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Notice: Flow-through Entity Tax Quarterly Estimated Tax Payments for Tax Years Beginning in 2021 Not Subject to Penalty or Interest

Date: January 18, 2022

PA 135 of 2021 amended Part 4 of the Income Tax Act to implement an elective tax on flow-through entities with business activity in Michigan.  The Michigan flow-through entity tax, which was signed into law on December 20, 2021, is retroactive to January 1, 2021, for certain electing flow-through entities. Electing flow-through entities may be required to pay quarterly estimated tax payments.[1]  For calendar year flow-through entities that have elected into the tax, the fourth quarter estimated tax payment is due on January 18, 2022. For fiscal year flow-through entities that have elected into the tax, any remaining quarterly estimated tax payments are due on dates determined in accordance with the entity's fiscal year.

The Michigan Flow-through Entity Tax is administered under the provisions of the Revenue Act,[2] which permits a compromise of interest or penalties, or both.[3] Due to the unique combination of factors related to the implementation of the tax, including its enactment late in 2021, its retroactive application effective January 1, 2021, and its immediate estimated tax payment obligations in 2022, the Department has determined that, under these particular limited circumstances, quarterly estimated payments of tax otherwise due for tax years beginning in 2021 will not accrue any penalty or interest.

The annual return due date for flow-through entities remains the last day of the third month after the tax year (for calendar year filers, March 31, 2022).[4]  Penalty and interest may apply if the annual tax liability is not paid by that date.

[1] MCL 206.831.

[2] MCL 206.841(1). 

[3] MCL 205.28(1)(e).

[4] MCL 206.833(1).