Skip to main content

Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667




Friday, May 28 2010

The Michigan Department of Treasury (Treasury) in Revenue Administration Bulletin 2010-5 (RAB 2010-5) has issued guidance to determine where the benefit of services is received for sales factor apportionment purposes under the Michigan Business Tax (MBT).  The law provides that sales from the performance of services are sourced to Michigan if the recipient of the services receives the benefit of the services in Michigan.  The recipient of the services performed may be someone other than the purchaser. 

RAB 2010-5 provides that all of the benefit is received in Michigan if one of the following applies:

  • The service relates to real property that is located entirely in Michigan.

  • The service relates to tangible personal property that (1) is owned or leased by the purchaser and located in Michigan at the time that the service is received, or (2) is delivered to the purchaser in Michigan.

  • The service is provided to a purchaser who is an individual physically present in Michigan at the time that the service is received.

  • The services are received in Michigan and are in the nature of personal services that are typically conducted or performed first-hand, on a direct, one-to-one or one-to-many basis.

  • The service is provided to a purchaser that is engaged in a trade or business in Michigan and relates only to the trade or business of that purchaser in Michigan.

  • The service relates to the use of intangible property that is used entirely in Michigan.

  • The services provided are professional in nature, such as legal or accounting services, and are provided to a purchaser that is an individual domiciled in Michigan, or to a purchaser with business operations only in Michigan.

In addition, if the recipient of the services receives only a portion of the benefit of the services in Michigan, then the receipts are included in the apportionment factor in proportion to the extent that the benefit of the services is received in Michigan. Guidance is also provided regarding this situation.

The method to determine the extent of the benefit received in Michigan must be reasonable in light of the existing facts and circumstances.  The method chosen by the taxpayer must be uniformly and consistently applied.  Taxpayers are reminded that if they cannot determine where the recipient of the services has received the benefit, then the customer's location may be used.

RAB 2010-5 includes 13 examples, all of which will be discussed in detail at the MACPA series of seminars in June Cases in Michigan Business Tax: Nexus Apportionment and Unitary.

June 15th in Saginaw

June 21 in Grand Rapids

June 23 in Livonia

Register on line at the MACPA website:

In addition, a June Newsletter from will be devoted to the new RAB.

Posted by: Ed Kisscorni AT 12:51 pm   |  Permalink   |  0 Comments  |  Email
Thursday, May 27 2010

The Michigan Tax Tribunal did not err in ruling that a corporation's appraisal of its properties for local Michigan Property Tax assessment purposes lacked credibility.  (Inn At Watervale, Inc. v. Township of Blaine, Michigan Court of Appeals, No. 289869, May 20, 2010)  However, the Tax Tribunal did err in failing to make an independent determination of the true cash value of the properties and erred in failing to base its decision on competent, material, and substantial evidence.

In its ruling, the Tax Tribunal outlined the applicable appraisal methodology to be used in a situation where a conservation easement had been granted on property to be assessed as found in Indian Garden Group, 1995 WL 901434 (1995), and determined that the corporation did not provide the necessary evidence. The Indian Garden Group decision was declared precedential by the Tax Tribunal with respect to the valuation methodology of a property that was encumbered by an easement.

In this case, the corporation's appraiser generated a before-value and an after-value appraisal in 2003 and merely updated the after-value appraisal to account for economic conditions as of December 31, 2005. However the Tax Tribunal's decision in Indian Garden Group mandated that the applicable appraisal methodology be used to determine the true cash value of a property that was encumbered by an easement as of each relevant tax date in contention. The Indian Garden Group opinion stated that the value of the property was to be determined on a year-by-year basis according to the applicable and available market evidences. Therefore, the Tax Tribunal was correct in finding that the corporation's attempt to provide a before-value appraisal from 2003 with merely updated values as of December 31, 2005, did not satisfy the appraisal methodology outlined in Indian Garden Group for the relevant tax date.

Although the Tax Tribunal's decision was correct that the corporation's appraisal was unreliable, the Tax Tribunal failed to meet the requirement that it make an independent determination of the true cash value of the corporation's property. It acknowledged that the township assessor's values were somewhat incorrect, but nevertheless it adopted those exact values as the corporation's true cash value. The Tax Tribunal had a duty to make its own determination of true cash value and not merely affirm the value of the assessing authority. If the Tax Tribunal did not have adequate evidence to make a determination, then it could have sought additional data from the parties.


Posted by: Ed Kisscorni AT 12:44 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, May 26 2010

The Michigan Court of Appeals has ruled that contributions made to a voluntary employees' beneficiary association (VEBA) were not compensation under the former Single Business Tax and thus were not required to be added back to the tax base.  (Ford Motor Co. v. Department of Treasury, Michigan Court of Appeals, No. 283925, May 20, 2010) 

The statutory definition of "compensation" included payments for insurance for which the employees were beneficiaries, including payments under health, welfare, and noninsured benefit plans.  However, the taxpayer's contributions to the VEBA represented only potential compensation to employees.  The amount in the VEBA account could have decreased due to market forces. The VEBA was essentially a savings fund to facilitate payment of the taxpayer's employees' future health care services, and not payment of actual health care costs incurred. The payments into VEBA were not required by contract and were not paid in order to procure insurance to cover medical services due employees. For these reasons, the court concluded that the VEBA contributions were not compensation under the former SBT.

Taxpayers who previously added VEBA contributions to compensation could be entitled to a refund of SBT tax.  The statute of limitations is four years starting with the later of the due date for the return or the actual file date.

Posted by: Ed Kisscorni AT 12:36 pm   |  Permalink   |  0 Comments  |  Email
Saturday, May 22 2010

The Michigan Court of Appeals supports the Michigan Tax Tribunal decision to accept the recommendation of the hearing referee in a Small Claims case.  [Schellenberg v. Township of Bingham, Michigan Court of Appeals, No. 289801, May 11, 2010] 

The Tax Tribunal did not err by ignoring substantial evidence that proved the taxpayers' contended true cash value of their property for the local Michigan property tax years at issue. The tribunal upheld the hearing referee's findings that the land value established by one of the taxpayers' appraisers was too low, and that the one submitted by the township was too high, and that the proper methodology was the one used by the taxpayers' other appraiser. The referee arrived at an independent determination of true cash value on the basis of substantial evidence. It was not necessary for the referee to discuss each piece of evidence submitted. The findings of the referee were in turn adopted by the Tax Tribunal, upon appropriate review, and the tribunal likewise was not obliged to discuss each piece of evidence. Further, there was sufficient evidence for the Tax Tribunal to make an independent determination of the true cash value of the taxpayers' property.

The Tax Tribunal also did not err in determining that it did not have jurisdiction for three earlier tax years at issue because the taxpayers failed to appeal the assessments for those tax years. Therefore, there was nothing for the Tax Tribunal to review.


Posted by: Ed Kisscorni AT 12:11 pm   |  Permalink   |  0 Comments  |  Email
Friday, May 14 2010

Candidate for governor, Rick Snyder, a CPA from Ann Arbor is suggesting the Michigan Business Tax be repealed and replaced by an income tax.  He spoke to a group of about 250 CPAs on Tuesday of this week in Lansing.

It is true that many in the business community would like the tax repealed.  I have said "it's a monster".  Please check out the video which I participated in by clicking on the link below.

Retooling Michigan Report on the Michigan Business Tax

Retooling Michigan report on the MI Business Tax

Posted by: Ed Kisscorni AT 02:14 pm   |  Permalink   |  0 Comments  |  Email
Friday, May 14 2010

In First Industrial (First Industrial, L.P. v. Department of Treasury, Michigan Court of Appeals, No. 282742, August 18, 2009) a Michigan taxpayer was entitled to use the business loss deduction under the single business tax (SBT) that was carried over from an asset transfer, but could not claim the capital acquisition deduction (CAD).

The taxpayer was a 99% limited partner and the partnership transferred all of its Michigan assets to the taxpayer. Under the former SBT, taxpayers could deduct available business losses from the tax base. Departmental guidance provided that the transferee was entitled to the loss when the transferor "completely discontinued operations" and was no longer an SBT taxpayer.

Examining the statutory language, the court determined that the transferee/taxpayer was entitled to the loss when the Michigan operations were terminated. In other words, the transferor was not required to end operations everywhere for the transferee to use the loss. However, the taxpayer was not entitled to claim a CAD, because the taxpayer did not prove that it expended any money during the tax year to acquire the assets. Although the asset transfer from the partnership was a non-liquidating distribution for federal income tax purposes, it is not one of the tax-free events that received special SBT treatment. This particular distribution was a return of the taxpayer's capital investment in the partnership, so the taxpayer could not claim a CAD.

Posted by: Ed Kisscorni AT 08:40 am   |  Permalink   |  0 Comments  |  Email
Thursday, May 13 2010

A recent development under the former Single Business Tax (SBT) may affect individuals with an interest in flow through entities, investment clubs and Family Limited Partnerships (FLPTs).
The Michigan Department of Treasury has begun sending "Letters of Inquiry" to individuals, fiduciaries, and banks and other entities that are partners in partnerships and that manage FLPTs and common trust funds asserting an SBT filing obligation for investment activity.  These Notices are generated from the Department's Discovery Unit which indicates there is a specific audit project designed to discover individuals who hold an interest in flow through entities, FLPTs and trust funds and to collect tax, penalty and interest.  Letters of Inquiry were sent to a large number of individuals, banks, partnerships, trusts and other family estate-planning entities earlier this year.  The letters and follow-up correspondence are automated.
The SBT was around for 32 years.  In the past the Department of Treasury has attempted to expand the tax to investment activities.  The Single Business Tax Act did not exempt investment activities.  However, there was an exclusion for casual sales.  In recent years the Michigan Department of Treasury has held to a definition of "gross receipts" which covered only receipts from a regular trade or business and the Department never subjected passive investment income of individuals or from family estate-planning entities to the SBT.
Due to a statutory change in 2000, the Department now believes that investment activity meets the definition of business activity.  Though historically the Department assessed few, if any, taxpayers for their passive investment activity, the Discovery Unit is now asserting that the individuals and family estate-planning entities are non-filers; that they are taxable for all prior years; and it is signaling that it will issue assessments to those who fail to respond to the Notices.

Taxpayer groups are approaching the legislature for a legislative fix to prohibit the Department of Treasury from assessing the SBT in investment activities.  Hopefully, the Department of Treasury will back down.  In the meantime, taxpayers should not pay the assessments and should appeal the assessments.

Posted by: Ed Kisscorni AT 07:49 am   |  Permalink   |  0 Comments  |  Email
Thursday, May 13 2010

Michigan voters overwhelmingly oppose an effort to expand the state sales tax to services and instead want their political leaders to balance the state's budget by cutting spending, according to a new poll released today by the Michigan Chamber of Commerce and the Michigan Association of REALTORS®.

The poll found 75 percent of likely voters oppose the proposal put forward by Gov. Jennifer Granholm and House Speaker Andy Dillon to lower the sales tax rate from 6 percent to 5.5 percent and expand the tax to most consumer services. Only 21 percent support such a tax increase.

The state faces a $1.7 billion budget shortfall for the upcoming fiscal year, which starts Oct. 1.

The proposal would result in a new tax on services such as haircuts, child care, dry cleaning, auto repairs, tax preparation and retirement planning services.

Voters universally reject the service tax plan, regardless of their political affiliation. Seventy-seven percent of Republicans and 74 percent of independents oppose such a service tax. Even 60 percent of Democrats oppose the governor's plan.

The survey of 600 likely voters was conducted April 21-22 by Public Opinion Strategies of Alexandria, Va.

Posted by: Ed Kisscorni AT 07:44 am   |  Permalink   |  0 Comments  |  Email


Design Your Own Website, Today!
iBuilt Design Software
Give it a try for Free