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Instructions for Form 4946

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

The CIT is based only on business activity apportioned to

Purpose

Michigan. A taxpayer that has not established nexus with one

To calculate the Corporate Income Tax (CIT) liability for

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

standard taxpayers filing a Michigan Business Tax (MBT)

entire business activity. Business activity is apportioned to

return.

Michigan based on sales.

A taxpayer calculates the business income and modified gross

Sale or Sales means the amounts received by the taxpayer as

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

consideration from the following:

certificated credits, deductions, and exemptions available under

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

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

in trade or other property of a kind which would properly

base under the CIT, applies all credits and deductions available

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

under the CIT and the amount of certificated credit allowed

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

from the MBT. The amount of certificated credit allowed

primarily for sale to customers in the ordinary course of

from the MBT is the amount of nonrefundable credit needed

its trade or business. For intangible property, the amounts

to offset MBT liability plus the entire amount of a refundable

received will be limited to any gain received from the

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

disposition of that property.

number, the taxpayer will receive a refund of the lower

• Performance of services which constitute business activities.

negative; but a nonrefundable credit cannot be used to reduce

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

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

take the lower refund.

property, including interest, that constitutes business

activity.

Line-by-Line Instructions

• Any combination of business activities described above.

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

Lines not listed are explained on the form.

include interest, dividends, and other income from investment

Public Law 86-272 Protection: If business activity is

assets and activities and from trading assets and activities.

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

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

Complete the Apportionment Calculation using amounts for

Part 2 of Form 4567.

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

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

Name and Account Number: Enter the name and Federal

Employer Identification Number (FEIN) as they appear on

or LLC.

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

the corresponding copy of the Michigan Business Tax Annual

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

Return (Form 4567).

entity. Sales between the taxpayer and flow-through entities

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

numbers entered reflecting the total amount for all members in

that are unitary with the taxpayer are eliminated.

the group.

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

section of these instructions to determine Michigan sales.

Recent statutory change: Under PA 233 of 2013, if this

taxpayer has a non-unitary ownership interest in a flow-through

There are two major differences in the apportionment

entity (FTE) that has a valid election to continue filing MBT,

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

distributive share items allocated to this taxpayer by that

comparison calculation. The first major difference concerns

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

FTE should not be included in the amounts entered on lines 4

through 29.

income received for the use of computer software. Under the

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

Part 1: Apportionment Calculation

privilege of using any computer software is attributable to the

For a Michigan-based taxpayer, all sales are Michigan sales

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

unless the taxpayer is subject to tax in another state or foreign

the CIT, only the royalties or other income received for the

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

use or for the privilege of using custom computer software is

country if the taxpayer is subject to a business privilege tax, a net

attributable to the state in which the property is used by the

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

purchaser. This difference should be reflected in the sales

tax for the privilege of doing business, a corporate stock tax,

factors for MBT and the CIT comparison calculation.

or if the state or foreign country has jurisdiction to subject the

The second major difference concerns flow-through entities

taxpayer to 1 or more of the above listed taxes. In that state, the

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

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

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

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

entities that are unitary with a CIT taxpayer are treated as

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

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.

Form 4946 - Schedule Of Corporate Income Tax Liability For A Michigan Business Tax Filer - 2014 Page 3

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