BIT, CIT, MBT, MGRT & SBT

News and Views on the Alphabet Soup of MI Taxes

By Michael J. Fleming

On February 17, 2011, as part of his 2012-2013 budget, Michigan Governor, Rick Snyder announced his proposal for the elimination of the Michigan Business Tax (MBT) and for the replacement of it with a flat Corporate Income Tax (CIT) of 6%. While not surprising (it was part of his campaign platform) it is unsettling. You see, the MBT was passed in 2007 but it didn’t replace the Single Business Tax (SBT) until January 1, 2008. Tax professionals are already tasked with knowing both the SBT and MBT. They must retain a working knowledge of the SBT as the audit periods are still open and they obviously must contend with the complexities of the current MBT. Now they must grapple with the reality that they may have another tax to plan for. In theory, you could have a tax professional defending an SBT audit, filing MBT returns and at the same time be involved with tax planning for the CIT. Talk about a heavy workload and it’s not farfetched at all. While we cannot say for sure that the Governor’s CIT will pass, it does seem probable. And there seems to be growing support for the elimination of the MBT. If the MBT is eliminated it will have to be replaced by something. In the meantime, working with the SBT, MBT and it’s component parts the BIT and MGRT will be taxing enough.
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An Amnesty Worth Its SALT

A look at the B & O, Economic Nexus, Elimination of Physical Presence and Amnesty

By Michael J. Fleming

In the current economic environment, states have a tightrope to walk between balancing the need to increase revenues with the need to save and create jobs. The state of Washington probably thinks it has found a creative way to do both.

Prior to June 1, 2010 many of WA’s in-state companies that provided services were at a competitive disadvantage to out of state companies. In instituting an economic nexus standard in addition to changing the apportionment method for certain companies to “single factor receipts apportionment” WA has leveled the playing field. In fact, many WA companies with out of state sales will see their taxes go down, some substantially.

On the other hand, out-of-state companies who have never worried about the B & O before will now be subject to the WA tax, even if they don’t have a physical presence. Common sense tells us that WA will look at ways to not only make up for the tax relief they have provided their domestic companies, but also to bring in the additional revenues all states are looking for. Increased enforcement of both the B & O and the sales and use tax are two of the most logical ways to do this. Out-of-state companies who are not paying the B & O seem to be likely (and lucrative) targets. The current amnesty program is a useful tool that many taxpayers may or may not take advantage of for a multitude of reasons.
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You Missed the Tax Amnesty Express

Don’t Worry. You are probably better off with a VDA anyway!

By Michael J. Fleming

Tax Amnesty programs wax and wane in popularity depending on economic conditions. Recently with the depressed economy, Amnesty Programs seem to be all the rage. State and local jurisdictions have been announcing them at a rapid pace with some jurisdictions, like the city of Philadelphia offering one for the first time in 19 years and the state of WA offering the program apparently for the first time ever. The programs usually have short windows of opportunity and require quick action in order to take advantage of the benefits. Many states increase the sense of urgency by threatening increased enforcement actions once the amnesty period ends. A prime example is Pennsylvania, who’s Revenue Secretary, C. Daniel Hassell said, “Before Tax Amnesty ended, we promised to step up enforcement efforts against anyone who did not take advantage ... Now we’re delivering on a second promise, to hold corporate officers personally accountable for taxes their businesses owe.” It is statements like this that have caused many taxpayers who were not able to meet amnesty deadlines to worry that the states will soon be knocking at their door. If you are one of these taxpayers your worries may be over. You may be able to complete a Voluntary Disclosure Agreement (VDA) and actually be better off than if you filed for amnesty.
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