The Implementation of the Michigan Flow-Through Entity Tax

Published: January 14, 2022

Last Updated: January 26, 2022¹

This notice provides an overview of the provisions of the Michigan flow-through entity tax as recently enacted by 2021 PA 135 and includes special instructions related to the retroactive implementation of that tax.

1. Overview of the Flow-Through Entity Tax
1. Who is eligible to pay the flow-through entity tax?
2. How do flow-through entities make an election to pay the flow-through entity tax?
3. How is tax on an electing flow-through entity calculated?
1. Determining the Business Income Tax Base
2. Apportionment of the Business Income Tax Base
4. What are the filing and payment deadlines under the flow-through entity tax?
1. Annual return filing and payment due dates
2. Estimated tax payments
5. What are the relevant reporting requirements for flow-through entities?
6. For which tax year is the flow-through entity tax effective?
7. In what formats can an electing flow-through entity file its annual return? What methods can be used to make estimated or annual tax payments?
2. The Flow-through Entity Tax and Member Returns
1. What is the refundable credit available to members of an electing flow-through entity?
1. General Information About the Credit
2. Credit Adjustment for Trusts and Estates
3. Credit for Members Subject to Corporate Income Tax
2. What adjustments are necessary on the member return for taxes paid by the flow-through entity?
3. What adjustments are necessary on the member return for flow-through entity taxes that are refunded to the flow-through entity?
4. How will the flow-through entity tax impact the estimated tax payments of members of an electing flow-through entity?
5. How will composite returns be impacted by the flow-through entity tax?
3. Questions

¹ Sections I.B., I.D.a., I.E., and II.A.a. as they relate to limitations on the member credit have been corrected to refer to the fifteenth day of the third month after the tax year as the date by which flow-through entity tax payments will be eligible for the credit for a particular tax year. The previous version erroneously named the due date of the annual return as the cutoff. Additionally, the election instructions in Section I.B. have been modified to clarify the irrevocable three-year election for 2021 and the amount of payment required to make a valid election into the tax.