The deduction is determined by:
1) Calculate the difference between the value of all assets
on the books of a taxpayer for the first fiscal period ending after
July 12, 2007 and the federal
tax basis for those same assets for the same period. (For a UBG, compute for
each member entity individually. The group will file one combined Form 4593,
entering the result for each member of the group separately).
2) Calculate the amount needed to offset the net deferred tax
liability of the taxpayer which results from the imposition of the business
income tax, at a rate of 4.95%, and the modified gross receipts tax, at a rate
of .8%, calculated for the first fiscal period ending after
July 12, 2007.
3) Take the lesser of the result of (1) or (2).
4) For the 2015 through 2019 tax years apply 4%, for the 2020
through 2024 tax years apply 6%, and for the 2025 through 2029 tax years apply
10% to the result of step (3).
5) Subtract the result of step (4) from business income in
appropriate tax year.
Example 1: Company A reviews all assets on its books as of
its first fiscal period which ends after
July 12, 2007 and which
includes the enactment date of the MBT. The book value of these assets is then
compared to the federal tax basis of the same assets for the same period. The
difference between the assets is calculated at $5,000. Company A calculates its
net deferred liability in accordance with GAAP for this same period at $7,000.
Company A reports a $5,000 book-tax difference to the Department on Form 4593
with its first MBT return. Beginning in the 2015 tax year, Company A may take
4% of the $5,000, (the lesser of the book-tax or net deferred tax liability) or
$200, as a deduction to business income. Beginning in the 2020 tax year Company
A may take 6%, or $300 as a deduction, and beginning in the 2025 tax year the
deduction will equal 10% or $500.
Example 2: Entities A, B
and C, members of a unitary business group individually calculate their book-tax
difference based on their own books and records for the appropriate fiscal
period. The UBG files one Form 4593 with its initial MBT return. Entity A
reports a book-tax difference of $500, B reports $1,000 and C reports $2,000.
The net deferred tax liability is calculated for the group in accordance with
GAAP at $3,000. Beginning in the 2015 tax year the UBG will begin to take a
percentage of $3,000, which is the lesser of the net deferred tax liability of
the group and the combined book tax difference of the three group members.