Make S-Corp Election to Eliminate Michigan Corporate Income Tax

  • January 10, 2012
  • Steve Wisinski, CPA, MAFF

As we have discussed in previous posts, the Michigan Business Tax (MBT) has been replaced  by the CIT (Corporation Income Tax).  Under the CIT, the following types of taxpayers are not subject to the tax:

  •  Individuals
  • Trusts & Estates
  •  Partnerships including LLC’s
  •  S-Corporations

That leaves only regular C-Corporations who are required to file and pay CIT.

For those of you who operate a Michigan-based business as a C-Corp., you might want to consider making an S-Corp election with the IRS effective January 1, 2012.  Having done so, your company will not be subject to the CIT.

For most of our corporate clients, this might be a good business decision.  At the Federal level there are a few changes in the method that remove benefits for the officers.  However, the tax impact is minimal. Potentially there is one issue, built-in gains, that could be significant, but we know several methods of minimizing or eventually eliminating any tax consequences.  Therefore, we are not concerned about built in gains.

To make an S-Corp election, you need to file Form 2555.  To be effective for the year 2012, this form must be filed by February 15, 2012.

Contact your ShindelRock tax professional to discuss the possibilities for your company.  If you determine that making this change would be beneficial to you, we can assist in preparing Form 2555.