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Instructions for the Small Business Alternative Credit Calculation

for the Corporate Income Tax Worksheet

Tax Years Less Than 12 Months

Purpose

If the reported tax year is less than 12 months, gross

This worksheet is used to allow a taxpayer to calculate the CIT

receipts, adjusted business income, and shareholders’ or

Small Business Alternative Credit for standard taxpayers filing

officers’ compensation and share of business income must be

a Michigan Business Tax (MBT) return.

annualized to determine eligibility and reduction percentage. If

annualized gross receipts exceed $19,000,000 but do not exceed

Due to differences between the MBT Small Business

$20,000,000, annualize figures to compute the Reduction

Alternative Credit and the CIT Small Business Alternative

Based on Gross Receipts, lines 15 through 18.

Credit, a taxpayer must use this worksheet and may not use

MBT Common Credits for Small Businesses (Form 4571) when

NOTE: If a shareholder owned stock for less than the entire tax

calculating its CIT Small Business Alternative Credit.

year of the corporation, or an officer served as an officer less

A taxpayer is disqualified from taking the Small Business

than the entire tax year, shareholder compensation amounts must

be annualized when determining disqualifiers.

Alternative Credit under certain circumstances, which are

detailed below. Financial institutions and insurance companies

Annualizing

are not eligible for this credit

Multiply each applicable amount, total gross receipts, adjusted

business income, and shareholder and officer income by 12 and

Do not attach this worksheet or any supporting forms to the

MBT filing. A taxpayer must retain this worksheet and any

divide the result by the number of months in the tax year. If the

supporting forms in its records.

tax year is less than one month, consider the tax year to be one

month for the purposes of this calculation.

Eligibility for the Small Business Alternative

Loss Adjustment

Credit

If taxpayers are not eligible for the full Small Business

Taxpayers are not eligible for the Small Business Alternative

Alternative Credit due to an adjusted business income or

allocated income disqualifier, they may benefit from the CIT

Credit if any of the following conditions exist:

Loss Adjustment for the Small Business Alternative Credit (Form

• Gross receipts exceed $20,000,000.

4895). If the adjusted business income was less than zero in

• Adjusted business income after loss adjustment exceeds

any of the five years immediately preceding this filing period

$1,326,000 for Corporations (and LLCs federally taxed as

and Small Business Alternative Credit was received for that

such).

same year, the taxpayer may be able to reduce the current year’s

• Any shareholder or officer has allocated income after

adjusted business income or allocated income amounts by the

loss adjustment of over $180,000, as determined on the

loss. See Form 4895 for more details. Do not attach a copy of

CIT Schedule of Shareholders and Officers (Form 4894).

Form 4895 to the MBT filing. If a loss adjustment is used, the

(Retain a pro forma copy of Form 4894 for your records, if

taxpayer must retain a completed Form 4895 in its records. Do

necessary.)

not attach Form 4895 to this return.

UBGs: See “Special Instructions for UBGs” for Form 4895.

In addition, the Small Business Alternative Credit is reduced

if a shareholder or an officer has allocated income after loss

A loss adjustment will not prevent a reduction or elimination of

adjustment of more than $160,000 but less than $180,000. This

the Small Business Alternative Credit based on gross receipts

reduction is based on the officer/shareholder with the largest

that exceed $19,000,000. It will also not change the amount of

allocated income.

compensation on Form 4894, column L.

The Small Business Alternative Credit also is reduced if gross

NOTE: If using a loss adjustment, Form 4895 must be used

receipts exceed $19,000,000 but are not more than $20,000,000.

when using this worksheet to calculate the CIT Small Business

Allocated income is the greater of either:

Alternative Credit. This form must be used in place of Form

4571 due to the differences between the MBT Small Business

(a) Shareholders’ or officers’ compensation and director fees

Alternative Credit and the CIT Small Business Alternative

from Form 4894, column L, or

Credit.

(b) Shareholders’ compensation, director fees, and share of

business income (or loss) after loss adjustment, from Form

Special Instructions for UBGs

4894, column N.

UBGs calculate the gross receipts and adjusted business

If either (a) or (b) is greater than $180,000, the Corporation

income disqualifiers at the UBG level without eliminating

intercompany transactions. For a UBG to claim a Small

is not eligible for the Small Business Alternative Credit. In

addition, if either (a) or (b) is more than $160,000 but not more

Business Alternative Credit, each member of the UBG that is

a corporation (including an entity taxed federally as such) must

than $180,000, the Corporation must reduce the Small Business

complete Form 4894, column L. Retain a completed Form 4895

Alternative Credit based on the officer or shareholder with the

in your records; do not attach Form 4895 to this return.

largest allocated income.

Form 4946 - Schedule Of Corporate Income Tax Liability For A Michigan Business Tax Filer Page 7

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