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Instructions for Form 4946

Schedule of Corporate Income Tax Liability for a Michigan Business Tax Filer

Sale or Sales means the amounts received by the taxpayer as

Purpose

consideration from the following:

To calculate the Corporate Income Tax (CIT) liability for

• The transfer of title to, or possession of, property that is stock

standard taxpayers filing a Michigan Business Tax (MBT)

in trade or other property of a kind which would properly

return.

be included in the inventory of the taxpayer if on hand at

A taxpayer calculates the business income and modified gross

the close of the tax period, or property held by the taxpayer

receipts tax bases of the MBT and applies all credits, including

primarily for sale to customers in the ordinary course of

certificated credits, deductions, and exemptions available under

its trade or business. For intangible property, the amounts

the MBT. Then, a taxpayer calculates the business income tax

received will be limited to any gain received from the

base under the CIT, applies all credits and deductions available

disposition of that property.

under the CIT and the amount of certificated credit allowed

• Performance of services which constitute business activities.

from the MBT. The amount of certificated credit allowed

• The rental, leasing, licensing, or use of tangible or intangible

from the MBT is the amount of nonrefundable credit needed

property, including interest, that constitutes business

to offset MBT liability plus the entire amount of a refundable

activity.

credit. If the result of both steps of the calculation is a negative

• Any combination of business activities described above.

number, the taxpayer will receive a refund of the lower

negative; but a nonrefundable credit cannot be used to reduce

• For taxpayers not engaged in any other business activities, sales

liability below zero. A taxpayer must pay the higher liability or

include interest, dividends, and other income from investment

take the lower refund.

assets and activities and from trading assets and activities.

Line-by-Line Instructions

Complete the Apportionment Calculation using amounts for

the taxpayer’s business activity only. Do not include amounts

Lines not listed are explained on the form.

received from a profits interest in a Partnership, S Corporation,

Public Law 86-272 Protection: If business activity is

or LLC.

protected under Public Law (PL) 86-272, leave lines 4 through

If a flow-through entity is unitary with the taxpayer, the

29 blank. For more information, please see the instructions to

group’s sales factor includes the sales of the flow-through

Part 2 of Form 4567.

entity. Sales between the taxpayer and flow-through entities

Name and Account Number: Enter the name and Federal

that are unitary with the taxpayer are eliminated.

Employer Identification Number (FEIN) as they appear on

Use the information in the “Sourcing of Sales to Michigan”

the corresponding copy of the Michigan Business Tax Annual

section of these instructions to determine Michigan sales.

Return (Form 4567).

There are two major differences in the apportionment

UBGs: Complete one Form 4946 for the group, with all

of a taxpayer’s MBT liability and the taxpayer’s CIT

numbers entered reflecting the total amount for all members in

comparison calculation. The first major difference concerns

the group.

the definition of “sales” and the treatment of royalties or other

income received for the use of computer software. Under the

Part 1: Apportionment Calculation

MBT, royalties or other income received for the use or for the

For a Michigan-based taxpayer, all sales are Michigan

privilege of using computer software is attributable to the state

sales unless the taxpayer is subject to tax in another state

in which the property is used by the purchaser. Under the CIT,

or foreign country. A taxpayer is subject to a tax in another

only the royalties or other income received for the use or for the

state or foreign country if the taxpayer is subject to a business

privilege of using custom computer software is attributable to

privilege tax, a net income tax, a franchise tax measured

the state in which the property is used by the purchaser. This

by net income, a franchise tax for the privilege of doing

difference should be reflected in the sales factors for MBT and

business, a corporate stock tax, or if the state or foreign

the CIT comparison calculation.

country has jurisdiction to subject the taxpayer to 1 or more

The second major difference concerns flow-through entities

of the above listed taxes. In that state, the taxpayer must

be subject to a business privilege tax, a net income tax, a

that are unitary with a taxpayer under the CIT. For purposes

of the MBT and the CIT comparison calculation, flow-through

franchise tax measured by net income, a franchise tax for the

privilege of doing business, or a corporation stock tax, or that

entities that are unitary with a CIT taxpayer are treated as

state has jurisdiction to subject the taxpayer to one or more of

members of the taxpayer’s unitary business group. Because of

this, the entire amount of Michigan and total sales of the flow-

such taxes regardless of whether the tax is imposed.

through entities that are unitary with the taxpayer, and minus

The CIT is based only on business activity apportioned to

eliminations, are included in line 1 and line 2 of this form,

Michigan. A taxpayer that has not established nexus with one

respectively.

other state or a foreign country is subject to the CIT on its

Line 1: Enter the Michigan sales that are directly attributable

entire business activity. Business activity is apportioned to

Michigan based on sales.

to the taxpayer.

Form 4946 - Schedule Of Corporate Income Tax Liability For A Michigan Business Tax Filer Page 3

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