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Michigan Business Tax
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U47. Can a unitary business group with one or more fiscal year members use the annual method for calculating its first MBT return? If so,must all fiscal year members in the group make the same election between annual and actual methods? What if a fiscal year group,rather than fiscal group member has made the opposite choice with respect to its final SBT return? Also,if the unitary business group can use the annual method,and the group has members with different year ends,how is the percentage in MCL 208.1503(a) calculated?
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Answer:
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Section 503 of the MBTA provides that a fiscal year taxpayer may elect to
file its first MBT return (a short year return) by either reporting business
income and modified gross receipts as if the MBT were in effect on the first day
of the taxpayer's annual accounting period and prorating those numbers (the
annual method),or by computing MBT liability based on actual business income and
modified gross receipts for the portion of the accounting period in which the
MBT was actually in effect (the actual method). MCL 208.1503.
Under the MBTA,"taxpayer" is defined to mean either a person or a unitary
business group. MCL 208.1117(6). Thus,in the case of a unitary business group
filing a combined return under section 511,the filing method election permitted
by section 503 is applicable to the group as a whole,and not to the group's
members individually. A unitary business group will file its combined return
using the tax year of the group's designated member. If the designated member is
a calendar year taxpayer,section 503,which allows a choice of filing methods for
fiscal year taxpayers,will be inapplicable to the group. Calendar year filers
use the actual method; therefore,if the designated member is a calendar year
filer,all members of the unitary business group will be required to use the
actual method.
If the designated member is a fiscal year taxpayer,however,the designated member
must choose one of the two filing methods available under section 503,consistent
with the choice made for its final individual return under the SBT. All other
members of the unitary business group must then conform to the method chosen by
the designated member. In some cases,this may mean that an individual member of
a unitary business group that is a fiscal year filer will have to calculate its
MBT tax bases using a method different than the one that it used in filing its
final short period SBT return (if,for example,the member did not realize that it
would be a member of a unitary business group under the MBT). Because the
Department has required that filing methods be consistent between a fiscal
filer's final short period SBT return and its initial short period MBT
return,such group members will be required to amend their final SBT returns so
that their filing methods are consistent. RAB 2007-5.
If the various fiscal year unitary business group members have different year
ends,it will be necessary for each such group member to calculate its own
section 503(a) ratio for purposes of annualization,based upon the number of
months in its own short period.
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