Calculating Premiums Tax and Retaliatory Tax Liability for a Unitary Business Group of Insurers

The Michigan Corporate Income Tax (CIT) levies a general insurance company tax on insurance premiums written on property or risk located in Michigan. MCL 206.635. Insurance companies pay either the premiums tax or the so-called “retaliatory tax” imposed under section 476a of the Michigan Insurance Code, whichever is greater. MCL 500.476a. Pursuant to the Michigan Court of Appeals' June 20, 2024, decision in Nationwide Agribusiness Ins Co v Dep't of Treasury, _ Mich App _ (2024) (Docket No. 364790), a unitary business group (UBG) of insurers must file a unitary return that calculates both premiums tax and retaliatory tax liabilities at the UBG level. Because the Nationwide decision does not provide guidance on how such a calculation should be made, this notice provides guidance on that calculation.

For information on the Nationwide decision, taxpayers should review Treasury’s February 19, 2026, notice, Nationwide Agribusiness Insurance Co v Department of Treasury.

Calculation

To determine the liability of a UBG of insurers, the UBG must first identify its members that are foreign or alien insurers and its members that are domestic insurers. Generally, a foreign insurer is an insurer formed under the laws of a US state, district, commonwealth, territory, or possession, other than the State of Michigan, and an alien insurer is an insurer formed under the laws of a country other than the US. For purposes of this notice, both types of insurers (foreign and alien) will be referred to as a “foreign” insurer or member. A domestic insurer is an insurer formed under Michigan law.

UBG with No Foreign (out-of-state) Members

A UBG with no foreign members should calculate one combined premiums tax liability based on the combined tax attributes (e.g., premiums written in Michigan and credits) of all its members.

UBG with Foreign Members

A UBG with foreign members should start its calculation by determining whether its foreign members, as a group, have a retaliatory tax liability. Generally, the retaliatory tax compares the Michigan burdens imposed on a foreign insurer with the burdens imposed on a hypothetical Michigan insurer in the foreign insurer’s domicile state. Because the retaliatory tax is imposed only on foreign insurers, the retaliatory tax liability of a UBG must be computed by considering only the UBG’s foreign members and their tax attributes (e.g., their credits and burdens). The tax attributes of the UBG’s domestic members, who are not subject to the retaliatory tax, are not included in the retaliatory tax calculation of the foreign insurers. This treatment is consistent with the purpose of the retaliatory tax, which is to protect Michigan insurers from discrimination by foreign jurisdictions.

If Foreign Members Pay Retaliatory Tax

If, after aggregating the tax attributes of its foreign members, the UBG determines those members have a retaliatory tax liability, it would pay retaliatory tax for that group of foreign insurers in lieu of premiums tax. The UBG would then determine its premiums tax liability based on the combined tax attributes of only its domestic members.

If Foreign Members Do Not Pay Retaliatory Tax

Conversely, if the UBG determines its foreign members, as a group, do not have a retaliatory tax liability, it would calculate one combined premiums tax liability based on the combined tax attributes of all its members, foreign and domestic.

Forms and Instructions

Treasury is developing new forms and instructions to be used starting with tax year 2026. It is also developing interim schedules to be used for tax year 2025 and any prior years for which the statute of limitations is open. To avoid processing errors, once available, these schedules should be used for these years when filing an original or amended return based on the result in Nationwide. For open years prior to 2025, amended returns are not required to be filed solely to comply with the Nationwide decision and this notice, but will be accepted.

Return Processing

Returns filed in response to Nationwide have been on hold pending Treasury’s implementation of the result in that case. Those returns will now be reviewed and processed based on the calculation guidance provided in this notice.

Additional Information

For information on determining whether a UBG exists, taxpayers should consult Revenue Administrative Bulletin 2018-12, which details the UBG Control Test and Relationship Tests.

Additional information will be posted to Treasury’s website at www.michigan.gov/taxes.