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Instructions for Form 4575, Michigan Business Tax (MBT) Loss Adjustment

for the Small Business Alternative Credit

adjustment available for the UBG for both the ABI (Group

Purpose

Copy for ABI) and allocated income (separate member copy)

disqualifiers. For years in which a member was not part of the

To reduce the adjusted business income (ABI) or shareholder

allocated income to qualify for the Small Business Alternative

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

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

Credit (SBAC) or minimize the reduction percentage required.

consumed or extinguished.

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

immediately preceding the tax year for which a credit is being

If one or more members exceed the shareholder income

disqualifier, only those members with shareholder income

claimed, and the taxpayer received an SBAC under MBT for

disqualifiers must file a Form 4575, using member-only (pro

that same year, the taxpayer may adjust for the loss before

figuring eligibility for the SBAC. Business income for credit

forma) figures in lines 4 through 16 on each member form.

purposes is adjusted by using available loss from prior years

If the UBG’s ABI exceeds the threshold, one Form 4575 must be

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

filed to determine the UBG’s business income loss adjustment,

A loss adjustment will not affect a reduction to the SBAC

which will be calculated on a group basis (the Group Copy for

based on gross receipts that exceed $19,000,000. Also, it will

ABI, detailed below). For years in which a member was not part

not change the amount of compensation in column L for a C

of the UBG, the UBG will use that member’s available loss from

Corporation on the MBT Schedule of Shareholders and Officers

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

(Form 4577).

are extinguished. These amounts are calculated initially at the

NOTE: Use Part 2 to determine the loss available from the

member level but used and maintained for use in future years on

five preceding periods. Calendar year taxpayers will use

the Group Copy for ABI. Supporting 4575 forms must be filed

the five years prior to the tax year: 2013, 2012, 2011, 2010 and

by each member who has a loss available from the separate years

that is used against the UBG’s ABI disqualifier (member forms).

2009. Fiscal year taxpayers with no short federal tax years will

calculate using the fiscal years ending in 2014 and 2013, the short

For members who do not exceed the credit’s shareholder income

state period beginning January 1, 2012 and ending in 2012, the

threshold, only Part 2, lines 10 through 13, of Form 4575 need

short state period ending December 31, 2011, and the fiscal year

to be completed on the member form. For members who also

ending in 2011.

exceed the credit’s shareholder income threshold, lines 4 through

16 of the member form must be completed. Member forms must

NOTE: Although this form is formatted for Corporations, it

be completed using member-only figures.

can be used by other types of entities with minor adjustments.

Shareholder Income Disqualifier

See instructions for further details.

Any member whose shareholder income creates a partial

Special Instructions for Unitary Business

or complete disqualification, and that has loss available to

Groups (UBGs)

resolve that disqualification in whole or in part, must file Form

The ABI disqualifier must be calculated by the UBG by

4575. Leave lines 1 through 3 blank. Complete line 4 (using

a pro forma figure) and lines 5 through 16, all with data for the

combining the ABIs of its members. Likewise, to reduce

an ABI disqualifier of the UBG, loss adjustment must be

reporting member only. For years that the member was part of

the UBG, pro forma figures will be entered in lines 11 through

calculated on a group level and used against the group’s ABI.

13; however, the member cannot complete these lines for a tax

Loss used at the group level is independent of the loss available

year that it was part of the UBG and the UBG did not receive

at the member level.

the SBAC. The member may complete these lines for a tax year

Disqualifiers based on shareholder or partner allocated income

that it was not a member of the UBG and it received the SBAC,

must be determined on a member by member basis. If any

regardless of whether the UBG received the credit in that same

shareholder or partner has allocated income in excess of

year. Lines 14 through 16 on the member’s Form 4575 will reflect

$180,000, the loss adjustment must be calculated on a member

the usage of loss adjustment to resolve the allocated income

disqualifier only. The use of loss adjustment to resolve the ABI

by member basis for any and all members for which it may

apply. Loss used at a member level does not reduce the group’s

disqualifier will be maintained on the Group Copy for ABI.

available loss.

NOTE: If any member still has a total disqualification on this

NOTE: Members with available loss adjustment must complete

basis (greater than $180,000) after completing its own Form

a copy of Form 4575 using member data, referred to here as a

4575 as described above, the UBG is disqualified from the

SBAC. Do not proceed with these instructions. However, if each

member copy or member form. The combined UBG member

data is displayed on a separate Form 4575 identified as “Group

member’s shareholder income disqualification is fully resolved

Copy for ABI.” Details regarding the forms are addressed

or reduced to a partial disqualification by this method, continue

further in these instructions.

below to compute the groupwide ABI loss adjustment required.

NOTE: The usage of loss adjustment for one disqualifier does

Adjusted Business Income Disqualifier

not affect the available loss adjustment for the other disqualifier.

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

This form will accommodate the separate maintenance of loss

has ABI in excess of $1,426,100, the UBG must complete one

Form 4575 - Michigan Business Tax Loss Adjustment For The Small Business Alternative Credit - 2014 Page 3

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