Form 4599 - Michigan Business Tax For Financial Institutions Booklet - 2012 Page 7
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42following are straightforward, but take care to consider any
deductions, and activities separately by member, then combines
available refundable credits on Form 4590, Part 2.
those items as if the members were a single entity. References
in the instructions to “the taxpayer” generally will refer to the
Further General Guidance
group rather than any one of its members.
For purposes of MBT, person means an individual, firm, bank,
This is a simplification for introductory purposes, and there are
financial institution, insurance company, limited partnership,
many details and exceptions described throughout the MBT
limited liability partnership, copartnership, partnership, joint
forms and instructions. In particular, tax credits, transactions
venture, association, corporation, S corporation, LLC, receiver,
between members, and the presence of financial institutions or
estate, trust, or any other group or combination of groups
insurance companies in the group require careful attention.
acting as a unit.
One key issue in dealing properly with unitary taxation is to
A taxpayer includes a single person or a UBG liable for tax,
recognize that it is not limited to large, multi-state companies.
interest, or penalty. A UBG must file a combined MBT return
Businesses of any size and any geographic extent may find that
(addressed in the “UBGs and Combined Filing” section of this
they are members of a UBG.
General Information).
Limited Liability Company. An LLC is classified for MBT
Determining the Existence and Membership of a
purposes according to its federal tax classification. The
UBG
following terms, whenever used in MBT forms, instructions,
Unitary Business Group means a group of United States
and statute, include LLCs as indicated:
persons, other than a foreign operating entity, that satisfies the
S Corporation includes an LLC federally taxed as an S
control test and relationship test.
Corporation, and a member of this LLC is a shareholder.
United States person is defined in Internal Revenue Code (IRC)
C Corporation includes an LLC federally taxed as a C
§ 7701(a)(30). A foreign operating entity is defined by statute in
Corporation, and a member of this LLC is a shareholder. A
Michigan Compiled Laws (MCL) 208.1109(5).
member or other person performing duties similar to those of
Control Test. The control test is satisfied when one person
an officer in a true corporation is an officer in this LLC.
owns or controls, directly or indirectly, more than 50 percent
NOTE: In this booklet, the term “corporation,” used without a
of the ownership interest with voting or comparable rights of
C or S, generally refers to both types.
the other person or persons. A person owns or controls more
than 50 percent of the ownership interest with voting rights
NOTE: In general, a person that is a disregarded entity for
or ownership interest that confer comparable rights to voting
federal tax purposes, including a single member LLC or
rights of another person if that person owns or controls:
Q-Sub, must file as if it were a sole proprietorship if owned
by an individual, or a branch or division if owned by another
More than 50 percent of the total combined voting power of all
business entity.
ownership interests with voting (or comparable) rights, or
Fiduciaries filing for Trusts engaged in business activity must
More than 50 percent of the total value of all ownership
file an MBT return and report the total business activity.
interests with voting (or comparable) rights.
Relationship Tests. The definition of a UBG requires, in
UBGs and Combined Filing
addition to satisfying the control test, that the group of persons
NOTE: UBGs are addressed below, in general. In the
have business activities or operations that either:
instructions for each form, “Special Instructions for Unitary
Business Groups” are located directly before “Line-by-Line
1) Result in a flow of value between or among persons in the
Instructions.” The areas in the “Line-by-Line Instructions” that
group, or
apply only to UBGs are labeled “UBGs.” Additional direction
2) Are integrated with, dependent upon, or contribute to each
is found in the “Supplemental Instructions for Standard
other.
Members in UBGs.”
A taxpayer need only meet one of the two alternative tests to
General Overview of Unitary Taxation
satisfy the relationship test.
More than 20 states have adopted unitary taxation. Unitary
1) Flow of value is established when members of the group
taxation is a method of taxing related persons that, if it applies,
demonstrate one or more of functional integration, centralized
generally treats those related persons as if they were one.
management, and economies of scale. Examples of functional
There are specific tests, discussed below, to determine whether
integration include common programs or systems and shared
two or more persons (Individuals or business entities) are
information or property. Examples of centralized management
sufficiently connected by ownership and business relationships
include common management or directors, shared staff
to be treated as a group.
functions, and business decisions made for the UBG rather
If those tests are satisfied and a UBG is found to exist, in most
than separately by each member. Examples of economies
cases the members of that UBG will file a single MBT return.
of scale include centralized business functions and pooled
One member will be designated as the group’s representative
benefits or insurance. Groups that commonly exhibit a flow of
for filing the return and corresponding with Treasury. Included
value include vertically or horizontally integrated businesses,
in that return will be a separate form that reports income,
conglomerates, parent companies with their wholly owned
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