A unitary business group is defined - in part - as:
a group of United States persons, other than a foreign operating entity, 1 of which owns or controls, directly or indirectly, more than 50% of the ownership interest with voting rights or ownership interests that confer comparable rights to voting rights of the other United States persons . . . . [MCL 208.1117(6) (emphasis added).]
"United States person" means "that term as defined in [IRC] 7701(a)(30)." MCL 208.117(7). Under IRC 7701(a)(30), "United States person" means:
(A) a citizen or resident of the United States,
(B) a domestic partnership,
(C) a domestic corporation,
(D) any estate (other than a foreign estate, within the meaning, of paragraph (31)), and
(E) any trust if-
(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and
(ii) one or more United States persons have the authority to control all substantial decisions of the trust. [IRC 7701(a)(30).]
A partnership or corporation is "domestic" when that entity is "created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations." IRC 7701(a)(4).
In other words, a foreign entity is not a U.S. person and is therefore excluded from unitary business groups. Similarly, foreign operating entities are also excluded from unitary business groups under the MBT. "Foreign operating entity" means a U.S. person that:
(a) Would otherwise be a part of a unitary business group that has at least 1 person included in the unitary business group that is taxable in this state.
(b) Has substantial operations outside the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or a political subdivision of any of the foregoing.
(c) At least 80% of its income is active foreign business income as defined in section 861(c)(1)(B) of the Internal Revenue Code. [MCL 208.1109(5).]
A foreign entity that is the single member of a domestic limited liability company disregarded for federal income tax purposes would likewise not be included in a unitary business group. Under MCL 208.1512, an entity that is disregarded for federal income tax purposes is classified as a disregarded entity for MBT purposes. That is, the disregarded entity is treated as a branch or division of its owner and will be included in a unitary business group as part of its owner if the owner is a member of a unitary business group. Since a foreign entity is not a U.S. person and, thus, may not be included in a unitary business group, the domestic disregarded entity treated as a branch or division of the foreign entity owner would likewise not be includible in a unitary business group.