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Instructions for Form 4895, Corporate Income Tax (CIT) Loss Adjustment

for the Small Business Alternative Credit

or extinguished. For the purposes of completing Part 2, if a

Purpose

member’s separate year does not share a common year end

To reduce the adjusted business income (ABI) or shareholder

with the UBG, use a separate column for that member. If some

allocated income to qualify for the Small Business Alternative

members’ separate years share a common year end, total the

Credit (SBAC) or minimize the reduction percentage required.

amount of those members’ available loss in a single column.

Arrange all of the columns in chronological order. If additional

If the ABI was less than zero in any of the five years

columns are needed to accommodate the five preceding periods,

immediately preceding the tax year for which a credit is

create and attach a table comparable to that found in lines 4

being claimed, and the taxpayer received an SBAC under

through 10. Apply to that custom table the calculations described

the Michigan Business Tax (MBT), or an SBAC under the

in the form text and instructions for lines 4 through 10.

Corporate Income Tax (CIT) for that same year, the taxpayer

may adjust for the loss before figuring eligibility for the

Loss adjustment used for the ABI disqualifier from a member’s

separately filed years should be tracked in the taxpayer’s

current period SBAC. Business income for credit purposes

is adjusted by using available loss from prior years on a first-

records. Any ABI loss adjustment remaining from a member’s

in, first-out basis until those losses are consumed (by use) or

separately filed years will be available to that member in the

extinguished (by age). A loss adjustment will not affect a

event the member leaves the UBG prior to complete usage of

reduction to or elimination of the SBAC based on gross receipts

the available loss adjustment by the UBG, or expiration due to

that exceed $19,000,000. Also, it will not change the amount

age. See the “Supplemental Instructions for Standard Members

in UBGs” section in Form 4890 for details.

of compensation in column L for a C Corporation on the CIT

Schedule of Shareholders and Officers (Form 4894).

Line-by-Line Instructions

Special Instructions for Unitary Business

Lines not listed are explained on the form.

Groups (UBGs)

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

The ABI threshold must be calculated by the UBG by combining

the ABIs of its members. Likewise, to reduce an ABI disqualifier

Name and Account Number: Enter name and account number

of the UBG, loss adjustment must be calculated on a group level

as reported on page 1 of the CIT Annual Return (Form 4891).

and used against the group’s ABI. Loss used at the group level is

Also, the taxpayer FEIN from the top of page 1 must be

independent of the loss available at the member level.

repeated in the proper location on page 2.

NOTE: The usage of loss adjustment for one disqualifier does

UBGs: Enter the DM’s name in the Taxpayer Name field and

not affect the available loss adjustment for the other disqualifier.

FEIN on the FEIN line.

This form will accommodate the separate maintenance of

Part 1: Current Year Amounts for ABI Disqualifier

loss adjustment available for the UBG for both the ABI and

Use Part 1 and Part 3 to determine the amount of loss

allocated income disqualifiers.

adjustment necessary to qualify for the SBAC.

For years in which a member was not part of the UBG,

If the taxpayer is not eligible for the credit because its ABI

the UBG will use that member’s available loss from those

exceeds $1,346,800, complete lines 1 through 10.

separate years on a first-in, first-out basis until those losses are

consumed or extinguished.

Tax Year Less Than 12 Months: Business income and

shareholder disqualifiers must be calculated on an annualized

Adjusted Business Income Disqualifier

basis. Enter annualized numbers on lines 1, 11, and 13.

This disqualifier is calculated at the group level. If the UBG

Annualizing

has a group wide ABI of $1,346,800 or more then the entire

UBG is disqualified.

To annualize, multiply each applicable amount, ABI, or

shareholder compensation, by 12 and divide the result by the

In the Taxpayer Name field at the top of the page, enter the

number of months in the tax year.

Designated Member’s (DM’s) name followed by the DM’s

Federal Employer Identification Number (FEIN).

UBGs: For UBG members reporting a period of less than 12

months with the group return, annualization is done using the

To reduce the UBG’s ABI disqualifier, the group will use its

member’s number of months in the group’s tax year. Sum the

available loss from a prior tax period when the UBG received

annualized member figures (when applicable) to get the group’s

the SBAC, as well as a member’s available loss from a tax

total annualized figure.

year when it received the SBAC and was not part of the UBG

Part 2: Available Loss for ABI Disqualifier

(member’s separate year). However, the group may not use

Use Part 2 to determine the loss available from the five

a member’s separately calculated available loss for a tax year

when the member was part of the UBG under MBT to reduce

preceding periods. Report the loss amount as a positive number.

the group’s ABI disqualifier.

Complete lines 4 through 10, one column at a time. Complete

To reduce the UBG’s ABI disqualifier, available loss is used

only columns for periods that reported a loss and received an

on a first-in, first-out basis until those losses are consumed

SBAC. If the taxpayer did not have a loss or did not receive a

Form 4895 - Michigan Corporate Income Tax Loss Adjustment For The Small Business Alternative Credit - 2014 Page 3

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