Michigan Corporate Income Tax Annual Return For Financial Institutions - 2012 Page 6
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30generally treats those related persons as if they were one. There
For information on nexus, and other CIT issues, see the
Michigan Department of Treasury (Treasury) Web site at
are specific tests, discussed below, to determine whether two or
(Click on the “Corporate Income
more business entities are sufficiently connected by ownership
Tax” on the left side of the page.) Treasury will post updates
and business relationships to be treated as a group.
here and via Revenue Administrative Bulletin (available on the
If those tests are satisfied and a UBG is found to exist, in most
“Reference Library” link on the left side of the page).
cases the members of that UBG will file a single CIT return.
One member will be designated as the group’s representative
For a taxpayer using Form 4908, first complete lines 1 through
for filing the return and corresponding with Treasury. Included
20, which is sufficient to calculate total liability before
in that return will be separate forms that report income,
recapture of Certain Business Tax Credits. At that point, if any
deductions, and activities separately by member, and then the
recapture of credits exists begin the CIT Schedule of Recapture
combined amounts are entered on the Form 4891. References
of Certain Business Tax Credits (Form 4902).
in the instructions to “the taxpayer” generally will refer to the
group rather than any one of its members.
Further General Guidance
This is a simplification for introductory purposes, and there
For purposes of CIT, taxpayer means a C Corporation,
insurance company, financial institution, or a unitary business
are many details and exceptions described throughout the CIT
group liable for tax, interest, or penalty.
forms and instructions. In particular, tax credits, transactions
between members, and the presence of financial institutions or
A Unitary Business Group (UBG) is a group of United
insurance companies in the group require careful attention.
States persons that are corporations, insurance companies, or
One key issue in dealing properly with unitary taxation is to
financial institutions, other than a foreign operating entity, that
recognize that it is not limited to large, multi-state companies.
satisfies the following criteria:
Businesses of any size and any geographic extent may find that
• One of the persons owns or controls, directly or indirectly,
they are members of a UBG.
more than 50 percent of the ownership interest with voting
rights (or rights comparable to voting rights) of the other
Determining the Existence and Membership of a UBG
members; AND
Unitary Business Group means a group of United States
• The UBG has operations which result in a flow of value
persons that are corporations, insurance companies, or
financial institutions, other than a foreign operating entity, that
between the members in the UBG or has operations that are
satisfies the control test and relationship test.
integrated with, are dependent upon, or contribute to each
other. Flow of value is determined by reviewing the totality of
United States person is defined in Internal Revenue Code (IRC)
facts and circumstances of business activities and operations.
§ 7701(a)(30). A foreign operating entity is defined by statute in
Michigan Compiled Laws (MCL) 206.607(3).
A UBG must file a combined CIT return (addressed in
the “UBGs and Combined Filing” section of this General
Control Test and Relationship Tests. For information on
Information).
CIT issues — including the Control Test and Relationship
Tests to determine whether a UBG exists — see the
C Corporation includes an LLC federally taxed as a C
Michigan Department of Treasury (Treasury) Web site at
Corporation, and a member of this LLC is a shareholder. A
(Click on the “Corporate Income
member or other person performing duties similar to those of
Tax” on the left side of the page.) Treasury will post updates
an officer in a true corporation is an officer in this LLC.
here and via Revenue Administrative Bulletin (available on the
NOTE: In general, a person that is a disregarded entity for
“Reference Library” link on the left side of the page).
federal tax purposes must file as if it were a branch or division
Filing the Correct Form
if owned by another business entity.
A different primary return and instruction booklet are available
The general rule provides that a person that is disregarded for
for standard taxpayers (Form 4891) and insurance companies
federal income tax purposes must be classified as a disregarded
(Form 4905).
entity for CIT purposes.
Filing if Tax Year Is Less Than 12 Months
UBGs and Combined Filing
In most cases, annual returns must be filed for the same period
NOTE: UBGs are addressed here, in general. In the
as federal income tax returns. If the filing period is less than 12
instructions for each form, “Special Instructions for Unitary
months, annualize to determine if there is a filing requirements
Business Groups” are located directly before “Line-by-Line
and which forms to file. Do not use annualized numbers on
Instructions.” The areas in the “Line-by-Line Instructions” that
a return unless specified; use them only to determine filing
apply only to UBGs are labeled “UBGs.” Additional direction
requirements.
is found in the “Supplemental Instructions for Standard
Members in UBGs” section of this instruction booklet.
Tax year means the calendar year, or the fiscal year ending
during the calendar year, upon the basis of which the tax base
General Overview of Unitary Taxation
of a taxpayer is computed. If a return is made for a fractional
More than 20 states have adopted unitary taxation. Unitary
part of a year, tax year means the period for which the return is
taxation is a method of taxing related persons that, if it applies,
made.
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