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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




Monday, December 19 2011

Must the Final Short Period Return be Filed on an Actual Basis


Must a fiscal year 9/30 S Corporation file their final Michigan Business Tax (MBT) return on the actual basis or if they would have the option of filing on the prorated annual or actual basis.  The S Corporation will not be subject to the new Corporate Income Tax (CIT).


Public Act 209 enacted earlier this fall amended Section 503 of the Michigan Business Tax Act.  See below.  The amendment added new subsections (2) and (3).


Subsection (2) specifies that a fiscal year taxpayer subject to both the MBT and the CIT and required to file two short period returns must file the final MBT return on the same method as used for the first CIT return.


Subsection (3) specifies that a taxpayer required to file two short period returns covering the same fiscal year must file both returns using the same method.  It also specifies that credits are claimed "based on actions taken or payments made during the period represented on each short period return of those respective parts of the same tax year.


Please note that Section 503 does not address whether a fiscal year taxpayer filing the final MBT return not being subject to the CIT will have the actual/prorated annual option. The implication is that they would be required to file a short period final MBT return on the actual basis.  However, the law does not say it. 


The Department of Treasury will be issuing additional CIT FAQs early in 2012.  Your question may be addressed at that time.  However, I suspect, based on their prior policy, that a short period final MBT return would be filed on an actual basis.

Sec. 503. (1) If a taxpayer's tax year to which this act applies ends before December 31, 2008 or if a taxpayer's first tax year is less than 12 months then a taxpayer subject to this act may elect to compute the tax imposed by this act for the portion of that tax year to which this act applies or that first tax year in accordance with 1 of the following methods:

(a) The tax may be computed as if this act were effective on the first day of the taxpayer's annual accounting period and the amount computed shall be multiplied by a fraction, the numerator of which is the number of months in the taxpayer's first tax year and the denominator of which is the number of months in the taxpayer's annual accounting period.

(b) The tax may be computed by determining the business income tax base and modified gross receipts tax base in the first tax year in accordance with an accounting method satisfactory to the department that reflects the actual business income tax base and modified gross receipts tax base attributable to the period.

(2) The method chosen by a taxpayer under this section that is subject to the tax imposed under this act and the tax imposed under part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to 206.713, for a portion of the same tax year shall be the same as the method used by that same taxpayer when computing the tax imposed under part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to 206.713, for the other portion of that same tax year.

(3) A taxpayer that is subject to the tax imposed under this act and required to file 2 separate short period annual returns encompassing a fractional part of the taxpayer's same fiscal tax year shall elect to compute the tax imposed by this act for each short period return for each respective portion of the same fiscal tax year using the same method as provided under this section. A taxpayer that files 2 separate short period annual returns for a fractional part of the same year as provided under this subsection and section 117(4) shall calculate and claim its credits based on actions taken or payments made during the period represented on each short period return of those respective parts of the same tax year.


Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Friday, December 16 2011

A Before Tax Season Opportunity to get Up To Date on Michigan Tax Issues

The 2012 tax season will be transitional involving the filing of final and part year final Michigan Business Tax (MBT) returns along with the first Corporate Income Tax (CIT) estimated tax returns.  Changes to the Michigan Individual Income Tax will be effective January 1, 2012.  However, the changes will immediately affect 2012 withholding and estimated tax payments.


Get answers to all your state tax issues in this critical update, available in 4 locations statewide!

Michigan State and Local Tax Update with Ed Kisscorni and Ron Kaley

When & Where:  Ctrl+Click to follow link to seminar details in the city of your choice.

Wednesday, January 18, 2012 - Traverse City

Friday, January 20, 2012 -Novi

Tuesday, January 24, 2012 - Grand Rapids

Thursday, January 26, 2012 - Troy

Register or sign up for the seminar of your choice at the MACPA website or by contacting the MACPA CPE Department toll-free at 1.855.594.4273.

Seminar Outline


Michigan Single Business Tax

         Senate Bill 368

o   Entities organized for estate and gift planning

o   Investment entities and personal investment activities

o   Sales of personal assets

o   Casual sales


Michigan Business Tax

         MBT Amendments

o   Certificated credits

o   Technical amendments

         MBT Disregarded Entities

         MBT Filing issues

         MBT Audit Issues


Michigan Individual Income Tax

         Changes to credits

         Changes to withholding

o   Pension and annuity payments

o   Flow through entities


  Out of Michigan

  Publically traded partnerships

         Administrative provisions

         Michigan Supreme Court rulings


Change in Michigan Residency

         Taxation of retirement income



Corporate Income Tax

         Clean up bills passed in 2011

         Nexus issues - flow through entities


o   Flow through entities

o   Sourcing rules



Corporate Income Tax Planning

         S Corporation election

         Income shifting

         Small Business Credit

o   Disqualifiers


Michigan Sales and Use Tax

         Ten year use tax audit

         Michigan vendor liability

         Prewritten computer software

         Cloud computing (Software as Service)

         Audit procedures

         Transfer of title issues


Michigan Property Tax

         Personal Property Tax repeal

         Valuation issues in a declining economy


Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Thursday, December 15 2011

Temporary Bolt Did Not Constitute an Affixation to Realty

In Dallman Industrial Corporation v. Michigan Department of Treasury, Michigan Tax Tribunal, No. 311862, June 6, 2011, a manufacturer of ATM kiosks was not liable for use tax on sales made to customers in Michigan because it did not provide installation of the kiosks and therefore did not serve as a contractor. The taxpayer collected sales tax on its retail transactions except for those sales in which the purchaser claimed an exemption or held a direct pay permit.  In those instances where the taxpayer delivered the kiosks to its customer, its activities consisted of unloading and unpacking the kiosk, placing it in position, and securing it with a temporary bolt.  The ATM owner subsequently hired other service providers to permanently affix the ATM and to install security.

The Department of Treasury's challenge to the taxpayer's claim of exemption for its sales to banks and credit unions claiming to be governmental instrumentalities was dismissed based on its failure to exhaust administrative remedies, as it failed to provide the taxpayer with the required notice that the claim of exemption was improper, an opportunity for an informal conference to discuss the issue, and a written decision regarding the department's position. The penalty for the taxpayer's unpaid sales tax for the 1995-1996 period was upheld because the taxpayer failed to show reasonable cause that would justify waiver of the penalty.  No documentary evidence was submitted to substantiate the claim that a fire destroyed the taxpayer's financial records or that its former chief financial officer claimed that he filed the required returns.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, December 14 2011

Non Michigan Business Income and Losses Are Not Attributable to Michigan

In Malpass v. Department of Treasury, Michigan Court of Appeals, No. 299057, December 6, 2011, the Michigan Court of Appeals has held that taxpayers were not permitted to combine business income from separate entities for personal income tax purposes.  The taxpayers, through S corporations, operated a foundry in Michigan and another foundry and distribution center in Oklahoma.  The Michigan business earned a profit, while the Oklahoma business had losses.  There is no provision in the income tax law that allows individuals to combine business income from separate businesses and then use a combined apportionment formula on the total income.

Under Michigan law, if a resident earns business income derived from another state, it is allocated to that state.  However, if business income is attributable to Michigan and one or more other states, it is apportioned.  In this case, because the losses sustained by the Oklahoma business were not attributable to Michigan, the losses were not allocated or apportioned to Michigan and were added back to the taxpayers' adjusted gross income.  The Court of Appeals determined that the two businesses were separate and not unitary, so that apportionment should be calculated at the entity level.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, December 13 2011

Hearing Referee Decision Not Based on Competent, Material, and Substantial Evidence

In American Legion Post 267 v. Township of Lyon, Michigan Court of Appeals, No. 300613, November 22, 2011, a corporation's claim of a local memorial home property tax exemption on a cabin that it owned and leased to its members on a weekly basis was remanded to the Tax Tribunal because the Michigan Court of Appeals was unable to resolve the case.  The court held that the Tax Tribunal's hearing referee clearly relied on the articles of incorporation of an entirely different entity in denying the corporation's claim.

The hearing referee's decision was based on the fourth element of the test set forth in American Legion Memorial Home Ass'n of Grand Rapids v. City of Grand Rapids, 325 N.W. 2d 543 (1982), which was whether the cabin was utilized for the purposes for which the corporation was incorporated.  However, because the hearing referee considered the articles of incorporation of the organization that was cited in American Legion, the tribunal's decision was not based on competent, material, and substantial evidence. Consequently, this case was remanded to allow the tribunal to develop the record and, if applicable, to reconsider the case using the corporation's articles of incorporation.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Monday, December 12 2011

Tax Tribunal Made Specific Credible Determinations Supported by Evidence

In Berenjian v. City of Ann Arbor, Michigan Court of Appeals, No. 300490, November 29, 2011, the Michigan Tax Tribunal legitimately assessed the true cash value of the taxpayers' property for local property tax purposes because the Tax Tribunal made specific credibility determinations that were supported by the evidence provided by each party as to the features of the property.  In making its assessment, the Tax Tribunal was under no obligation to accept the valuation figures or the approach to valuation that was advanced by either the taxpayers or the city.

The Tax Tribunal correctly concluded that the city credibly testified as to the effective age of the property and appropriately decided not to adjust for the presence of a septic system because of its potential to raise, not lower, the property's ultimate value.  Further, the taxpayers failed to provide any evidence as to the extent of a 1957 remodel of their property in order to dispute the increase in the property's value and failed to provide evidence to dispute the city's decision not to adjust for the septic system.  In addition, the taxpayers could not claim that the city's assessment amounted to fraud as an intentional overassessment simply because they disagreed with the final valuation.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, December 07 2011

Personal Property Tax Repeal Seems to be Off the Table

Lieutenant Governor Brian Calley and Senator Jack Brandenburg, Chair of the Senate Finance Committee, said there is no current plan to look at eliminating the Personal Property Tax (PPT) before the end of the year.  The original plan was to eliminate the tax before year end effective in 2012. 

Calley said the administration received a lot of input and feedback from different groups on the PPT, a tax mostly industrial businesses pay on their equipment.  By and large, the proceeds go to local governments.  "There were really a lot of great ideas that were presented, a few that I hadn't thought of before, and so I guess I would describe it as tapping the brakes at the moment just so some of these new concepts or ideas could be considered." 

"It's going to be an issue that we're going to have to take some time with," Brandenburg said. "I think that's why it's been decided we'll take it up after the first of the year." 

There is major concern from local government that the loss in revenue would not be replaced.  To date there has been no guarantee that local government would be held harmless.  For this to happen, the legislature needs to find a $1 Billion source of revenue and figure out a way to get it back to local government in a fair and efficient manner.

Meanwhile, the Anderson Economic Group released an independent report concluding that doing away with the PPT in Michigan would make the state more economically competitive. 
The report found that the PPT's "high compliance costs add to the cost of doing business in Michigan in all sectors." Eliminating PPT would also eliminate some costs associated with implementing incentives offered by local and state economic development agencies to lower PPT liability and attract firms, according to the report. 

The timing of PPT reform could also be important because some businesses will see their rates increase after losing the Michigan Business Tax (MBT), but rates will still be a bit lower than they were before the MBT, according to the report. 

The study also found the PPT provides, in aggregate, 2.7 percent of total non-school local government revenue and just more than 1 percent of revenue for schools.  However, certain local governments and school districts would be disproportionately affected by elimination of the PPT. 

Posted by: Ed kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, December 06 2011

The Pendulum May Be Swinging In Favor of the States and Local Subdivisions


The following report was taken from "A Peisner Johnson Blog", a member of SALTSource, Your Source for State and Local Tax News. is affiliated with Peisner Johnson.

Many Internet-only retailers do not collect sales tax on their sales except in a few states where they have a physical presence or nexus. may be the largest of them all and certainly must be the most well-known, but by no means are they the only ones.  There are many online sellers large and small who do not collect sales tax everywhere they ship product.


Internet sellers have generally followed Amazon's lead and taken the position that since they don't have physical presence, they don't have "substantial nexus" and therefore states can't force them to be tax collectors.  States have struck back with a variety of so-called "amazon laws" attempting to assert that these online sellers do in fact have at least a type of physical presence through so-called "click-through affiliates" and other agents in the state.

Online-only sellers usually collect tax in just a few states.  This contrasts sharply with traditional retailers that have "brick-and-mortar" stores.  These traditional retailers who also make substantial sales online almost universally collect taxes on their online sales.  And with an estimated $170 billion dollars in online retail sales in 2010 according to the National Retail Federation, it's become a huge issue.  It's a big deal for states starving for revenues and for small/local as well as large/international companies who may or may not be collecting tax on online sales.


Not collecting tax has made Amazon a target of state revenue departments and their traditional retail competitors.  State revenue departments face a tremendous pressure to stem the tide of falling tax revenue.  Brick-and-mortar competitors large and small are also bringing the heat to the politicians.  These self-styled "main-street" businesses who do collect tax but face what they feel is the unfairly subsidized competition from online sellers want their legislators to level the playing field.


Keep in mind that the prominent online retailers like and are only the tip of the iceberg.  There are many more businesses who sell online but don't collect taxes in most states.  Amazon gets all the attention, but any change in the nexus laws hits all the smaller retailers as well.  In fact, it hits them much harder in terms of cost of compliance. Compliance costs are pretty much fixed or not very variable, so the cost of compliance is relatively small for a large online seller and relatively large, even bordering on prohibitive for a smaller online retailer.

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Monday, December 05 2011

Michigan Department of Treasury Issued a Draft RAB on "Single Mixed Transactions" and "Bundled Transactions"


Companies are changing the way they do business.  The internet and software developers are opening up new opportunities for storage and processing of data in the internet.  The generic name is "cloud computing".


First taxing authorities and now politicians in Michigan are grappling with the issue of whether "cloud computing" should be subject to either the sales tax or use tax.  Cloud computing, also called "software as a service," takes place on virtual servers over the Internet.   In all cases software is used in the performance of some sort of service whether it is merely storage or processing of files.  Cloud computing has gained credibility as an efficient and viable means of doing business as an increasing number of businesses have moved their operations to the cloud.


Legislative Activity


The Michigan Senate has passed legislation (SB 335 and SB 336) which, if enacted, would exempt from the Michigan sales tax and use tax, "prewritten computer software installed on another person's server".  The two bills are stalled in the Michigan House where both the Department of Treasury and the Snyder administration have reservations.


Prewritten computer software is used in "cloud computing" as a gateway for access to storage or processing of data.  Whether the transaction is the sale of a service (storage or processing of data) or the sale of software is a determination based on a factual finding of the essence of the transaction.  If Senate Bills 335 and 336 were to pass, it would solve only part of the problem. 


Administrative Activity


The Michigan Department of Treasury is currently debating whether companies that sell software and data accessed through the cloud are peddling a taxable good or a nontaxable service. In an audit, factors to be considered in determining taxability can include whether a license of software is granted by the agreement, how pricing is structured under the agreement, the location of the server, and to what extent the service or software is accessed from a point within state or in multiple states.  Also relevant is whether the service provider has a taxable presence in the state where the customer accesses the application, and whether the customer has a taxable presence where the servers running the application are located.


The Department of Treasury has promulgated a draft Revenue Administrative Bulletin (RAB) on the taxation of "single mixed transactions" and "bundled transactions".  The draft RAB proposes using the Michigan Supreme Court "incidental to service test" and consideration of six factors to determine if the transaction is the sale of a service or the sale of tangible personal property.  (Catalina Marketing Sales Corporation v. Department of Treasury, Michigan Supreme Court #121673 and #121674)


Judicial Activity


In Catalina, the Supreme Court adopts the "incidental to service" test for categorizing a business relationship that involves both the provision of services and the transfer of tangible personal property as either a service or a tangible property transaction.  Under this test, "sales tax will not apply to transactions where the rendering of a service is the object of the transaction, even though tangible personal property is exchanged incidentally." (85 CJS 2d, Taxation, 2018, p 976) The "incidental to service" test looks objectively at the entire transaction to determine whether the transaction is principally a transfer of tangible personal property or a provision of a service.  The sales tax is a tax on sellers for the privilege of engaging in the business of retail sales.  If the consideration paid in a transaction is not paid for the transfer of the tangible property, but for the service provided, and the transfer of the tangible property is only incidental to the service provided, the transaction is not a sale at retail under MCL 205.51(b).


The court must objectively examine the totality of the transaction in determining whether it is subject to sales tax.  When tangible goods or items are provided in conjunction with services, courts examine the totality of the transaction to determine its taxability.  The essence of the transaction test specifically applies to those sales tax cases in which it is initially unclear whether the transaction mixes sales and services.  For purposes of determining whether a transaction falls within a sales tax statute, the court considers whether the tangible personal property exclusively as the medium of transmission for an intangible product or service; if the intangible component is the true object of the sale, the intangible object does not assume the taxable character of a tangible medium.  Where the item is the substance of the transaction, and the service or skill provided is merely incidental, the transaction is one for tangible personal property, to which sales tax may be applied. The focus belongs on the transaction, not the character of the participants. (68 Am Jur 2d, Sales and Use Taxes, 62 pp 51-52)


In determining whether the transfer of tangible property was incidental to the rendering of personal or professional services, a court should examine (1) what the buyer sought as the object of the transaction, (2) what the seller or service provider is in the business of doing, (3) whether the goods were provided as a retail enterprise with a profit-making motive, (4) whether the tangible goods were available for sale without the service, (5) the extent to which intangible services have contributed to the value of the physical item that is transferred, and (6) any other factors relevant to the particular transaction.


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Friday, December 02 2011

Headlee Amendment Electors Mandate Not Applicable


In Newell v. Village of Otter Lake, Michigan Court of Appeals, No. 299543, November 15, 2011, a local assessment for a sanitary sewage system that was levied on all the parcels situated within a special assessment district did not violate the Headlee Amendment to the Michigan Constitution, Article IX, Section 31, because the fee was a user fee and not a tax.  The Headlee Amendment prohibited units of local government from levying any tax not authorized by law without the approval of a majority of the qualified electors of the unit of local government.


The fee served a regulatory and not a revenue-raising purpose.  It was assessed in order to cover the costs of treating sewage, and there was no evidence that the fee was disproportionate for this purpose.  Although the fee did not meet the criterion of voluntariness, the court viewed the applicable criteria as a whole and concluded that the fee was a user fee and not a tax.


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Thursday, December 01 2011

Michigan 6% Use Tax Can be Paid on the Michigan Individual Income Tax Return

The Michigan Department of Treasury has reminded residents that, during the holiday shopping season, use tax may be owed on online purchases made from out-of-state retailers, such as e-commerce retailers, TV home-shopping networks, and catalog retailers.  In a release dated December 14, 2011 taxpayers are reminded of their tax paying obligation. 

Michigan consumers are required to pay use tax on their purchases when out-of-state retailers do not collect Michigan use tax.  Use tax applies generally to purchases of the same types of items that are subject to sales tax.

The state use tax rate is 6%, the same as the state sales tax rate.  The easiest way to report and pay the use tax is on a taxpayer's Michigan individual income tax return that is due for most filers on April 15 of each year.  

If the purchaser is a business, the use tax should be reported on the combined sales-use-withholding tax return.  Every business in Michigan should be registered for use tax.


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Thursday, December 01 2011

Office Building Constructed on Adjacent Parcel Disqualified it from Exemption


In Koester v. County of Saginaw, Michigan Court of Appeals, No. 300141, November 10, 2011, a taxpayer that owned two contiguous parcels of property was denied a local Michigan principal residence property tax exemption on one of the parcels because the parcel had human occupants.  At the time the taxpayer purchased the second parcel at issue in this case, the taxpayer was granted a principal residence exemption because the property was contiguous and adjacent to the parcel containing his dwelling.  However, a year after the purchase, the taxpayer obtained a special permit to construct an office building on the second parcel.  The office building was used to operate the taxpayer's construction business. Therefore, the parcel did not qualify for an exemption because it was not "unoccupied" as that term was used in the homestead exemption provision. Moreover, because the taxpayer used the building for business purposes, the building did not constitute an "other structure" that was part of his principal residence.


The taxpayer also was not entitled to a partial exemption for the areas that he did not occupy exclusively for business purposes.  Although the homestead exemption provision allowed for an exemption for all of an owner's unoccupied property that adjoined or was contiguous to his dwelling, the provision made no mention of partial occupation.


Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email


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