Form 4919 - Michigan Schedule Of Unitary Apportionment For Flow-Through Withholding - 2014 Page 2
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4Instruction for Form 4919
Schedule of unitary Apportionment for Flow-Through Withholding
The denominator must include the total sales everywhere of
Purpose
the CIT taxpayer, the proportionate share of the total sales
To allow a flow-through entity that is unitary with a Corporate
everywhere of the flow-through entity filing this return, and the
proportionate share of the total sales everywhere of other flow-
Income Tax (CIT) taxpayer to calculate the distributive
business income that is subject to Flow-Through Withholding
through entities that are unitary with the CIT taxpayer and the
flow-through entity filing this return.
(FTW) for its members that are C Corporations and the CIT
taxpayer it is unitary with.
This combined sales factor can be calculated using the
This form will also allow a flow-through entity that withholds
following equations:
on a non-resident individual for purposes of the Individual
Numerator = [(CIT taxpayer’s ownership percentage of the
Income Tax (IIT) who will report income using combined
flow-through entity) x (flow-through entities’ Michigan sales –
apportionment for unitary flow-through entities to calculate the
Michigan sales eliminations)] + (CIT taxpayer’s Michigan sales
distributive business income using a combined sales factor.
– Michigan sales eliminations)
Filing When unitary for CIT or IIT
Denominator = [(CIT taxpayer’s ownership percentage of the
flow-through entity) x (flow-through entities’ total sales – total
The entire amount of a Michigan-based flow-through entity’s
sales eliminations)] + (CIT taxpayer’s total sales – total sales
business income is subject to FTW unless the flow-through
entity is subject to tax in another state or foreign country. If the
eliminations)
flow-through entity is subject to tax in another state or foreign
Ultimately, the apportionment percentage used by the flow-
country, then its business income that is subject to FTW is
through entity to apportion the distributive shares of business
apportioned to Michigan. Generally, if the flow-through entity
income received by its C Corporation members will be the
is subject to tax in another state or foreign country, it will
same apportionment percentage that will be used by that C
apportion its business income to Michigan using the flow-
Corporation when computing its CIT liability. This also means
through entity’s sales factor. The flow-through entity’s sales
that if the flow-through entity is owned by two C Corporations,
factor is a fraction. The numerator is the flow-through entity’s
one of which is unitary with the flow-through entity, the
flow-through entity must use separate sales factors for each
sales that have been sourced to Michigan and the denominator
is the flow-through entity’s total sales.
C Corporation. This form allows the flow-through entity to
apportion its distributive share of business income using these
Flow-Through Entities unitary with a CIT Taxpayer
two, separate sales factors.
If the flow-through entity is unitary with a CIT taxpayer, then
it will use a combined sales factor to apportion the distributive
Flow-through Entities Withholding on an Individual
share of business income for that unitary CIT taxpayer. The
Who Will Report Income using Combined
flow-through entity will be unitary with a CIT taxpayer if:
Apportionment for unitary Flow-through Entities
If the flow-through entity withholds on an individual who
• The CIT taxpayer owns or controls, directly or indirectly,
more than 50 percent of the ownership interest of the flow-
will report income using combined apportionment for unitary
flow-through entities, the flow-through entity filing this return
through entity with voting rights or ownership interests that
will use a combined sales factor to apportion the distributive
confer comparable rights to voting rights and
share of business income attributable to the individual member.
• The CIT taxpayer and flow-through entity have business
The filer need only use this method when the individual will
activities or operations which result in a flow of value
report income using combined apportionment for unitary flow-
between the CIT taxpayer and the flow-through entity, or
through entities.
between the flow-through entity and another flow-through
An individual owner of flow-through entities may elect to
entity unitary with the taxpayer, or has business activities or
apportion the business income of its flow-through entities on
operations that are integrated with, are dependent upon, or
contribute to each other.
a separate entity basis or a unitary basis. The individual may
elect combined apportionment when the business operations
If the unitary requirements are satisfied, then the numerator
of the flow-through entities show (1) economic realities;
of the sales factor used to apportion the flow-through entity’s
(2) functional integration; (3) centralized management; (4)
business income must include the Michigan sales of the unitary
economies of scale; and (5) substantial mutual interdependence.
CIT taxpayer, the proportionate share of the Michigan sales of
These factors are not exhaustive or exclusive, and the ability to
the flow-through entity filing this return, and the proportionate
elect combined apportionment will depend on the totality of the
share of the Michigan sales of other flow-through entities that
circumstances.
are unitary with the CIT taxpayer and the flow-through entity
filing this return. Also, all sales between the CIT taxpayer and
If the individual will report income using combined
apportionment for unitary flow-through entities, the numerator
the flow-through entities unitary with that CIT taxpayer must
of the combined sales factor must include the Michigan sales
be eliminated when calculating the combined sales factor for
of the flow-through entities for which the individual member
these entities.
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