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3. How is business income apportioned?

Beginning in 2012, business income or loss generated from business activity within and without Michigan is apportioned to Michigan using a single sales factor, the ratio of the business’ Michigan sales to the business’ total sales.*

Business income or loss apportioned to Michigan is computed on the Michigan Schedule of Apportionment (Form MI-1040H).  Business income apportioned to Michigan is taxable to Michigan.  Business income not apportioned to Michigan may be claimed as a subtraction from adjusted gross income (AGI).  Conversely, losses not apportioned to Michigan cannot reduce Michigan taxable income and must be added to AGI.

Taxpayers who are apportioning business income must complete a separate Form MI-1040H for each business entity unless an eligible taxpayer elects to combine apportionment of unitary businesses.

There are special apportionment formulas for transportation companies and other authorized taxpayers.  See “Does every type of business use the single sales factor for apportioning business income to Michigan?” 

Please see the Michigan Schedule of Apportionment (Form MI-1040H) under Individual Income Tax Forms and Instructions.


*For years 2011 and earlier business income was apportioned using a three-factor apportionment formula.