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Instructions for Form 4570, Michigan Business Tax (MBT)

Credits for Compensation, Investment, and Research and Development

PA 282 of 2014 provides for a change to the Investment Tax Credit (ITC) Recapture. For assets purchased, acquired, or

transferred into Michigan in a tax year beginning after December 31, 2007, that were sold or otherwise disposed of, or

transferred outside Michigan during the tax year, recapture is now required to the extent and at the rate the credit was

used under the MBT. Taxpayers need to take special care completing lines 10 through 19 of this form, and should use the

instructions for those lines in this section. DO NOT follow the instructions on the face of the form for lines 10-19.

PART 1: COMPENSATION CREDIT

Purpose

UBGs: If the taxpayer is a UBG, the Compensation Credit is

To claim the Compensation Credit, Investment Tax Credit

calculated on the combined Michigan compensation of the

(ITC), and the Research and Development Credit calculated

UBG members. Intercompany transactions are not eliminated

here and carried to the MBT Nonrefundable Credits Summary

for this purpose.

(Form 4568).

Line 2: Enter compensation paid in the tax year on behalf of

NOTE: This form may be used by standard taxpayers to

or for the benefit of employees, officers, or directors as defined

claim eligible credits and by financial institutions to claim

in Michigan Compiled Laws 208.1107(2). Generally, under

the Compensation Credit only. Insurance companies use the

this definition, compensation includes, but is not limited to,

Miscellaneous Credits for Insurance Companies (Form 4596)

payments that are subject to or specifically exempt or excepted

to claim credits for which they may be eligible.

from withholding under Internal Revenue Code (IRC) § 3401

The Compensation Credit and ITC together are limited to

through § 3406.

52 percent of the pre-surcharge total tax liability. The Research and

Compensation also includes fringe benefits and any earnings

Development Credit, combined with the Compensation Credit and

that are net earnings from self-employment, as defined under

ITC, are limited to 65 percent of the pre-surcharge tax liability.

IRC § 1402, of the taxpayer, partner, or Limited Liability

Company member of the taxpayer. Wages, salaries, fees,

This form will also determine an ITC recapture that potentially

bonuses, commissions, and other payments made in the tax

could increase the tax liability.

year on behalf of or for the benefit of employees, officers, or

NOTE: Beginning January 1, 2012, only those taxpayers

directors, as well as net earnings from self-employment, must

with a certificated credit, which is awarded but not yet fully

be reported on a cash basis.

claimed or utilized, may elect to be MBT taxpayers. If a

Payments made to a pension plan, retirement or profit sharing

taxpayer files an MBT return and claims a certificated credit,

the taxpayer makes the election to file and pay under the MBT

plan, employee insurance plans, and payments under health and

welfare benefit plans, as well as the administration fees paid for

until the certificated credit and any carryforward of that credit

are exhausted. A taxpayer making a valid certificated credit

the administration of the health and welfare benefit plan, are

compensation. Compensation also includes certain payments

election may also claim the credits on this form.

made by licensed taxpayers that are statutorily identified. These

Special Instructions for Unitary Business Groups

compensation payments are calculated on a cash or accrual basis

consistent with the taxpayer’s method of accounting for federal

Credits are earned and calculated on either an entity-specific or

income taxes. The statute provides for certain exclusions from

group basis, as determined by the relevant statutory provisions

compensation, including employee discounts on merchandise

for the respective credits. The credits on this form are

and services, payments for State and federal unemployment

calculated on a group basis. Intercompany transactions are not

compensation and federal insurance contributions, and payments

eliminated for the calculation of any credits. Assets transferred

made to most independent contractors.

between members of the group are not considered capital

Expenses incurred for the benefit of the taxpayer rather than for

investments in qualifying assets for purposes of calculating

the benefit of employees of the taxpayer are not compensation.

the ITC in Part 2. Credits are generally applied against the

tax liability of the Unitary Business Group (UBG), unless

Noncompensation expenses might include payments reported

otherwise specified by statute.

on a Form 1099 to an employee for the rental of a building or

for interest income.

Complete one Form 4570 for the group.

This credit is calculated on the taxpayer’s Michigan

Line-by-Line Instructions

compensation.

Lines not listed are explained on the form.

Compensation is “in this state” if (a) the individual’s service

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

is performed entirely within Michigan, or (b) the individual’s

service is performed both within Michigan and outside

Name and Account Number: Enter name and account number

Michigan, but the services performed outside Michigan are

as reported on page 1 of the applicable MBT annual return

incidental to the individual’s service within Michigan.

(either the MBT Annual Return (Form 4567) for standard

taxpayers or the MBT Annual Return for Financial Institutions

Example 1: Sales Co. employs Salesperson whose territory

(Form 4590)).

includes both Detroit, Michigan, and Toledo, Ohio. Salesperson

Form 4570 - Business Tax Credits For Compensation, Investment, And Research And Development - 2014 Page 5

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