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Instructions for Form 4570, Michigan Business Tax (MBT)

Credits for Compensation, Investment, and Research and Development

Fiscal Year Filers: See “Supplemental Instructions for Standard Fiscal MBT Filers” on page 145.

Compensation also includes fringe benefits and any earnings

Purpose

that are net earnings from self-employment, as defined under

To claim the Compensation Credit, Investment Tax Credit

IRC § 1402, of the taxpayer, partner, or Limited Liability

(ITC), and the Research and Development Credit calculated

Company member of the taxpayer. Wages, salaries, fees,

here and carried to the MBT Nonrefundable Credits Summary

bonuses, commissions, and other payments made in the tax

(Form 4568).

year on behalf of or for the benefit of employees, officers, or

directors, as well as net earnings from self-employment, must

Note: This form may be used by standard taxpayers to

be reported on a cash basis.

claim eligible credits and by financial institutions to claim

the Compensation Credit only. Insurance companies use the

Payments made to a pension plan, retirement or profit sharing

Miscellaneous Credits for Insurance Companies (Form 4596)

plan, employee insurance plans, and payments under health and

to claim credits for which they may be eligible.

welfare benefit plans, as well as the administration fees paid for

the administration of the health and welfare benefit plan, are

The Compensation Credit and ITC together are limited to

compensation. Compensation also includes certain payments

52 percent of the pre-surcharge total tax liability. The Research and

made by licensed taxpayers that are statutorily identified. These

Development Credit, combined with the Compensation Credit and

compensation payments are calculated on a cash or accrual basis

ITC, are limited to 65 percent of the pre-surcharge tax liability.

consistent with the taxpayer’s method of accounting for federal

This form will also determine an ITC recapture that potentially

income taxes. The statute provides for certain exclusions from

could increase the tax liability.

compensation, including employee discounts on merchandise

and services, payments for State and federal unemployment

Special Instructions for Unitary Business Groups

compensation and federal insurance contributions, and payments

made to most independent contractors.

Credits are earned and calculated on either an entity-specific or

group basis, as determined by the relevant statutory provisions

Expenses incurred for the benefit of the taxpayer rather than for

for the respective credits. The credits on this form are

the benefit of employees of the taxpayer are not compensation.

calculated on a group basis. Intercompany transactions are not

Noncompensation expenses might include payments reported

eliminated for the calculation of most credits. However, assets

on a Form 1099 to an employee for the rental of a building or

transferred between members of the group are not considered

for interest income.

capital investments in qualifying assets for purposes of

This credit is calculated on the taxpayer’s Michigan compensation.

calculating the ITC in Part 2. Credits are generally applied

against the tax liability of the Unitary Business Group (UBG),

Compensation is “in this state” if (a) the individual’s service

unless otherwise specified by statute.

is performed entirely within Michigan, or (b) the individual’s

service is performed both within Michigan and outside

Complete one Form 4570 for the group.

Michigan, but the services performed outside Michigan are

Line-by-Line Instructions

incidental to the individual’s service within Michigan.

Lines not listed are explained on the form.

example 1: Sales Co. employs Salesperson whose territory

includes both Detroit, Michigan, and Toledo, Ohio. Salesperson

Dates must be entered in MM-DD-YYYY format.

calls on customers located in both Michigan and Ohio. The

Name and Account Number: Enter name and account number

compensation paid to Salesperson is not “compensation in this

as reported on page 1 of the applicable MBT annual return

state” because Salesperson’s activity is not limited solely to

(either the MBT Annual Return (Form 4567) for standard

Michigan, and calling on customers in Ohio is not incidental to

taxpayers or the MBT Annual Return for Financial Institutions

Salesperson’s activity in Michigan.

(Form 4590)).

example 2: Manufacturer employs Engineer at its Michigan

PART 1: COMPENSATION CREDIT

facility. Several times a year, Engineer travels out of state to meet

with suppliers. Although Engineer performs services both within

UBGs: If the taxpayer is a UBG, the Compensation Credit is

Michigan and outside Michigan, Engineer’s out-of-state services

calculated on the combined Michigan compensation of the

are incidental to Engineer’s services within Michigan. The

UBG members. Intercompany transactions are not eliminated

compensation paid to Engineer is “compensation in this state.”

for this purpose.

PART 2: INVESTMENT TAX CREDIT

Line 2: Enter compensation paid in the tax year on behalf of

Use Part 2 to determine the total eligible acquisitions and

or for the benefit of employees, officers, or directors as defined

in Michigan Compiled Laws 208.1107(2). Generally, under

dispositions for the filing period. Complete Tables 1 through 6

this definition, compensation includes, but is not limited to,

(lines 35 through 42) before completing lines 4 through 16. If

more space is needed for any assets acquired, sold, or disposed

payments that are subject to or specifically exempt or excepted

of in this tax year, include additional copies of page 3 or page

from withholding under Internal Revenue Code (IRC) § 3401

through § 3406.

4 (as applicable) of the form identifying the name and account

Form 4570 - Michigan Business Tax Credits For Compensation, Investment, And Research And Development - 2011 Page 5

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