tax. Developing clear and accurate information for tax stakeholders is our top priority. This guidance will be posted to our website in the coming weeks.
Filing Requirements 20. (Answer rescinded as of 11/19/19) Are federally disregarded entities required to withhold under the CIT?
No. Part 3 of the Income Tax Act requires a "flow-through entity" with business activity in Michigan that has more than $200,000 of business income in the tax year after allocation or apportionment to withhold a tax on the distributive share of business income of each corporation or flow-through member of the flow-through entity in an amount computed pursuant to MCL 200.623. MCL 206.703(4).
However, the definition of "flow-through entity" under Part 3 of the ITA expressly excludes entities that are classified as disregarded entities pursuant to MCL 206.699. MCL 206.701(d). MCL 206.699 states that, "[n]otwithstanding any other provision of this act, a person that is a disregarded entity for federal income tax purposes under the internal revenue code shall be classified as a disregarded entity for purposes of parts 2 and 3 of this act." Consequently, an entity classified as a disregarded entity under the CIT is not required to withhold on the distributive share of business income of its owners under MCL 206.703(4).