 | | |
|
|
|
Michigan Business Tax
|
|
|
N3. If a flow through entity establishes nexus for either or both the business income tax or modified gross receipts tax under the MBTA, do the individual partners or shareholders automatically acquire nexus for individual income tax purposes under the Michigan Income Tax Act (ITA)?
|
|
|
|
Answer:
|
|
If a flow through entity has business income tax nexus with Michigan for MBT, the individual partners or shareholders will be subject to apportionment under the ITA on their distributive or pro-rata share of the flow through entity's (partnership or S corporation) income.
If a flow through entity has nexus with Michigan under the MBT nexus standards, but the business activity of the flow through entity is afforded immunity under Public Law (P.L.) 86-272, 15 USC 381 ? 384, the individual partners or shareholders will not be subject to apportionment on their share of profits from the flow through entity.
Conversely, if a Michigan flow through entity has nexus with another state or states as described above, and the activity of the flow through entity is not protected under PL 86-272, the individual partners or shareholders, whether residents or nonresidents of Michigan, would be able to apportion income from the flow through entity to other states under the apportionment provisions of the ITA.
Michigan's Income Tax Act does not apply to gross receipts.
|
|
