MICPA Goes With the Flow-Through in New Roundtable


News Finance

In a roundtable discussion hosted by the MICPA on Mar. 2, MICPA State and Local Tax Experts Michael Merkel, State and Local Tax Partner, Plante Moran and John Eardley, State and Local Tax Partner, Crowe, fielded questions from among 279 members in attendance regarding the new Michigan flow-through entity (FTE) tax. With less than two weeks to go before many of these elections must be made, several key points were raised during the roundtable.

For instance, clarity regarding the computation of the business income tax prior to adjustment was found to be addressed in sections 805 and 815. Eardley stated, “Based on the way the statute is written, they want you to file, or at least calculate, based on separate entity basis.”

Merkel explained, “Section 805 defines federal income for partnerships and s corporations, and 815 addresses the SALT modifications. You will need both of those numbers and it will need to be allocated by the various owners or state defined members.”

“It isn’t necessarily going to match your 1040H,” Eardley added.

For those with clients wondering if there is yet a way to opt out of the FTE tax, there is some disappointing news. “There is not guidance for getting out,” Eardley said, adding that there is guidance for re-electing back in after those first three years. According to Merkel, that doesn’t mean businesses can’t merge themselves out of existence or submit a zero due filing if they don’t have any Michigan income.

What about the mechanics of preparation? Can CPAs prepare the FTE tax on behalf of their clients, perhaps even signing for them as a power of attorney? Failing that, what about saving the return so a client can log in and sign the prepared file for submission?

For those unable to attend last week, MICPA members can receive an explanation of the above alongside a host of other questions by viewing the full roundtable on the MICPA Connect FTE Forum where members can find current and future resources, including a list of important dates, and discuss emerging FTE tax issues and ask questions.

The MICPA will continue to follow this issue closely for all the latest developments.

Source: MICPA

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