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| B40. At what date should the book-tax difference be calculated for the deduction provided in MCL 208.1201(2)(i)? The term "first fiscal period ending after July 12, 2007" is unclear. |
The phrase "first fiscal period ending after July 12, 2007" as used in MCL
208.1201(2)(i) is the first fiscal period of the taxpayer which ends after July
12, 2007 and which includes the July 12, 2007 enactment date of MBT.
Under FAS 109, paragraph 27, a taxpayer who maintains books and records under
Generally Accepted Accounting Principles ("GAAP") must make a one-time book
adjustment to reflect the change in deferred taxes that occurs as the result of
a tax law change, and record that adjustment in the accounting period that
includes the enactment date of the tax law change. The future deductions
provided for in MCL 208.1201(2)(i) ("FAS 109 deduction") are based solely on the
book-tax difference of qualifying assets for this same period, and are intended
to create a one-time deferred tax asset for GAAP taxpayers to use as an offset
against the one time change in the deferred tax liability that resulted from the
enactment of the MBT. For SBT taxpayers, the change in deferred tax liability
that results from the enactment of MBT will primarily be attributable to the
difference between the net book value and tax basis of depreciable assets
recorded on the books for the first fiscal period ending after July 12, 2007.
Assets acquired or placed in service after the SBT was repealed on December 31,
2007 would not be included in the calculation of the one time book adjustment
required under FAS 109 for the enactment of MBT.
The deferred tax asset will be recorded in the same period the taxpayer is
required to record the one-time change in deferred tax liability under GAAP. As
a result, the date a taxpayer must use to compute the book-tax difference for
the FAS 109 deduction allowed under MCL 208.1201(2)(i) will be the same date
used to compute the book-tax difference for the calculation of the one-time
change in the deferred tax liability that must be reported by GAAP taxpayers
under FAS 109.
Caution: If the deferred asset calculated by use of the formula specified in MCL
208.1201(2)(i) is more than the net deferred MBT tax liability reported under
FAS 109, the deduction will be limited as provided in MCL 208.1201(3).
A taxpayer must report the amount of the FAS 109 deduction on the Michigan form
4593 with the first MBT return in order to claim the deductions allowed in the
years specified in MCL 208.1201(2)(i), i.e. 2015 - 2029. Taxpayers must retain
all records and workpapers, that are necessary to support the taxpayer's
calculation of the deduction and the deferred liability recorded, for the entire
period the deduction is available and for the period that the return is subject
to audit by the Michigan Department of Treasury.
A taxpayer who does not maintain deferred tax liability accounts under GAAP does
not need to create an offsetting deferred tax asset, and therefore is ineligible
for the FAS 109 deduction allowed in MCL 208.1201(2)(i).
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