Michigan Business Tax - Business Provisions

On May 25, 2011, Governor Snyder signed two bills that repeal the Michigan Business Tax (MBT), create a Corporate Income Tax (CIT) and revise many pieces of the Michigan Income Tax. Most provisions take effect January 1, 2012. 

Following are highlights of the bills that affect business taxes. 

• The MBT is repealed for years beginning on or after January 1, 2012, unless the taxpayer elects to continue to file under the MBT provisions.
• A 6% income tax will be levied on C Corporations, very similar to the income tax portion of the MBT.
• S Corporations, LLCs, partnerships and individuals with business activities will not be subject to the Business Tax. Shareholders, partners, members, sole proprietors and rental property owners would pay only the individual income tax on business income.
• Unitary filing, nexus and sales-based apportionment provisions of the MBT are retained, but applied only to C Corporations.
• The only credit allowed under the Corporate Income Tax (CIT) is the Small Business Alternate Tax Credit.
• A corporate taxpayer with long-term “certified” credits, i.e., Brownfield Redevelopment, Renaissance Zone, Farmland Preservation and other extended period credits, could elect to retain the credits and file under the MBT until their credits expire.  A buy-back option for taxpayers with Brownfield credits is available. 
• Businesses with fiscal years will file MBT returns through December 31, 2011, and, if applicable, Corporate Income Tax (CIT) for the remainder of their fiscal year after January 1, 2012.

Read the provisions that affect Michigan individual taxpayers.

The provisions of the new laws are quite extensive and will impact virtually all Michigan taxpayers. Contact your local Yeo & Yeo tax professional if you have questions or want to talk about strategies for minimizing your taxes for 2011 and beyond.