Michigan Department of Treasury Mails Flow-Through Withholding Notices

The State of Michigan has taken steps to implement some of the changes in Michigan business and individual taxation taking effect in 2012. Most recently the Michigan Department of Treasury mailed notices about the 2012 Flow-Through Withholding Quarterly Return. The notice explains that new withholding requirements have been placed on flow-through entities that have C Corporation owners, and reminds them that the Income Tax Act requires flow-through entities with non-resident owners to withhold Michigan income tax. 

The notice goes on to state that “based on past filings with the Michigan Department of Treasury, your business has been identified as having the obligation to file a quarterly flow-through withholding return beginning in 2012.” Unfortunately, their screening process for “past filings” was designed to ensure they didn’t miss any potential withholding violators. They appear to have selected all flow-through entities, whether or not there was a C Corporation or non-resident owner. As a result, virtually all entities registered to do business in the State of Michigan as a flow-through entity will receive the above notice and have been placed on Treasury’s “flow-through withholding registry.” Further, as the year progresses, Treasury will expect to see quarterly filings of Form 4917, 2012 Michigan Flow-Through Withholding Quarterly Returns. 

To remove a business from the withholding registry, the taxpayer must file Form 163, Notice of Change or Discontinuance, completing “Part 1: Business Information” and in “Part 3: Change Tax Type” mark delete (DEL) for “Flow-Through Withholding.” The Form should be signed, dated and mailed to Treasury’s Registration Unit using the address provided on the Form as soon as possible.