Weekly Round-Up: Nexus Standards for Flow-Through Entities Under Michigan's New CIT


With the enactment of the Corporate Income Tax (CIT), Michigan leads the states with an aggressive nexus standard with respect to flow-through entities and their nonresident owners, Lynn A. Gandhi, of Honigman Miller Schwartz and Cohn , explains in this week’s issue of the Bloomberg BNA Weekly State Tax Report. This standard is coupled with extensive flow-through entity withholding requirements.

On Jan. 29, 2014, the Michigan Department of Treasury issued Revenue Administrative Bulletin (“RAB”) 2014-5 “Michigan Corporate Income Tax Nexus Standards”to provide taxpayers guidance on the nexus standards for the relatively new CIT, Gandhi says . The RAB provides interpretation on the CIT's nexus standards that were effective Jan. 1, 2012, and thus, appears to be retroactive in effect, Gandhi writes .

The RAB provides three alternative ways in which a taxpayer has nexus under the CIT, one of which is through an ownership interest or beneficial interest standard based on an interest in a flow-through entity doing business in the state.

Although future rules or case law will be necessary to flesh out the incongruity that is apparent in the new guidance provided by the department, Gandhi writes .

Concurrent with the enactment of the CIT, the state also enacted tough new withholding requirements for flow-through entities operating in Michigan, Gandhi explains .

Check out Gandhi’s article, which provides a closer look at the RAB and the new withholding requirements here .

In other developments…

State Sales Tax Jurisdictions Approach 10,000 , by the Tax Foundation

State Tax Revenues Slip Back to Slower Growth , by The Nelson A. Rockefeller Institute of Government

States’ Response to Storms and Disasters , by the National Association of State Budget Officers

Compiled by Priya D. Nair
Follow us on Twitter at:
 @BBNATax
Join BNA's State Tax Group on LinkedIn here .