News Briefings - State Taxes

Have you heard about Thomson Reuters News & Insight? Now there is a current awareness and news experience specifically for today's tax, accounting, corporate finance and audit professionals. Designed to keep up with you, on your computer, Smartphone and tablet, whenever and wherever you need it.
Show Me		Learn More - Order Now or Try it Free for 30 days.!

The following article was taken from the 2/6/2012 issue of State & Local Taxes Weekly.

2/72 -- Michigan revises notice regarding Michigan business tax treatment of federally disregarded entities

by Peter G. Pupke, Esq. (RIA)

The Michigan Department of Treasury has revised a release regarding the Michigan Business Tax (MBT) treatment of federally disregarded entities in light of recent legislation. The release replaces a previous Department notice regarding the MBT treatment of federally disregarded entities which regarded federally disregarded entities to file and or amend MBT returns by July 1, 2012 (Notice to taxpayers regarding federally disregarded entities and the Michigan Business Tax, Michigan Dept. of Treasury, 01/26/2012)

Recent legislation. Recent legislation (L. 2011, S369 (P.A. 305)) added Mich. Comp. Laws Ann. § 208.1612, retroactive to January 1, 2008, governing the Michigan Business Tax treatment and filing requirements of entities that are disregarded for federal income tax purposes. This section requires an entity that is disregarded for federal income tax purposes to be classified as a disregarded entity for MBT filing purposes. are two exceptions to this default rule:

• An entity that is disregarded for federal income tax purposes that filed separate from its owner for its 2008, 2009, or 2010 MBT tax year in original returns filed prior to January 1, 2012, or in amended returns filed prior to December 1, 2011, is not required to amend those returns.
• An entity that is disregarded for federal income tax purposes that filed separate from its owner for its 2010 MBT tax year in an original return filed prior to January 1, 2012, or in an amended return filed prior to December 1, 2011, may also file separate from its owner for its 2011 tax year.

Effect of legislation. Under this legislation, an entity that is disregarded for federal income tax purposes that did not file as a separate entity for the 2008, 2009, or 2010 MBT tax year in either an original return filed before January 1, 2012, or an amended return prior to December 1, 2011, may not file as a separate entity for its 2008, 2009, 2010, or 2011 MBT tax year.

However, an entity that is disregarded for federal income tax purposes that did file as a separate entity for the 2008, 2009, or 2010 MBT tax year in either an original return filed before January 1, 2012, or in an amended return filed prior to December 1, 2011, may file an amended MBT return as a disregarded entity if the MBT return at issue is within the statute of limitations provided in Mich. Comp. Laws Ann. § 205.27a.

2011 MBT returns for disregarded entities filing separately. An entity disregarded for federal income tax purposes that is eligible to file as a separate entity for its 2011 MBT tax year and does file as a separate entity in that year must file all required forms and supporting schedules, including combined filing schedules if the entity is part of a unitary business group.

The disregarded entity must identify its Organization Type before its MBT return will be processed. It must select the Organization Type under which its parent filed its return. For example, if the entity is a limited liability company (LLC) whose single member (parent) is a C corporation, it must select the Organization Type: C Corporation/LLC C Corporation. If the entity is a qualified subchapter S subsidiary (QSub), it must select the Organization Type: S Corporation/LLC S Corporation.

The disregarded entity that is filing separately must prepare a corresponding pro forma federal return and attach that pro forma federal return to its 2011 MBT return.

The parent entity must also prepare a corresponding pro forma federal return and attach that pro forma federal return to its 2011 MBT return.