New Combined Filing Election Available in Michigan

Jan. 9, 2014

On Dec. 30, 2013, Michigan Gov. Rick Snyder signed Senate Bill 367, which allows all members of an affiliated group to elect to file a combined Michigan corporate income tax (CIT) return for tax years beginning after Dec. 31, 2012, even if all members are not unitary with one another.

The CIT is imposed on a unitary basis. Prior to this election, any nonunitary members of an affiliated group doing business in Michigan were required to file separate returns. Under the new legislation, the nonunitary members can continue to file separate returns, or they can elect to file a combined return.

The election is made on the taxpayer’s timely filed CIT return and generally is binding on the taxpayer for 10 tax years. The election must be renewed after the end of the 10-year period if continued combined filing is desired. If the election is not renewed for the first year after its expiration, the combined group cannot make a new election for the following three years. Businesses that plan on making the election should consider the impact on their income tax expense under U.S. generally accepted accounting principles.

This election also is available to banks and insurance companies but will have a different effect as these entities pay tax on a basis other than income.

This new law is similar to elections available in Massachusetts and Wisconsin and might allow corporations to avoid audit exposure and litigation over which entities are unitary and constitute part of the combined group.

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John Eardley
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