Part three of The Leaders’ Edge MBT Q&A series focuses on the new Small Business Alternate Tax Credit. The MACPA Business Tax Restructuring Task Force and Michigan Department of Treasury have both provided extensive guidance addressing how the Small Business Alternate Tax Credit is calculated, to whom it may apply and its similarity to the Small Business Credit provided for under the Single Business Tax (SBT).

The Small Business Alternate Tax Credit (section 417) under the Michigan Business Tax (MBT) is available to any taxpayer that meets the following three criteria:

1. Gross receipts do not exceed $20 million (phase-out begins at $19 million).
2. Adjusted business income minus the loss adjustment does not exceed $1.3 million, as adjusted annually for inflation using the Detroit consumer price index.
3. The individual compensation or distributive income does not exceed $180,000 (phase-out begins at $160,000). MCL 208.1417(1).

If a taxpayer (including a unitary group) meets all three criteria, then the taxpayer’s MBT will be 1.8% of federal taxable income with adjustments.

The following questions and responses address the different aspects of the Small Business Alternate Tax Credit:

MACPA Guidance

(Please note that the responses provided to MACPA member questions are not official. MACPA accepts no responsibility for out-dated or incorrect information. The responses below are simply interpretations of Public Act 36 of 2007. MACPA members seeking official guidance should contact the Department of Treasury directly.)

Disqualifications – Schedule C Income (Sole-Proprietor)
http://www.michcpa.org/Content/18435.aspx

Calculation of Credit – Order Taken
http://www.michcpa.org/Content/18115.aspx

Application of Credit – Interpretation of MBT Act Language
http://www.michcpa.org/Content/18093.aspx

(Please visit the MACPA’s MBT Resources Page for additional information on the Michigan Business Tax.)

Treasury Guidance

Disqualifications – Schedule C Income (Sole-Proprietor)
http://www.michigan.gov/taxes/0,1607,7-238-47449-183317--F,00.html

Similarity to Single Business Tax (SBT) – Stock Ownership
http://www.michigan.gov/taxes/0,1607,7-238-47449-183319--F,00.html

Credit Eligibility – Using Data from SBT Tax Periods
http://www.michigan.gov/taxes/0,1607,7-238-47449-194356--F,00.html

(Additional information provided by Treasury regarding the Act is available here.)

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