On May 25, 2011, the Michigan Corporate Income Tax (CIT) was signed into law, imposing a 6% corporate income tax on C corporations and taxpayers taxed as corporations for federal income tax purposes. The CIT allows only one credit, the small business alternative credit, offering an alternative tax rate of 1.8% of adjusted business income.
The CIT replaces the Michigan Business Tax (MBT) for most taxpayers and is effective January 1, 2012. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT. The gross receipts threshold does not apply to financial institutions or insurance companies.
A CIT taxpayer’s tax year is the calendar year, or the fiscal year ending during the calendar year. Fiscal year taxpayers must file a final MBT return for the year ending on December 31, 2011. A taxpayer that is subject to the MBT and the CIT for fractional parts of the same fiscal year must use the same method to compute the MBT as used to compute the CIT for the other portion of the tax year.
Fiscal year taxpayers will be granted an automatic extension for their 2012 fiscal year annual CIT return. Fiscal year returns ending in 2012 will be due the same date as 2012 calendar year returns, April 30, 2013. An extension request form is not needed unless the taxpayer is required to transmit payment of any tax that would be due with the annual return.
Calendar year taxpayers must file a Michigan Application for Extension of Time to File by the due date of the CIT annual return, together with payment of estimated tax. CIT annual returns for calendar year taxpayers is April 30th.
Annual returns will be finalized and posted to the Michigan website by the time the legislature adjourns for the year in December 2012. It is anticipated that paper forms and instructions will be available for distribution in January 2013.
Individuals and flow-through entities, including partnerships, S corporations, and trusts are not subject to the CIT.
Flow-through entities may be subject to withholding. A flow-through entity with business activity in Michigan that has more than $200,000 of business income after allocation or apportionment is required to withhold a tax on the distributive share of business income of each corporation or flow-through member of the flow-through entity in an amount computed pursuant to MCL 200.623.
Insurance companies are subject to tax equal to 1.25% of gross direct premiums written on property or risk located or residing in Michigan.
Financial institutions are subject to tax equal to 0.29% of their apportioned net capital.
Additional information may be obtained on the Michigan Department of Treasury website at: http://www.michigan.gov/taxes/0,4676,7-238-59553—,00.html