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Michigan Business Tax
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B10. If a business or unitary group taxpayer has a negative business income tax base, is the 4.95% tax rate applied to the negative business income base, with the result then netted against a positive modified gross receipts tax to determine Michigan Business Tax (?MBT") liability?
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Answer:
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No. Other than for an insurance company under Chapter 2A and a financial institution under Chapter 2B, the Michigan Business Tax Act ("MBTA") imposes two taxes on a taxpayer: one on business income and one modified gross receipts. The Business Income tax base is a separate and distinct tax base from the Modified Gross Receipts tax base. In determining a taxpayer's total tax liability under the MBTA, one tax base is not netted, partially or wholly, against the other tax base. If the arithmetic calculation of a taxpayer's business income tax base for a tax year results in a negative value, then the business income tax base used for purposes of determining total MBT liability is zero. Thus, the 4.95% tax rate for business income applied against a zero tax base produces a business income tax liability of zero. The modified gross receipts tax, calculated by multiplying the modified gross receipts tax rate of 0.80% against the modified gross receipts tax base after apportionment and allocation, would be added to the zero value business income tax to produce the taxpayer's total MBT liability for the tax year before credits.
Even though a taxpayer may not offset a negative business income tax against a positive marginal gross receipts tax in a given tax year, the taxpayer may, under MCL 208.1201(4), carry forward the negative business loss after allocation or apportionment into the tax year immediately succeeding the loss year as an offset to the allocated or apportioned business income tax base for that succeeding tax year. Such losses may be carried forward up to 10 years following the loss year or until the loss is used up, whichever comes first. Any loss remaining after the 10 year carryforward period specified in MCL 208.1201(4) will expire unused.
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