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4913, Page 3

NOTE: An insurance company is not required to file an annual

negative business income taxable amount after allocation or

apportionment. A taxpayer may use available business loss

CIT return if current year liability is $100 or less.

incurred under the CIT after December 31, 2011. For more

Foreign and alien insurers may be liable for the Retaliatory Tax

guidance on business loss, see instructions for Form 4891.

under Section 476a of the Insurance Code and must look to the

laws of their state of incorporation (or port of entry) to make

Some C Corporations may find that business income may be

the appropriate calculation. Insurance companies must pay the

approximated using monthly profit and loss statements. To the

greater of the CIT or the Retaliatory Tax.

extent that a C Corporation’s tax base arises from interests in

flow-through entities (FTEs) that make withholding payments

Financial Institutions

on behalf of the corporation, the corporation may choose

In lieu of other taxes imposed by CIT, every financial

to reduce its estimated payments accordingly. Ultimately,

institution with nexus in Michigan is subject to a franchise tax

however, the corporation is responsible for adequate,

imposed on its tax base, after allocation or apportionment, at

timely payments toward its corporate income tax liability.

the rate of 0.29 percent.

Therefore, if the FTE fails for any reason to make the expected

NOTE: A financial institution is not required to file an annual

withholding payments, causing the C Corporation’s account

CIT return if current year liability is $100 or less.

to be underpaid, the corporation may be assessed penalty and

interest for underpaid estimates.

A financial institution is defined as:

NOTE: Under Public Act 158 of 2016, flow-through

• A bank holding company, a national bank, a state chartered

withholding is repealed effective for FTEs with tax years

bank, a state chartered savings bank, a federally chartered

beginning after June 30, 2016.

If a CIT taxpayer has

savings association, or a federally chartered Farm Credit

business income attributable to a distributive share of income

System institution.

of an FTE whose tax year begins after June 30, 2016, the CIT

• Any entity, other than an insurance company subject to the

taxpayer will not have withholding from that FTE to claim on

tax imposed under Chapter 12 of the Income Tax Act, who

its annual return. The CIT taxpayer should consider this when

is directly or indirectly owned by an entity described in the

determining its quarterly estimated payments.

preceding bulleted item and is a member of the UBG.

• A UBG made up of the entities described above.

Insurance Companies

The tax base of a financial institution is the financial

Under CIT, insurance companies are subject to a 1.25 percent

institution’s net capital, which is equity capital as computed in

tax on gross direct premiums written on property or risk located

accordance with generally accepted accounting principles, with

or residing in Michigan with certain exclusions, including:

certain adjustments. Capitalization of an insurance company

• Premiums on policies not taken.

subsidiary that is in excess of 125 percent of the minimum

• Returned premiums on canceled policies.

regulatory capitalization requirements is included in net

• Receipts on sales of annuities.

capital. (The amount capitalized would be carried on the books

of the insurance company subsidiary as an asset.) Deductions

• Receipts on reinsurance premiums if the tax has been paid

are allowed for the average daily book value of United States

on the original premiums.

and State of Michigan obligations.

• The first $190,000,000 of disability insurance premiums

NOTE: If a financial institution does not maintain its books

written in Michigan, other than credit insurance and

and records in accordance with generally accepted accounting

disability income insurance premiums, reduced by two

principles, net capital may be computed in accordance with the

dollars for each dollar by which the gross direct premiums

books and records used by the financial institution, so long as

from insurance carrier services, both within and without

the method fairly reflects the financial institution’s net capital

Michigan, exceed $280,000,000.

for purposes of CIT.

Credits may be claimed against the tax for amounts paid to

Net capital is determined by averaging the financial

the following, using the assessments from the immediately

institution’s net capital as of the close of the current tax year

preceding tax year:

with the preceding four tax years. This calculation is modified

• Michigan Workers’ Compensation Placement Facility

if a financial institution has been in existence for less than five

• Michigan Basic Property Insurance Association

tax years. The statute provides additional guidance for mergers

and acquisitions.

• Michigan Automobile Insurance Placement Facility

• Property and Casualty Guaranty Association

The tax base of financial institutions whose business activities

are subject to tax both within and outside Michigan is

• Michigan Life and Health Guaranty Association.

apportioned by the gross business factor, utilizing rules set in

In addition, credits are available for 50 percent of examination

statute. Gross business means the sum of the following:

fees paid during the tax year, and 100 percent of the

• Fees, commissions, or other compensation for financial

amount paid during the tax year pursuant to Section 352

services.

of the Worker’s Disability Compensation Act of 1969, as

certificated by the director of the Bureau of Worker Disability

• Net gains, not less than zero, from the sale of loans and

Compensation.

other intangibles.

Instructions For Form 4913 - Michigan Corporate Income Tax (Cit) Quarterly Return - 2017 Page 3

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