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Corporate Income Tax
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Unitary Business Groups 11. If a taxpayer that is a unitary business group has a business loss carry forward under MCL 206.623(4), what happens to the business loss carry forward if membership in the unitary business group changes?
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Answer:
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When the membership of a taxpayer that is a unitary business group changes, the business loss carryforward of the unitary business group is divided among the unitary business group and the departing members in proportion to the losses the members would have generated had each member filed separately. Specifically, the portion of the business loss carryforward of a taxpayer that is a unitary business group attributable to a departing member is an amount equal to the business loss carryforward of the unitary business group multiplied by a fraction, the numerator of which is what would have been the business loss of that member had that member filed a separate return, and the denominator of which is the sum of what would have been the separate business losses of all members of the group in that year having business losses if those members filed separate returns.
Example. Taxpayer LMNOP is a unitary business group comprised of Corporations L, M, N, O, and P. The 2012 tax year generated an apportioned business loss of $100 to be carried forward to the 2013 tax year. However, due to a change in ownership, Corporation P is not part of the unitary business group for the 2013 tax year. If each member calculated their tax base on a separate basis for 2012, only Corporations N, O, and P showed losses of 50, 70, and 30 respectively. P gets a business loss carryforward of $20 [(30/(50+70+30))*100)] for the 2013 tax year. Taxpayer LMNO retains a business loss carryforward of $80.
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