Presentation 13 Presentation 13 MBT Unitary Business Group – – MBT Unitary Business Group General Concepts General Concepts (Form 4580) (Form 4580) Form 4580
Presentation Overview Presentation Overview � Forms located in Presentation Resources Forms located in Presentation Resources � section section Please print before viewing presentation � Please print before viewing presentation � � Numerous other MBT Forms Numerous other MBT Forms � Presentations Presentations � Forms are DRAFT versions Forms are DRAFT versions �
Identifying a Unitary Business Group Identifying a Unitary Business Group As defined in MCL 208.1117(6), a "Unitary business group" means As defined in MCL 208.1117(6), a "Unitary business group" means a group of United States persons, other than a foreign operating a group of United States persons, other than a foreign operating entity, 1 of which owns or controls, directly or indirectly, more e entity, 1 of which owns or controls, directly or indirectly, mor than 50% of the ownership interest with voting rights or than 50% of the ownership interest with voting rights or ownership interests that confer comparable rights to voting ownership interests that confer comparable rights to voting rights of the other United States persons, and that has business rights of the other United States persons, and that has business activities or operations which result in a flow of value between or or activities or operations which result in a flow of value between among persons included in the unitary business group or has among persons included in the unitary business group or has business activities or operations that are integrated with, are business activities or operations that are integrated with, are dependent upon, or contribute to each other. For purposes of dependent upon, or contribute to each other. For purposes of this subsection, flow of value is determined by reviewing the this subsection, flow of value is determined by reviewing the totality of facts and circumstances of business activities and totality of facts and circumstances of business activities and operations. operations. Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group A United States person is defined in IRC 7701(a)(30) as A United States person is defined in IRC 7701(a)(30) as the following: the following: � A citizen or resident of the United States A citizen or resident of the United States � � A domestic partnership A domestic partnership � � A domestic corporation A domestic corporation � � Any estate (other than a foreign estate defined under Any estate (other than a foreign estate defined under � IRC 7701(a)(31) IRC 7701(a)(31) � Any trust (with certain jurisdiction and control Any trust (with certain jurisdiction and control � limitations) limitations) Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group A foreign operating entity is a United States person that satisfies ies A foreign operating entity is a United States person that satisf each of the following: each of the following: � Would otherwise be a part of a UBG that has at least one person Would otherwise be a part of a UBG that has at least one person � included in the UBG that is taxable in Michigan included in the UBG that is taxable in Michigan � Has substantial operations outside the United States, the Distri Has substantial operations outside the United States, the District ct � of Columbia, the Commonwealth of Puerto Rico, any territory of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or a political subdivision of f or possession of the United States, or a political subdivision o any of the foregoing any of the foregoing � At least 80 percent of the person’s income is active foreign At least 80 percent of the person’s income is active foreign � business income as defined in IRC 861(c)(1)(B). business income as defined in IRC 861(c)(1)(B). Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group To qualify as a UBG, the related United States To qualify as a UBG, the related United States persons must satisfy both a control test and one and one persons must satisfy both a control test of two relationship tests. of two relationship tests. The control test will be discussed on slides 6 The control test will be discussed on slides 6 through 11 and the relationship tests discussion through 11 and the relationship tests discussion will begin on slide 12. will begin on slide 12. Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group Groups that satisfy the control tests are defined Groups that satisfy the control tests are defined below: below: � Parent Parent- -subsidiary controlled group subsidiary controlled group � � Brother Brother- -sister group sister group � � Combined controlled group Combined controlled group � Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group Excluded Ownership Interests. For purposes of Excluded Ownership Interests. For purposes of determining ownership or control under the determining ownership or control under the control test, the Department will apply IRC control test, the Department will apply IRC 1563 to exclude certain ownership interests from 1563 to exclude certain ownership interests from determination of ownership and control, except determination of ownership and control, except that the Department will again apply IRC 1563 that the Department will again apply IRC 1563 to all forms of ownership interests and not just to all forms of ownership interests and not just corporate stock. corporate stock. Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group In addition to satisfying the control test, the group of In addition to satisfying the control test, the group of persons must have business activities or operations that persons must have business activities or operations that satisfy one of two relationship tests: satisfy one of two relationship tests: Relationship Tests Relationship Tests (1) Result in a flow of value between or among persons in the between or among persons in the (1) Result in a flow of value group, or or group, (2) Are integrated with, dependent upon, or contribute to each (2) Are integrated with, dependent upon, or contribute to each other. other. Form 4580
Identifying a Unitary Business Group Identifying a Unitary Business Group Notably, the ownership tests for controlled groups Notably, the ownership tests for controlled groups under the SBT differ from that under the MBT. under the SBT differ from that under the MBT. The MBT also requires members of a UBG to The MBT also requires members of a UBG to meet a relationship test not necessary for meet a relationship test not necessary for controlled groups under the SBT. Therefore, controlled groups under the SBT. Therefore, while there might be some overlap between while there might be some overlap between affiliated groups under the SBT and UBGs affiliated groups under the SBT and UBGs under the MBT, an affiliated group under the under the MBT, an affiliated group under the SBT will not necessarily be a UBG under the SBT will not necessarily be a UBG under the MBT. MBT. Form 4580
Computing Tax Liability for the UBG Computing Tax Liability for the UBG Nexus Nexus So long as one member of a UBG has nexus with Michigan, all So long as one member of a UBG has nexus with Michigan, all members of the UBG must be included when calculating the members of the UBG must be included when calculating the taxpayer’s business income and modified gross receipts tax base taxpayer’s business income and modified gross receipts tax base and apportionment formula. Similarly, if any member of the and apportionment formula. Similarly, if any member of the UBG has activities that go beyond the limits of PL 86- -272, then 272, then UBG has activities that go beyond the limits of PL 86 all members of the UBG, including those otherwise protected all members of the UBG, including those otherwise protected under PL 86- -272, must be included when calculating the 272, must be included when calculating the under PL 86 taxpayer’s business income and modified gross receipts tax bases taxpayer’s business income and modified gross receipts tax bases and apportionment formula. and apportionment formula. Form 4580
UBG - - General Filing Requirements General Filing Requirements UBG A standard taxpayer whose apportioned or A standard taxpayer whose apportioned or allocated gross receipts are less than $350,000 is allocated gross receipts are less than $350,000 is not required to file a return or pay the tax not required to file a return or pay the tax imposed under the MBT. As long as the imposed under the MBT. As long as the apportioned or allocated gross receipts of the apportioned or allocated gross receipts of the standard UBG equal or exceed $350,000, the standard UBG equal or exceed $350,000, the UBG is required to file a combined 4567 MBT UBG is required to file a combined 4567 MBT annual return under MCL 208.1511. annual return under MCL 208.1511. Form 4580
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