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Instructions for the Small Business Alternative Credit Calculation

for the Corporate Income Tax Worksheet

Tax Years Less Than 12 Months

Purpose

If the reported tax year is less than 12 months, gross

This worksheet is used to allow a taxpayer to calculate the CIT

receipts, adjusted business income, and shareholders’ or

Small Business Alternative Credit for standard taxpayers filing

officers’ compensation and share of business income must be

a Michigan Business Tax (MBT) return.

annualized to determine eligibility. If annualized gross receipts

exceed $19,000,000 but do not exceed $20,000,000, annualize

Due to differences between the MBT Small Business

Alternative Credit and the CIT Small Business Alternative

figures to compute the Reduction Based on Gross Receipts,

lines 15 through 18.

Credit, a taxpayer must use this worksheet and may not use

MBT Common Credits for Small Businesses (Form 4571) when

Annualizing

calculating its CIT Small Business Alternative Credit.

Multiply each applicable amount, total gross receipts, adjusted

A taxpayer is disqualified from taking the Small Business

business income, and shareholder and officer income by 12 and

Alternative Credit under certain circumstances, which are

divide the result by the number of months in the tax year. If the

detailed below. Financial institutions and insurance companies

tax year is less than one month, consider the tax year to be one

are not eligible for this credit

month for the purposes of this calculation.

Do not attach this worksheet or any supporting forms to the

Loss Adjustment

MBT filing. A taxpayer must retain this worksheet and any

If taxpayers are not eligible for the full Small Business

supporting forms in its records.

Alternative Credit due to an adjusted business income or

allocated income disqualifier, they may benefit from the CIT

eligibility for the Small Business Alternative

Loss Adjustment for the Small Business Alternative Credit (Form

Credit

4895). If the adjusted business income was less than zero in any

Taxpayers are not eligible for the Small Business Alternative

of the five years immediately preceding this filing period and a

Credit if any of the following conditions exist:

Single Business Tax (SBT) Small Business Credit or Michigan

Business Tax (MBT) Small Business Alternative Credit was

• Gross receipts exceed $20,000,000.

received for that same year, the taxpayer may be able to reduce

• Adjusted business income after loss adjustment exceeds

the current year’s adjusted business income or allocated

$1,300,000 for Corporations (and LLCs federally taxed as

income amounts by the loss. See Form 4895 for more details.

such).

Do not attach a copy of Form 4895 to the MBT filing. If a loss

• Any shareholder or officer has allocated income after

adjustment is used, the taxpayer must retain a completed Form

loss adjustment of over $180,000, as determined on the CIT

4895 in its records. Do not attach Form 4895 to this return.

Schedule of Shareholders and Officers (Form 4894). (Retain a

UBGs: See “Special Instructions for UBGs” for Form 4895.

pro forma copy of Form 4894 for your records, if necessary.)

A loss adjustment will not prevent a reduction or elimination of

In addition, the Small Business Alternative Credit is reduced

the Small Business Alternative Credit based on gross receipts

if a shareholder or an officer has allocated income after loss

that exceed $19,000,000. It will also not change the amount of

adjustment of more than $160,000 but less than $180,000. This

compensation on Form 4894, column L.

reduction is based on the officer/shareholder with the largest

NOTE: If using a loss adjustment, Form 4895 must be used

allocated income.

when using this worksheet to calculate the CIT Small Business

The Small Business Alternative Credit also is reduced if gross

Alternative Credit. This form must be used in place of Form

receipts exceed $19,000,000 but are not more than $20,000,000.

4571 due to the differences between the MBT Small Business

Allocated income is the greater of either:

Alternative Credit and the CIT Small Business Alternative

Credit.

(a) Shareholders’ or officers’ compensation and director fees

from Form 4894, column L, or

Special Instructions for uBGs

(b) Shareholders’ compensation, director fees, and share of

UBGs calculate the gross receipts and adjusted business

business income (or loss) after loss adjustment, from Form

income disqualifiers at the UBG level without eliminating

4894, column N.

intercompany transactions. For a UBG to claim a Small

Business Alternative Credit, each member of the UBG that is

If either (a) or (b) is greater than $180,000, the Corporation

a corporation (including an entity taxed federally as such) must

is not eligible for the Small Business Alternative Credit. In

complete Form 4894, column L. Retain a completed Form 4895

addition, if either (a) or (b) is more than $160,000 but not more

in your records; do not attach Form 4895 to this return.

than $180,000, the Corporation must reduce the Small Business

Alternative Credit based on the officer or shareholder with the

The disqualifier that is based on compensation and/or share of

largest allocated income.

business income attributable to an owner or officer is applied

Form 4946 - Michigan Schedule Of Corporate Income Tax Liability For A Michigan Business Tax Filer - 2012 Page 7

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