Generally, a unitary business group is a group of related persons - including
entities - whose business activities or operations are interdependent. More
specifically, a unitary business group is two or more persons that satisfy both
a control test and one of two relationship tests. MCL 208.1117(6).
A unitary business group is a single taxpayer under the MBT and must file a
combined return. MCL 208.1117(5), 208.1511. Foreign persons and foreign
operating entities cannot be part of a unitary business group.
Control Test. The control test is satisfied when one person owns or
controls, directly or indirectly, more than 50% of the ownership interest with
voting or comparable rights of the other person or persons. Generally, indirect
ownership is determined using IRC 318, except that the Department will apply IRC
318 to all forms of ownership interests.
Relationship Tests. In addition to satisfying the control test, the
group of persons must have business activities or operations that (1) result in
a flow of value between or among persons in the group, or (2) are
integrated with, are dependent upon, or contribute to each other.
Flow of value is established when members of the group demonstrate one
or more of functional integration, centralized management, and economies of
scale. Examples of functional integration include common programs or systems and
shared information or property. Examples of centralized management include
common management or directors, shared staff functions, and business decisions
made for the group rather than separately by each member. Examples of economies
of scale include centralized business functions and pooled benefits or
insurance. Groups that commonly exhibit a flow of value include vertically or
horizontally integrated businesses, conglomerates, parent companies with their
wholly owned subsidiaries, and entities in the same general line of business.
Flow of value must be more than the mere flow of funds arising out of passive
Businesses are integrated with, are dependent upon, or contribute to each
other under many of the same circumstances that establish flow of value.
However, this alternate relationship test is also commonly satisfied when one
entity finances the operations of another or when there exist intercompany
transactions, including financing.