Multistate Tax: Michigan Single Business Tax (SBT) treatment of federally disregarded entities

On March 31, 2010, Michigan Governor Granholm signed House Bill No. 5937. As stated in the enacting section of the bill, the goal of this legislation was to "correct any misinterpretation" concerning the Michigan Single Business Tax (SBT) treatment of federally disregarded entities in light of the decision by the Michigan Court of Appeals in Kmart Michigan Property Services LLC v. Department of Treasury. H.B. 5937 amends the Michigan Revenue Act to prohibit:

- The Michigan Department of Treasury (MDOT) from assessing additional tax or reducing a tax overpayment attributable to inclusion of a federally disregarded entity in a taxpayer's previously filed Single Business Tax return;

- The Michigan Department of Treasury from requiring a federally disregarded entity (previously included in a taxpayer's Single Business Tax return) to file a separate SBT return; and

- Taxpayers that previously included a federally disregarded entity in a Single Business Tax return from claiming a refund based on the disregarded entity filing a separate Single Business Tax return.