Proposed Michigan Business Tax (MBT) Replacement
Last week Michigan Governor Rick Snyder released a draft of a proposed replacement of the Michigan Business Tax (MBT) with the Michigan Corporate Income Tax. The important word in the new tax name is “Corporate”. If passed in its present form, the following types of business would not be subject to this tax: Partnerships, Limited Liability Companies (LLCs), Sole Proprietorships, and S-Corporations (those corporations that elected to have the income taxed to its shareholders and not to the corporation).
The tax computation would be very simple compared to the MBT. Essentially, the net income for the year would be taxed at 6%. Under certain circumstances there would be a small business credit available to reduce the tax. This credit would be much simpler to calculate as compared to the large number of credits under MBT. Michigan would still tax those corporations located outside of Michigan that do business in Michigan.
Since 1976, when the Single Business Tax began (later replaced by MBT), the preparation of Michigan business tax returns has been very complicated. We think Gov. Snyder’s new Michigan Corporate Income Tax could be good news, allowing thousands of small business owners to understand their Michigan tax return for the first time in decades.