Probably not. Interest income, dividends and capital gains investment income receipts generated by an LLC set up for the purpose of pooling and investing money gifted to children and grandchildren trusts are not subject to the modified gross receipts tax under section 203 of the MBT, MCL 208.1203, to the extent such receipts are not derived from investment activity that is part of the LLC's trade or business. Similarly, such receipts would not be subject to the business income tax under section 201 of the MBT, MCL 208.1201, if the LLC elected to be taxed as a partnership pursuant to federal "check the box" regulations. If the LLC elected to be taxed as a corporation its income would be subject to the business income tax under section 201.

Interest, dividend and capital gains investment income receipts are generally included in gross receipts unless an enumerated exception applies. One such exception is for receipts from investment activity of a taxpayer that is an individual, estate or other person organized (exclusively or non-exclusively) for estate or gift planning purposes that are derived from transactions, activities or sources other than those made in the regular course of the taxpayer's trade or business. Such so-called "personal investment" receipts, including interest income, dividends and capital gains receipts from an investment portfolio or retirement account that is not part of such taxpayer's trade or business are excluded from gross receipts. MCL 208.1111(1)(w) and (w)(ii)(A). Consequently, such receipts from the LLC posed in the question are excluded from gross receipts and thus would not be subject to the MBT modified gross receipts tax.

A comparable exception provision exists regarding the business income tax base; however, it applies to a narrower category of entities than that applicable to gross receipts. Absent an express statutory exception to the contrary, interest, dividends and capital gains investment income would be subject to the MBT's business income tax. The exclusion for so-called "personal investment" income from "business income" applies only to a taxpayer that is one of the following: (1) an individual, (2) an estate, (3) a partnership organized exclusively for estate or gift planning purposes, or (4) a trust organized exclusively for estate of gift planning purposes. MCL 208.1105(2).

An LLC can elect to be taxed as a partnership or corporation for federal tax purposes. An entity that has elected or is required to file as a corporation or partnership under the Internal Revenue Code is treated as a corporation or partnership, respectively.

Therefore, if the LLC is treated as a partnership for federal income tax purposes then such investment income generated by the LLC, to the extent not derived from the taxpayer's trade or business, is excluded from the business income tax base under the MBT. MCL 208.1105(2). Alternatively, if the LLC is treated as a corporation for federal income tax purposes, then its interest, dividends and capital gains investment income would be subject to tax.