Perspectives

Enacted Michigan law retroactively repeals the Multistate Tax Compact

Multistate tax alert | September 12, 2014

On September 11, 2014, Michigan Governor Snyder signed Senate Bill 156 (“SB 156”), repealing retroactively MCL §§ 205.581 to 205.589, the Multistate Tax Compact (“Compact”) provisions of Michigan law, and adopting various retroactive amendments to the Michigan Business Tax (“MBT”) Act.1

Retroactive Michigan business tax amendments

On September 11, 2014, Michigan Governor Snyder signed Senate Bill 156 (“SB 156”), repealing retroactively MCL §§ 205.581 to 205.589, the Multistate Tax Compact (“Compact”) provisions of Michigan law, and adopting various retroactive amendments to the Michigan Business Tax (“MBT”) Act.1 This new law comes on the heels of the July 14, 2014, Michigan Supreme Court decision in International Business Machines v. Michigan Department of Treasury (“IBM”). In IBM the court held that the taxpayer could elect to compute both the Modified Gross Receipts Tax and the Business Income Tax components of its 2008 MBT liability using the Compact election (Compact Article III) in lieu of the 100% sales-weighted apportionment formula under the MBT Act.2 By application of the Compact election, the taxpayer was allowed to use an equally-weighted, three-factor apportionment formula (property, payroll and sales).3

In this tax alert we summarize the retroactive repeal of the Compact and certain retroactive MBT amendments contained in SB 156. We also provide taxpayer considerations in light of these law changes.

1 Public Act 282 of 2014, repealing MCL §§ 205.581 to 589; signed by Governor Snyder on Sept. 11, 2014, and filed with the Secretary of State on Sept. 12, 2014.

2 International Business Machines v. Michigan Department of Treasury, Mich. Supreme Court Docket No. 146440 (Jul. 14, 2014). 

3 The background, judicial history and implications of the IBM decision were discussed in detail in the Deloitte Tax Alert dated July 16, 2014.

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The Multistate Tax Alert Archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.

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