Michigan Notice Provides Guidance on Unitary Reporting Issues for Financial Institutions

Oct. 3, 2013

On Sept. 20, 2013, the Michigan Department of Treasury (Treasury) issued a notice providing guidance to financial institution unitary filers on the proper reporting of consolidated equity. The guidance is applicable to both the former Michigan Business Tax (MBT), which became effective for the 2008 tax year, and the Corporate Income Tax (CIT), which became effective for the 2012 tax year.

The tax under the MBT and CIT is based on the consolidated equity of a financial institution, but prior to the notice it was unclear where the elimination for investment in subsidiaries should be reported. Many financial institutions netted the elimination on the member’s equity capital line. This often resulted in a negative amount being reported for that member’s equity capital, which Treasury would contend should have been reported as zero.

The guidance issued by Treasury states that beginning Oct. 1, 2013, all affected taxpayers should file original or amended returns (2008 and forward) presenting negative amounts on the equity capital line for a group member only if the negative number is the result of eliminations. An amended return is necessary to correct for all cases where eliminations resulted in the presentation of negative numbers on the equity capital line of a unitary business group financial institution annual return, even if there is no change to the tax liability.

Treasury is revising its forms for the 2013 tax year to accommodate the reporting of eliminations for unitary business groups of financial institutions.

In the notice, Treasury also confirmed the state’s position that reported equity capital before eliminations cannot be less than zero.

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