Tax Alert: Change from Michigan Business Tax to Corporate Income Tax: Effect on Fiscal Year Taxpayers
2/01/2012
Effective January 1, 2012, Michigan replaced the Michigan Business Tax (“MBT”) with the Michigan Corporate Income Tax (“CIT”). The CIT is an income tax on C Corporations and other businesses taxed, for Federal income tax purposes, as C corporations. The tax rate for the CIT is 6 percent. Flow-thru entities are not subject to CIT. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT.
Fiscal year taxpayers must file a final short-period MBT return for the period ending on December 31, 2011. The final MBT returns are due April 30, 2012. If an extension request, together with payment of any estimated tax due, is made on or before April 30, 2012, an extension of time to file the short-period return will be granted until the standard fiscal year due date. At the option of the taxpayer, any MBT overpayments from the final MBT return may either be refunded or carried forward and applied to the initial CIT return.
If a taxpayer’s CIT tax year ends before December 31, 2012, the tax may be computed by applying the CIT to the actual short-period tax year or as though the CIT were in effect for the taxpayer’s entire year and prorating the tax due. The choice between the annual and actual calculation methods applies only to the first year under the CIT. The calculation method chosen by the taxpayer for the first short-period of the CIT must be the same as the method used by the taxpayer in computing its final MBT return.
Fiscal year filers will have an initial short-period CIT return for 2012. Fiscal year filers will be granted an automatic extension for the 2012 fiscal year return until April 30, 2013. After the initial tax year, annual CIT returns will be due on the last day of the fourth month after the end of the taxpayer’s tax year.
Estimated payments are due on the 15th day of the fourth, seventh, and tenth months of the current tax year, and the 15th day of the first month of the next tax year. A taxpayer with a tax year of less than four months is not required to make estimated payments.
For more information on the Michigan CIT, please contact Harry Tuul, a senior manager in the Firm’s State and Local Tax Practice, at htuul@jhcohn.com or 973-364-7687, or Patrick J. Duffany, CPA, JD, partner and director of the Firm’s State and Local Tax Practice, at pduffany@jhcohn.com or 860-368-3607.
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and J.H. Cohn LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.