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Michigan Business Tax

	NOTICE: The MBT was amended by 145 PA 2007 on December 1, 2007. Act 145 imposes an annual surcharge to taxpayers' MBT liability, as well as makes other changes. Due to PA 145, some of the FAQs have been rescinded and revised answers have been issued. See below for a list of the rescinded answers.

	MBT FAQ Index View FAQs in Chronological Order View FAQs in a Printer Friendly Version. View Rescinded FAQs

	Important Note: These responses are for informational purposes only and are not to be interpreted as official statements of the Michigan Department of Treasury. These responses are not to be construed as promulgated rules, bulletins or rulings of the Department and are subject to revision pursuant to the effect of legislation, court decisions, regulations and official statements of the Department. Additional questions are currently being reviewed by staff and will be posted to this page, as they are finalized. Please check back often. To submit your general question to Treasury for review, please email us at treasMBT@michigan.gov.


Administrative

	A1. (Answer rescinded, replaced by A22) Will taxpayers need to calculate the business income and modified gross receipts separately and pay 85% of each to meet the estimated tax payment safe harbor provision to avoid penalty and interest?

	A2. When does the MBT take effect?

	A3. Who must file MBT quarterly estimates?

	A4. When are MBT quarterly estimates due?

	A5. (Answer rescinded, replaced by A23) How are quarterly estimates calculated?

	A6. When are MBT Annual Returns due?

	A7. How can I get an extension of time to file an MBT Annual Return?

	A8. How is the tax computed if my first taxable year is less than 12 months?

	A9. If I'm registered for the SBT what do I need to do to register for the MBT?

	A10. When will forms be available for the Michigan Business Tax?

	A11. How does a Fiscal Year taxpayer file returns for their tax year ending in 2008?

	A12. Will there be E services with MBT?

	A13. (Answer rescinded, replaced by A24) Will a safe harbor be allowed for 2008 estimates based on the 2007 SBT return?

	A14. Will the business income tax and modified gross receipts tax be filed on a single return or on separate returns?

	A15. May a taxpayer make estimated MBT payments on Form 160, the Combined Return for Michigan Taxes, and if so, how will the different due dates be reconciled?

	A16. Will SBT overpayments be applied to MBT?

	A17. Will an estimated return be due for a taxpayer with a short taxable year of less than four months under the MBT?

	A18. What is the filing threshold under the Michigan Business Tax Act (MBTA)?

	A19. When are the first and second estimated MBT payments due for a fiscal year filer with an April 30, 2008 year end?

	A20. Can a fiscal year filer request an extension for the first MBT return?

	A21. (Answer rescinded, replaced by A25) How does a taxpayer with a fiscal year end calculate tax under the MBT for estimate purposes?

	A22. Will taxpayers need to calculate the business income, modified gross receipts, and surcharge separately and pay 85% of each to meet the estimated tax payment safe harbor provision in order to avoid interest?

	A23. How are quarterly estimates calculated?

	A24. Will a safe harbor be allowed for 2008 estimates based on the 2007 SBT return?

	A25. How does a taxpayer with a fiscal year end calculate tax under the MBT for estimate purposes?

	A26. (Answer rescinded, replaced by A30) Will a taxpayer be required to make a payment with an extension request or is the listing of estimated payments made going to be accepted as it is in the Single Business Tax?

	A27. Does the $350,000 filing threshold apply to just the gross receipts tax or to both the gross receipts and business income taxes?

	A28. The SBT has a Notice of No Return, Form C-8030 to be filed by taxpayers who were not required to file. Will there be a similar MBT form?

	A29. How must a fiscal year taxpayer calculate quarterly estimated payments if one quarter straddles the period in which the SBT ends and the MBT begins? Must a fiscal year taxpayer pay its final SBT quarterly estimated payment or can the taxpayer pay all remaining liability on its final SBT return?

	A30. Will a taxpayer be required to make a payment with an extension request or is the listing of estimated payments made going to be accepted as it is in the Single Business Tax?

	A31. When is the final short period Single Business Tax (SBT) return due for a fiscal year taxpayer? If the taxpayer chooses the annual method for calculating the final SBT liability, how does it file timely for the fiscal year that is required to close on December 31, 2007 for SBT reporting purposes?

	A32. Will Voluntary Disclosure continue with the Michigan Business Tax?

	A33. Can a taxpayer who claims an error was made in the calculation of an MBT quarterly estimated payment request a refund of that payment without filing an annual MBT return?

	A34. The first MBT annual returns could be due before MBT forms are released to the taxpayer public. Will penalties be waived for these first MBT returns if taxpayers make a good-faith guess as to liability?

	A35. Will there be other E services available with the MBT, in addition to electronic filing?

	A36. Will an overpayment made in connection with a taxpayer's final SBT return be applied as timely against that taxpayer's first quarter MBT estimate, even though the overpayment may have been made after the due date for the first quarter MBT estimated payment?


Apportionment

	Ap1. Under Chapter 3 of the MBT, if the business activities of a taxpayer are subject to tax within and without the state, each tax base must be apportioned based on the formula of sales in Michigan over sales everywhere. For purposes of apportionment, "sale" is defined in part as: [t]he transfer of title to, or possession of, property that is stock in trade or other property of a kind that would properly be included in the inventory of the taxpayer if on hand at the close of the tax period or property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business. [MCL 208.1115(1).] Is the occasional sale of assets by a taxpayer a "sale" for apportionment purposes?

	Ap2. How are gross receipts, rents etc. received from real property apportioned?

	Ap3. Does the Michigan Business Tax Act (MBTA) provide for "throw back sales"?

	Ap4. What is the location of investment partnerships? Is it based on the residence of the general partner, the location of the brokerage firm, the residences of the majority of partners, or where the partnership was formed?

	Ap5. Under MCL 208.1115, "sales" means "[f]or taxpayers not engaged in any other business activities, sales include interest, dividends, and other income from investment assets and activities and from trading assets and activities." Does this definition include the investment income of individuals?


Business Income Tax

	B1. Will shareholders of S corporations and partners in partnerships be liable for Michigan individual income tax on their share of flow-through income from entities subject to MBT? Does it matter whether the shareholders or partners are residents or nonresidents?

	B2. Under MCL 208.1201, the business income tax base means the business income of the taxpayer subject to certain adjustments, including a deduction for net earnings from self-employment. Specifically, the section instructs "[t]o the extent included in federal taxable income, deduct any earnings that are net earnings from self-employment as defined under section 1402 of the [IRC] of the taxpayer or a partner or limited liability company member of the taxpayer except to the extent that those net earnings represent a reasonable return on capital." MCL 208.1201(2)(h). What impact does this deduction have on the business income tax base of professional service partnerships (for example, some consulting, law, and accounting firms)?

	B3. Corporations, Limited Liability Companies (LLCs), and Partnerships will be able to fully deduct amounts paid out as compensation to employees, as well as a 100% deduction for distributions that are subject to self employment income tax. Are S corporations treated in the same manner as partnerships and corporations in this regard? Can you clarify the treatment of S corporation distributions?

	B4. Are capital gains that are included in the Modified Gross Receipts tax base also included in the Business Income tax base?

	B5. Is the deduction provided under MCL 208.1201(2)(i) altered by the MBT surcharge?

	B6. Does the deduction provided under MCL 208.1201(2)(i) reduce the MBT surcharge imposed under MCL 208.1281(1)?

	B7. Are system software royalties, excluded from the determination of tax liability under the Single Business Tax Act ("SBTA") (see MCL 208.9(4)(g)(viii) and (7)(c)(vii)), likewise excluded from the determination of tax liability under the Michigan Business Tax Act (?MBTA")?

	B8. Do the business income tax and modified gross receipts tax components of the MBT apply to individuals, estates, and trusts or family limited partnerships (FLIP)s that are specifically established for estate planning purposes, on income from investments, such as capital gains, interest, dividends, or other sources of personal income?

	B9. If an individual owns 100% of an S corporation law practice with gross receipts of $500,000, net income of $100,000 after wages of $250,000, and also has the following income not related to the S corporation or any other trade or business: dividends - $100,000, interest $250,000, capital gain $750,000, and pension of $100,000. Is he liable for the MBT taxes on a combined basis as an individual and owner of a S corporation?

	B10. If a business or unitary group taxpayer has a negative business income tax base, is the 4.95% tax rate applied to the negative business income base, with the result then netted against a positive modified gross receipts tax to determine Michigan Business Tax (?MBT") liability?

	B11. If a Michigan LLC has a nonresident corporate partner, does that partner file an MBT return and report and pay tax on it's share of LLC income at the same 4.95% [rate]?

	B12. Under the MBT, will there be a depreciation deduction, or will Michigan conform to federal depreciation rules?

	B13. For purposes of applying section 201(2)(f)(ii) of the MBTA, does the phrase "subject to tax in another jurisdiction" refer only to taxation by another state, or does it also include taxation by a foreign country?

	B14. Is interest and dividend income included in business income under the Michigan Business Tax (MBT)?

	B15. Does the sale by an individual of a direct investment in a corporation, partnership or LLC that is not traded on a public exchange constitute "personal investment activity" such that the income and proceeds from such a sale are excluded from business income and gross receipts? Similarly, is the distributive share of a partnership to a partner that is an individual business income or gross receipts to that individual?

	B16. Public Act 145 of 2007 amended the MBT to exclude certain personal investment activities from business income and gross receipts. Which taxpayers may exclude personal investment activity from business income and gross receipts? What about family limited partnerships that demonstrate a business purpose for federal purposes yet are intended to generate valuation discounts for gift and estate tax purposes? What about an investment club organized as a partnership?

	B17. Limited liability companies are included in the definition of "person" under the MBT. Assuming that the federal "check the box" rules are followed, does the business income adjustment set forth at section 201(2)(e), which requires a taxpayer to add the loss or subtract the income attributable to "another entity," apply to the income or loss of a disregarded limited liability company?

	B18. May taxpayers, including corporations and partnerships, take the IRC 199 deduction for MBT purposes?

	B19. What is the definition of intangible asset as used in computing the business income tax base?

	B20. Our company adds a handling charge to all customer invoices. Is this handling charge taxable under the MBT?

	B21. A real estate limited partnership owns an apartment project in Michigan. The partnership is in the process of selling the apartment project to avoid foreclosure. The apartment project is the partnership's only asset and the partnership will be dissolved shortly after the sale. As a result of the sale, the partnership will have a capital gain of approximately $6.3 million, and, in addition, will have debt forgiven of approximately $2.6 million. The debt being forgiven is a seller note and accrued interest that was executed in favor of the previous owner of the project. The potential buyer has agreed to pay a portion of the seller note and interest, and the former owner has agreed to forgive the balance of the debt. For federal tax purposes, their cancellation of debt ("COD") income is a pass through item and the ultimate taxability is determined at the partner level instead of the partnership level. The partnership will be liable for both the modified gross receipts (MGR) and business income tax portions of the MBT on the rental income of the partnership. Will the partnership COD income and capital gain that are passed through to the partners be subject to MBT?

	B22. How is a like-kind exchange treated under the MBT?

	B23. Is an individual person who earns more than $350,000 in interest and dividends for the tax year subject to the MBT? Are the person's capital gains from sales of stock subject to the MBT?

	B24. Is the sale of stock by a stockholder in a closely held corporation back to the corporation or another stockholder subject to MBT?

	B25. I am a 100% shareholder of a corporation that does business in Michigan. I am a nonresident of Michigan. The corporation is organized as a C corporation. I sell 100% of the stock of the corporation which results in a capital gain. Is the capital gain from the sale of the stock subject to the new MBT?

	B26. Does the deduction for net earnings from self employment exempt self-employed individuals from taxation under the MBT?

	B27. Under the Michigan Business Tax Act (MBTA) will a taxpayer receive a deduction for the modified gross receipts tax paid when calculating the business income tax base?

	B28. Is the gain recognized on the one time sale of business assets and goodwill by an entity to another entity taxed under the Michigan Business Tax (MBT)?

	B29. We manufacture customized tooling systems, which we then sell to our customer. After the sale, although the customer owns the tooling, it physically remains at our plant, and we use the tooling to manufacture the customer's product. Are these sales of tooling taxable under the Michigan Business Tax Act (MBTA)?

	B30. How are accounts receivable factoring companies treated for purposes of the Michigan Business Tax Act (MBTA)?

	B31. If a C corporation owns 56% of a flow-through entity, and the two meet the MBT definition of a unitary group, how does the corporation report all of the income of the flow-through entity when all it receives from the entity is a K-1? Also, do the other owners of the flow-through entity need to reduce their federal taxable income by their share of the flow-through entity income when computing their MBT liability?

	B32. Are royalties received from a foreign entity included in the tax base of the MBT?

	B33. Does business income include casual transactions or isolated sales?

	B34. How should inter-company transactions between members of a unitary business group be eliminated when the members have different year ends?

	B35. A real estate limited partnership owns an apartment project in Michigan subject to mortgage debt. The partnership negotiates a reduction in the mortgage but retains ownership of the apartment project. As the result of the reduction in the mortgage, the partnership receives a 1099-C from the mortgage holder and recognizes cancellation of debt ("COD") income in the amount of the negotiated debt reduction. The COD income is reported by the partnership on schedule 1065 K and to the partners on the partnership 1065 K-1 forms in the same year the COD is reported by the mortgage holder on the 1099-C. If any or all of the partners elect to exclude the COD from gross income on their individual federal income tax returns, must the partnership include the excluded COD in the income tax base on the MBT return filed by the partnership for that year?

	B36. MCL 208.1201(2)(h) provides a deduction from the business income tax base for self employment net earnings except to the extent that the net earnings represent a reasonable return on capital. What is a "reasonable return on capital"?

	B37. Section 201(2)(i) of the MBTA allows a series of deductions beginning in 2015, based on an amount called the "book-tax difference." A taxpayer's book-tax difference must be calculated for the first fiscal period ending after July 12, 2007. Section 201(3) states: In order to claim this deduction, the department may require the taxpayer to report the amount of this deduction on a form as prescribed by the department that is to be filed on or after the date that the first quarterly return and estimated payment are due under this act. Has the Department prescribed a form that taxpayers must use to report the amount of this deduction? If so, when and how will the form be filed? If the form is to be filed together with a return, will a valid extension for filing the return also extend the deadline for filing the form?

	B38. May a taxpayer that has no MBT filing obligation for 2008 file Form 4593 (documenting the future section 201(2)(i) deduction regarding the book-tax difference) as a free-standing form,in order to preserve the possibility of taking the deduction if they later become MBT taxpayers?

	B39. MCL 208.1201(2) provides a deduction for the book-to-tax difference or deferred liability resulting from the change from the SBT to the MBT. Is the deduction available to a privately held, cash-basis partnership that is not required to (and does not) maintain its books in accordance with generally accepted accounting principles?

	B40. At what date should the book-tax difference be calculated for the deduction provided in MCL 208.1201(2)(i)? The term "first fiscal period ending after July 12, 2007" is unclear.

	B41. I am a broker/dealer in securities without any W-2 payroll. My major expense is 1099 commissions paid to sales representatives. Are these commission expenses deductible on my MBT return?

	B42. What impact would a merger in 2008 have on the ability of the surviving entity to utilize SBT business loss carryforwards? How will losses incurred after December 31, 2007 be impacted by the merger?

	B43. Can a taxpayer net the cost of purchased securities with the proceeds from those securities? For purposes of taxing the gain, is the cost the actual cost of the securities or the fair market value on January 1, 2008?


Credits

	C1. Does the Michigan Business Tax Act contain a Renaissance Zone Credit?

	C2. How does a Professional Employer Organization, as defined by MCL 208.1113(4), determine compensation for the small business credit disqualifier in accordance with MCL 208.1417(8)?

	C3. How are the adjusted business income and compensation disqualifiers of the small business credit, found in MCL 208.1417, computed for PEOs and their clients?

	C4. Is a Professional Employer Organization, as defined by MCL 208.1113(4), entitled to the Compensation Credit of MCL 208.1403?

	C5. (Answer rescinded, replaced by C41) How is the alternate credit under MCL 208.1417 used by a unitary business group? How do the disqualifiers and percentage reducers work?

	C6. (Answer rescinded, replaced by C21) What is the compensation credit?

	C7. Do Historic Rehabilitation and Brownfield credits, approved under the Single Business Tax Act, carryover and can they be used against Michigan Business Tax liability?

	C8. Will Single Business Tax (SBT) credit carry forwards carry over to the Michigan Business Tax (MBT)?

	C9. How are existing SBT credits, or those awarded but not yet certified, handled under the MBT?

	C10. Who is considered an officer for purposes of the Small Business Alternative Credit under MCL 208.1417?

	C11. (Answer rescinded, replaced by C22) Is the farmland preservation credit available under the Michigan Business Tax?

	C12. (Answer rescinded, replaced by C27) Will the recapture limiting language of MCL 208.1403(3)(d)-(f) apply to both the Michigan Business Tax Investment Tax Credit (ITC) and ITC taken under the former Single Business Tax?

	C13. MCL 208.38g(34) and 208.39c(16) of the SBT permit taxpayers with pre-approval letters issued - or rehabilitation plans certified - prior to 2007 for projects completed after the taxpayer's last tax year under the SBT but prior to 2010 to claim a certain portion of the credit amount that would have been available in 2008 and 2009 had the SBT not been repealed on the taxpayer's amended 2007 SBT return. Are these provisions superseded by the MBT?

	C14. Under the MBTA, is the section 281 surcharge imposed before or after available credits are applied? Does the surcharge apply to both the modified gross receipts tax and the business income tax? Can the alternative small business credit eliminate liability for the surcharge?

	C15. Is the Arts and Culture credit available for donations made to science museums?

	C16. What types of expenses qualify for the MBT's "research and development" credit?

	C17. Is there a filing threshold phase-in for the Michigan Business Tax?

	C18. Does Schedule C (sole proprietor) income of over $180,000.00 preclude the taxpayer from using the Small Business Alternative Credit?

	C19. How will unused carryforward credits under the Single Business Tax Act (SBTA), the application of which is limited to tax years 2008 and 2009 under the Michigan Business Tax Act (MBTA), be treated for fiscal year taxpayers?

	C20. How is stock ownership determined with respect to Small Business Alternate Credit disqualifiers? Will the attribution rules used for the SBT and found in IRC section 318 apply when computing the active shareholder rules under the MBT?

	C21. What is the compensation credit?

	C22. Is the farmland preservation credit available under the Michigan Business Tax?

	C23. How were the rates of the Compensation Credit, the Investment Tax Credit, and the Research and Development Credit impacted by the passage of PA 145, which added the surcharge to the MBT?

	C24. Can a pre-2008 Brownfield credit or Historic Preservation credit of a unitary business group member be used in 2008 and thereafter against the tax liability of the entire unitary business group?

	C25. Regarding the industrial personal property tax credit under the MBT, will the Department continue to look to the parcel classification assigned by the local property tax assessor for qualification for the credit, as it has done under the SBT?

	C26. The MBT Act provides the following credits will be taken sequentially before any other credits: compensation and investment credits (MCL §208.1403), research and development credit (MCL §208.1405), alternate/small business credit (MCL §208.1417), tax phase-in credit (MCL §208.1411). In what order are the other MBT credits claimed?

	C27. MCL §208.1403(3)(d)-(f) provides for investment credit recapture. The recapture language includes the limiters "to the extent used and at the rate used." Does this limiting language only apply to assets acquired during SBT tax years? Also, does the Department deem the investment credit for assets acquired in the same year to be claimed on a FIFO, pro-rata, or other method?

	C28. Under MCL 208.1403(2), a taxpayer may claim a credit against the MBT equal to a specified percentage of the taxpayer's "compensation in this state." What is the definition of "compensation in this state"?

	C29. How is the Small Business Alternative Credit under MCL 208.1417 calculated by a taxpayer that is a unitary business group? How do the disqualifiers and percentage reducers work?

	C30. How do foreign persons with no U.S. federal taxable income calculate adjusted business income for purposes of the Small Business Alternative Credit under MCL 208.1417?

	C31. My company intends to purchase a significant piece of business equipment in the near future. This equipment is the type of property that is or will become eligible for depreciation for federal tax purposes. Under the MBT, can my company deduct the cost of this equipment in the year of purchase when calculating its modified gross receipts tax base, and also qualify for the investment tax credit, which is applied against final MBT liability?

	C32. What expense items are included in compensation for purposes of the compensation credit provided for at MCL 208.1403(2)? What accounting method is used to determine compensation?

	C33. How are gross receipts computed on an installment sale of a capital asset? Is the realized installment sale gain included in the two tax bases? How is the investment tax credit (ITC) affected?

	C34. What kinds of expenses qualify for the MBT credit under MCL 208.1451 that applies to beverage distributors who originate deposits on beverage containers?

	C35. If two shareholders of a C corporation ("X Corp") are themselves C corporations (Y Corp and Z Corp) and one of Y Corp's shareholders is paid a management fee for managing the business of X Corp, does the management fee factor into the disqualifiers for the Small Business Alternative Credit under MCL 208.1417?

	C36. Can a taxpayer use data from its SBT tax periods in calculating the loss adjustment for purposes of determining eligibility for the Alternative Small Business Credit under MCL 208.1417?

	C37. What is the proper treatment for an SBT carryforward credit which has only one year of carryforward remaining under the SBT dictated lifespan? Does MCL 208.1401 extend the life of the credit, or is it limited by the original SBT term?

	C38. Do dividends that represent distribution of previously taxed S corporation earnings qualify as dividends for purposes of determining an "active shareholder"?

	C39. For purposes of the private equity fund credit under MCL 208.1453, if a private equity fund manager is an entity that is a member of a unitary business group, does the calculated credit percentage apply to the tax liability of the entire unitary business group, or the separate tax liability of the fund?

	C40. Is compensation under the MBT reported on a cash or accrual basis?

	C41. How is the Small Business Alternative Credit under MCL 208.1417 calculated by a taxpayer that is a unitary business group? How do the disqualifiers and percentage reducers work?

	C42. For purposes of the Small Business Alternative Credit under MCL 208.1417, do the rules of attribution attribute the allocated business income of one shareholder to a related shareholder to determine whether the taxpayer is disqualified from the credit?

	C43. Is a staffing company as defined in section 113(6)(d)(ii) eligible for the section 403 compensation credit on wages etc. paid to the personnel it supplies to its customers?

	C44. Are the MEGA credits under the MBT (MCL 208.1431) the same as the MEGA credits under the SBT?

	C45. Under the MBT, does land qualify for the Investment Tax Credit ("ITC")?

	C46. When computing the loss adjustment for the small business alternative credit provided under MCL 208.1417, are losses established under the SBT considered when looking at the adjusted business income from the 5 tax years immediately preceding the current tax year.

	C47. Under the MBT, may unused Investment Tax Credits ("ITC") be carried forward to future tax years?


Film Credits

	Fi1. The MBT's film production credit (MCL 208.1455) provides, in part, a credit calculated as a specified percentage of "direct production expenditures". How will the criteria expressed in the definition of "direct production expenditures" (MCL 208.1455(12)(c)) be applied?

	Fi2. a) Is a fee paid to a business located outside Michigan for processing a film production company's payroll at a location outside Michigan a qualified expense? b) If not, does the answer change if an employee or agent is present in Michigan to handle the data transfer? c) Does the answer change if the payroll processing business is the "employer of record" for the employees whose payroll is being processed?

	Fi3. Is the expense for production insurance paid to an out-of-state insurance company through a Michigan based broker/agent a qualified direct production expenditure?

	Fi4. Does the purchase of tangible personal property through an 800 number answered outside of Michigan and delivered from a warehouse outside of Michigan qualify as a direct production expenditure if the seller collects and remits Michigan sales/use tax?

	Fi5. Is the rental of specialized motion picture equipment from a vendor located outside Michigan (and whose inventory is also located outside Michigan) a qualified direct production expenditure if the rental is handled by a Michigan based rental vendor?

	Fi6. Tax Return Filing: a) Is a taxpayer required to file an MBT tax return in order to obtain a film credit or refund?; b) If so, may the return be filed early (before the end of the return year)?

	Fi7. Does a production company that fails to withhold or insure that the personal services company ("PSC") or professional employment organization ("PEO") withholds lose an otherwise available film credit?

	Fi8. Do non-permanent fixtures such as honeywagons (a type of multi-room trailer used by film and television productions) and star trailers (larger trailers typically used by celebrities) qualify for the infrastructure credit?

	Fi9. Are fringe benefits paid to crew members such as the employer's share of FICA, health insurance, and so forth eligible for the Film Production Credit? If so, are these expenditures considered "direct production expenditures" eligible for a 40% - 42% credit, or are they "qualified personnel expenditures" eligible for a 30% credit?

	Fi10. MCL 208.1455 provides for an MBT Film Production Credit "equal to 42% of direct production expenditures for a state certified qualified production in a core community." What exactly does "in a core community" mean?" Where the production is filmed? Where the production office is located? Where the production expenditures are made?

	Fi11. For purposes of the Film Production Credit,a production company or its designated payroll company has an obligation to withhold Michigan payroll taxes on wages paid to employees working on a Michigan production. Similarly,a production company must also withhold from payments made to a PEO or PSC if the PEO or PSC does not withhold for their employees. If an employee on the production is a resident of a state with a reciprocal tax agreement with Michigan (i.e. Illinois,Indiana,Ohio,Kentucky,Wisconsin,and Minnesota),and no Michigan tax is withheld,are wages paid to the employee eligible for the film credits even though there is no withholding as a result of the reciprocal agreement?

	Fi12. Does a production company's interest expense associated with production financing qualify as a direct production expenditure that is eligible for the Film Production Credit? If so,does capitalized interest qualify? Does interest that continues to accrue post-Michigan activity qualify?

	Fi13. Film production companies with existing credit agreements that were approved have found that they have underestimated their Michigan budgets. What is the process to address this situation,and what procedure should be followed?

	Fi14. Are per diem expenses,living allowances,and car and meal allowances eligible for the Film Production Credit?

	Fi15. A "box rental" occurs when an employee of a production company charges the company a weekly fee for the use of his or her own tools. For instance,a makeup person may charge the production company a weekly fee for the use of the brushes,mirrors,and other supplies that she owns and uses on the job. Or,an electrician might provide his own tools and equipment. Do such costs qualify as "direct production expenditures" that are eligible for the Film Production Credit? Must the employee charge the company sales tax in order for the box rental to qualify? Is the answer different if the employee provides his or her services through a loan-out company? What if the box rental includes supplies that are fully expended during the production?

	Fi16. Are workers' compensation insurance expenditures eligible for film production credit?

	Fi17. Must a Michigan Business Tax annual return be filed to obtain a refund of a film production credit?

	Fi18. When will expenditures made prior to approval of a film production credit agreement by the State qualify for credit?

	Fi19. Under the Michigan Income Tax Act, MCL 206.367, a film production company that seeks a film production credit must either withhold Michigan income tax on the payments it makes to a PEO/PSC or, alternatively, it must insure that the PEO/PSC has paid the withholding taxes due to Michigan. How will the film production company that withholds Michigan income tax from payments to a PEO/PSC report and pay the amount withheld to the State of Michigan?

	For more Film Credit information, visit www.michigan.gov/filmoffice.


Financial Institutions Tax

	F1. Do nonresident financial institutions located outside Michigan whose only activity in Michigan consists of an ownership interest in loans secured in whole or in part by real property located in Michigan have nexus under the MBT?

	F2. The surcharge of the Michigan Business Tax Act,found at MCL 208.1281,exempts "a person subject to the tax imposed and levied under chapter 2B that is authorized to exercise only trust powers." What type of taxpayer fits this description?

	F3. How does a unitary business group ("UBG") composed of financial institutions that includes a bank authorized to exercise only trust powers,which is exempt from the MBT surcharge under MCL 208.1281(4)(b),calculate the surcharge?

	F4. The MBT franchise tax provides financial institutions with a tax base deduction for "the average daily book value of United States obligations and Michigan obligations." MCL 208.1265(1). Does "average daily book value" include the premiums and discounts for U.S. obligations?


Insurance Companies Tax

	I1. How must a foreign insurer file for purposes of the retaliatory tax when the insurer's state of incorporation requires unitary filing?

	I2. Does a unitary group of insurance companies have to file a combined MBT return?


Misc.

	Mi1. Revenue Administrative Bulletin 2001-2 describes provisions of the SBT related to the tax base of a foreign person for tax years beginning in or after 2000. Does RAB 2001-2 apply to the MBT?

	Mi2. How are Professional Employer Organizations and Staffing Companies defined for the MBT and how do the two differ?

	Mi3. Is sales tax collected by a retail business considered part of its modified gross receipts under the Michigan Business Tax?

	Mi4. How is the modified gross receipts tax base calculated for professional employment organizations and staffing companies? What is the significance of these different treatments?

	Mi5. (Answer rescinded, replaced by Mi28.) Are limited liability companies subject to the MBT?

	Mi6. (Answer rescinded, replaced by Mi34.) What is the meaning of the acronym FIRE which appears in the presentation entitled MBT Overview - August 1, 2007 on the Michigan Business Tax Website?

	Mi7. For developers in the trade or business of selling real property, does the definition of inventory as used in "purchases from other firms" include real property?

	Mi8. Will shareholders of S corporations and partners in partnerships be liable for Michigan individual income tax on their share of flow-through income from entities subject to MBT? Does it matter whether the shareholders or partners are residents or nonresidents?

	Mi9. Is the deduction provided under MCL 208.1201(2)(i) altered by the MBT surcharge?

	Mi10. Does the deduction provided under MCL 208.1201(2)(i) reduce the MBT surcharge imposed under MCL 208.1281(1)?

	Mi11. Will an Employee Stock Ownership Plan ("ESOP"), a tax exempt trust under federal laws, be liable for Michigan income tax under the Michigan Income Tax Act ("ITA"), 1967 P.A. 281, for it's share of flow-through income from a S corporation that is subject to MBT?

	Mi12. Can new motor vehicle and watercraft dealers who separately itemize and collect the modified gross receipts (MGR) tax from customers, in addition to the sales price, collect amounts in excess of the amount of taxes remitted to the Department?

	Mi13. Are cooperatives organized under IRC 1381(a)(2) exempt from the MBT?

	Mi14. Will charitable trusts be subject to the MBT?

	Mi15. If an entity is subject to the Business Income Tax, will the entity's members/shareholders be subject to Michigan personal income tax?

	Mi16. Are small businesses exempt from the imposition of the surcharge?