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.