Michigan Business Tax, analyzes the provisions of the Michigan Business Tax Act, particularly as they apply to multistate taxpayers.

The Portfolio provides an analysis of the MBT's nexus or jurisdictional standard, with emphasis on the applicability of Pub. L. No. 86-272. The Portfolio also discusses issues such as unitary returns and the MBT's apportionment provisions.
Attention is also paid to the problems that confront specialized businesses, such as insurance, financial organizations, and real estate. In the insurance area, the Portfolio presents the current MBT computation method, as well as an explanation of the “retaliatory” tax imposed on foreign insurance companies operating in Michigan.

Updates to the print version of the Portfolio will be included on Changes and Analysis pages or incorporated directly into the Detailed Analysis as appropriate. The Changes and Analysis pages should be filed immediately following the Table of Contents. All updates to the CD and Internet version of the Portfolio will be incorporated directly into the Detailed Analysis.

Michigan Business Tax allows you to benefit from:

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
• Invaluable practice documents including tables, charts and lists.
• Plain-English guidance from world-class experts.
• Real-world and in-depth analysis that lets you explore various options.
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
• Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

Portfolio Description

Authors

Description

Detailed Analysis

2150.01. BACKGROUND AND INTRODUCTION

A. Demise of the Single Business Tax in Michigan

B. Tax Administration in Michigan

C. Evolution of the Michigan Business Tax

1. The Michigan Business Tax

2. The Detroit Chamber of Commerce Proposal

3. The Grand Rapids Chamber of Commerce Proposal

4. The Michigan Chamber of Commerce

5. The Fair Tax

6. The Wolfram Proposal

7. Business and Economic Stimulus Tax

D. The Michigan Business Tax: Its Purpose and Overview

E. Overview of the MBT Structure and Tax Base

1. MBT Overview

a. Business Income Tax

(1) MBT Business Income Tax Base Calculation

(2) MBT Business Income Tax Base for a Unitary Business Group

b. Gross Receipts Tax

(1) MBT Gross Receipts Tax Base Calculation

(2) MBT Gross Receipts Tax Base Calculation for a Unitary Business Group

(3) Business Loss Carryforward Deduction for 2008

c. Franchise Tax on Net Capital of Financial Institutions

d. Gross Premiums Tax on Insurance Companies

2. Credits Under the MBT

a. New Credits Under the MBT

(1) Credit for Businesses with Michigan Receipts between $350,000 and $700,000

(2) Compensation Credit and Investment Credit

(3) Research and Development Expense Credit

(4) MEGA Research and Development Contribution Credit

(5) Large Retailer Compensation Credit

(6) Credit for Small Businesses

(7) Michigan Entrepreneurial Credit

(8) Credit for New Motor Vehicle Dealer Inventory

(9) Bonus Depreciation Credit

(10) Motor Sports Complex and Sports Facility Credit

(a) Motor Sports Complex Credit

(b) Sports Facility Credit

(11) Individual or Family Development Account

b. Retained Credits Under the MBT

2150.02. THE TAXPAYER

A. In General

B. "Persons" and "Unitary Business Groups" Subject to Tax

C. Excluded and Exempted Persons

2150.03. CONSTITUTIONAL LIMITATIONS

Introductory Material

A. Federal Constitutional Limitations

1. Substantial Nexus

2. Fair Appointment

3. Discrimination

B. The MBT's Statutory Nexus Provisions

1. Physical Presence Standard

2. Active Solicitation With Substantial Michigan Gross Receipts Nexus Standard

2150.04. COMPUTATION OF THE MBT

A. Basic Calculation of the MBT

B. Computation of the Business Income Tax

1. Business Income and Business Activity Defined

a. In General

b. Exemptions From the Definition of Business Activity

c. Business Income of a Unitary Business Group

2. Additions to the Base

a. Interest and Dividends From State Obligations

b. Taxes on or Measured by Net Income

c. Net Operating Losses

d. Losses Attributable to Another Entity

e. Royalty, Interest, or Other Expense Paid to a Related Party

3. Subtractions From the Base

a. Dividends and Royalties Received From Non-U.S. Persons and Foreign Operating Entities

b. Income Attributable to Another Entity

c. Interest Income From U.S. Obligations

d. Net Earnings Subject to Self-Employment Tax

e. Portion of Deferred Tax Liability Due to Book-Tax Difference

f. Available Business Loss Incurred After December 31, 2007

g. Gain From Sale of Residential Rental Units to a Qualified Affordable Housing Project and Income Attributable to Such Units

C. Computation of the Modified Gross Receipts Tax

1. Modified Gross Receipts

2. Taxable Gross Receipts

3. Excluded Gross Receipts

a. Amounts Collected on Behalf of a Principal or Received in an Agency Capacity

b. Amounts From Operation of International Aircraft

c. Amounts Used to Acquire Advertising - Media or Print

d. Amounts Expended for the Management of Real Property

e. Proceeds From the Transfer of an Account Receivable

f. Traditional Exclusions

(1) Proceeds From the Issuance of Stock or Debt

(2) Returned Merchandise

(3) Cash, In-Kind and Trade Discounts

(4) Tax Refunds

(5) Security Deposits

(6) Principal Portion of Loans

g. Property Received in a Like-Kind Exchange

h. Disposition of I.R.C. § § 1221(a) and 1231(b) Assets

(1) In General

(2) Hedging Transactions

(3) Treasury Function Assets

i. Insurance Proceeds

j. Certain Sales Finance Company Proceeds

k. Sales of Mortgages

l. Professional Employer Organizations

m. Floor Plan Assistance Charges

n. Amounts Received by an Individual, Estate, or Other Person Organized Exclusively for Estate or Gift Planning Purposes

o. Persons Organized to Conduct Investment Activity

p. Interest Income and Dividends from United States Obligations

q. Received and Deemed Received Amounts From Non-U.S. Persons

r. Excise Taxes Collected

(1) Sales or Use Tax Collected

(2) Excise Taxes on Cigarettes and Other Tobacco Products

(3) Excise Taxes on Motor Fuel

(4) Excise Taxes on Beer, Wine, and Intoxicating Liquor

(5) Communication, Video, Internet Access Fees or Taxes

(6) Excise Taxes on Energy

(7) Beverage Container Deposits

(8) Excise Tax on Airport Parking

s. Amounts Attributable to an Ownership Interest in a Pass-Through Entity

t. Regulated Investment Companies

u. Medicaid Premiums or Cost Reimbursements

4. Adjustment for "Purchases From Other Firms"

a. Inventory

(1) Included in the Definition of Inventory

(2) Excluded From the Definition of Inventory

b. Assets

c. Material and Supplies, Including Repair Parts, and Fuel

d. Industry Specific "Purchases From Other Firms"

(1) Staffing Companies

(2) Construction Contractors

(3) Theater Owners

(4) Real Estate Brokers and Appraisers

5. Deduction for Bad Debt

6. Deduction for Remaining Single Business Tax Business Loss Carryforward

7. Deduction for Receipts Attributable to Residential Rental Units in Qualified Housing Projects

D. Computation of the Tax on Insurance Companies

1. In General

2. Credits Allowed to Insurance Companies Under the MBT

E. Computation of the Tax on Financial Institutions

1. In General

2. Allocation and Apportionment

3. Credits Available to Financial Institutions

F. Computation of the Surcharge

1. In General

2. Insurance Companies

3. Financial Institutions

2150.05. SITUSING THE MBT

A. In General

1. Ability to Apportion

2. Apportionment Factor â€" Single Sales Factor

3. Sales of the Unitary Business Group

4. Exclusion From "Sales" for Apportionment Purposes

a. Casual, Isolated, or Occasional Sales

b. Sales That Generate Non-Business Income

B. Sales, Rents, and Royalties From Real Property

C. Sales, Rents, and Royalties From Tangible Personal Property

D. Sales of Electricity and Gas

E. Lease and Rental of Mobile Property

F. Sales, Rents, and Royalties From Intangibles

G. Sales of Services

H. Situsing Specific Services

1. Brokerage Services

2. Management of Regulated Investment Companies

3. Loan Origination Receipts

4. Loan Interest

a. Secured by Real Property

b. Not Secured by Real Property

5. Gain From the Sale of a Loan

6. Credit Card Receivables and Other Credit Card Related Receipts

7. Receipts From the Sale of Receivables

8. Loan Servicing Fees

9. Receipts From Investment Activities

10. Transportation Services

a. In General

b. Maritime Services

c. Transportation of Both Property and Individuals

d. Oil Pipeline Transportation

e. Gas Pipeline Transportation

f. Alternative Transportation Allocation

11. Telecommunications Services

a. In General

b. Postpaid Services

c. Prepaid Services

d. Private Telecommunications Services

e. Receipts From Billing and Other Ancillary Services

f. Network Access Fees and Sales of Telecommunication Services for Resale

12. Radio and Television Programming, Including Advertising

I. Alternative Calculation for Spun-Off Corporations

J. Alternative Situsing Methods

K. Insurance Company Receipts

L. Financial Institution Receipts

1. Gross Business Factor

2. Specific Elements of Gross Business Income

a. Credit Card Receivables

b. Credit Card Issuer Fees

c. Merchant Discounts

d. Loan Servicing Fees

e. Fees From Services

f. Receipts From Investment and Trading Activities

g. Interest Charged to Customers

h. Gains From the Sale of Loans

i. Receipts From Leasing Activities

2150.06. MANDATORY COMBINED REPORTING

A. In General

B. Definition of the Unitary Business Group

C. The Control Test

1. Controlled Groups of Entities

a. Parent-Subsidiary Controlled Group

b. Brother-Sister Controlled Group

c. Combined Controlled Group

d. Inclusion in More Than One Controlled Group of Entities

2. Ownership Interests That Confer Comparable Rights

3. Excluded Ownership Interests

4. Indirect Ownership Interests

a. Family Relationships

b. Attribution From Partnerships, Corporations, Trusts, and Estates

c. Attribution To Partnerships, Corporations, Trusts, and Estates

d. Options

e. Ownership by Two or More Persons

f. S Corporations

5. Foreign Persons

6. Controlled Group of Entities Without Common Control

7. Nonstock Nonprofit Organizations

D. The Relationship Test

1. In General

2. Flow of Value

3. Contribution/Dependency Test

4. Links in a Chain Doctrine

5. Instant Unity Under the MBT

E. Joint and Several Liability

F. Adding or Removing Members

2150.07. TAX CREDITS

A. Credits Under the Michigan Business Tax

B. Michigan Economic Growth Authority (MEGA) Credits

1. MEGA Payroll Credit

2. MEGA Job Retention Credit

3. MEGA Research and Development Credit

4. High Technology Business Credit

5. Anchor Company Credit

6. Federal Procurement Contract Credit

C. Renaissance Zones

1. Tax Incentives

a. Michigan Business Tax Credit

b. Individual Income Tax Deduction

c. Local Income Tax Deduction

d. Local Property Tax Exemptions

2. Industry Specific Renaissance Zones

a. Alternative Energy Renaissance Zone

b. Renewable Energy Renaissance Zones

c. Redevelopment Renaissance Zones

d. Pharmaceutical Recovery Renaissance Zone

e. Closed Military Base Renaissance Zones

f. Agricultural Processing Facility Renaissance Zones

g. Tool and Die Renaissance Recovery Zones

h. Forest Products Processing Facility Renaissance Zones

i. Border Crossing Facility Renaissance Zones

D. Research and Development Credit

E. Alternative and Renewable Energy Credits

1. Next Energy Authority Act

a. Business Activity Credit

b. Payroll Credit

c. Alternative Energy Zone

2. Photovoltaic Facility Credit

3. Polycrystalline Silicon Credit

4. Battery Technology Credits

a. Plug-In Traction Battery Pack Credit

b. Battery Pack Integration Engineering Credit

c. Vehicle Engineering Credit

d. Integrative Cell Manufacturing Facility Capital Investment Credit

e. Integrative Cell Manufacturing Facility Sourcing Credit

f. Large Battery Facility Credit

g. Advanced Lithium Ion Battery Credit

5. Hybrid Research and Development Credit

6. Service Station Conversion Credit

7. Renewable Energy Renaissance Zones

F. Redevelopment and Rehabilitation Credits and Incentives

1. Historic Property Rehabilitation Credits

a. Basic Historic Rehabilitation Credit

b. Additional Historic Rehabilitation Credit

c. High Community Impact Rehabilitation Plans

d. Use of Historic Rehabilitation Credits

2. Brownfield Redevelopment Credit

3. Industrial Personal Property Credit

G. Small Business and Business Formation Credits and Incentives

1. Small Business Alternative Tax Credit

2. Gross Receipts Credit

3. Business Start-Up Credit

4. Early Stage Venture Capital Credit

5. Entrepreneurial Credit

6. Private Equity Fund Credit

H. Personal Property Credits

1. Tangible Asset Investment Credit

2. Bonus Depreciation Credit

I. Employee Expense Credits

1. Compensation Tax Credit

2. Credit for Workers' Disability Compensation

J. Film Credits

1. Film Production Expenditures Credit

2. Film and Digital Media Infrastructure Project Credit

3. Film Job Training Credit

K. Credits for Charitable Contributions

1. Charitable Contributions Credit

2. Museums and Zoos Credit

3. Community and Education Foundations Credit

L. Miscellaneous Credits

1. Sports Stadium Credits

a. Motor Sports Complex Credit

b. Professional Sports Facility Credit

2. Hematite Ore Credit

3. New Motor Vehicle Dealer Credit

4. Large Exhibition Credit (International Auto Show)

5. Superstore Credits

6. Beverage Container Credit

7. Farmland Preservation Credit

M. Single Business Tax Credits

1. Enterprise Zone Credit

2. Apprenticeship Credit

3. Pharmaceutical Research Credit

4. Credit for Investment in Minorityâ€"Owned Businesses or MESBICs

5. Donated Automobile Credit

6. Credit for FUTA Increase

7. Transferred Jobs Credit

8. Unincorporated Business Credit

9. MEGA Distressed Business Credit

2150.08. GENERAL FILING REQUIREMENTS

A. Registration for the MBT

1. In General

2. Determination of Designated Taxpayer

B. Tax Periods, Returns, and Payments

1. Tax Periods in General

2. Quarterly and Estimated Returns and Payments

C. Quarterly Estimated Tax Payments

1. Statutory Method

2. Election for Taxpayers Using The Annualized Income Installment Method Provided In IRC § 6655(e)

3. First Tax Year of Less Than Twelve Months

4. Federal Election of Yearly Filing

5. Payments Required to Avoid Interest Charges

D. Final Return Due Date and Extensions

E. Amended Returns

F. Statute of Limitations for Seeking Refunds or Assessing Tax

G. Successor and Officer Liability

2150.09. ADMINISTRATION

Introductory Material

A. Distribution of Tax

B. Severability

2150.10. AUDITS, ASSESSMENTS AND APPEALS

A. Statute of Limitations

1. In General

2. Claims Based on Constitutional Grounds

B. Records and Confidentiality

C. Audits

D. Appeal of Assessments

1. Notice of Intent to Assess

2. Right to an Informal Conference

3. Appeal of Assessments or Denied Refund Claim

a. Tax Tribunal

b. Court of Claims

E. Duty to Refund Taxes

F. Collection of Assessed and Delinquent Taxes

1. Interest

2. Penalties

3. Liens

Working Papers

Item Description Sheet

Worksheet 1 Defining the Unitary Business Group Under the MBT - Frequently Asked Questions

Worksheet 2 Examples of Application of I.R.C. § 318 Attribution Rules - Frequently Asked Questions

Worksheet 3 Examples of Application of I.R.C. § 1563 Disregarded Interests - Frequently Asked Questions

Worksheet 4 Michigan Department of Treasury Nexus Questionnaire

Worksheet 5 BNA Survey of State Tax Departments: Michigan Questionnaire

Worksheet 6 Perspective: New, Five-Part Michigan Business Tax Replaces SBT, Leaving Many Questions Unanswered for Certain Taxpayers

Worksheet 7 Michigan Says ‘Goodbye Services Tax, Hello Surcharge' As Legislature Opts for an Unpredictable Revenue Stream

Bibliography