TAX NEWS - DECEMber 2009

Michigan Sales / Use Tax: Third-party lenders may be eligible for bad debt deductions so long as certain conditions are met

Third Party Lenders – Bad Debt Deductions, Mich. Dept. of Treas. (12/2/09). The department explains that, effective October 1, 2009, a sales tax bad debt deduction may be claimed by a third-party lender provided that the retailer that reported the tax and the lender financing the sale execute and maintain a written election designating which party may claim the deduction. The following conditions must also be met:

- No deduction or refund was previously claimed or allowed on any portion of the account receivable, and
- The account receivable has been found worthless and written off by the seller that made the sale or by the lender on or after September 30, 2009.

The written election must be in compliance with Internal Revenue Code Sec. 166, which states who may take the bad debt deduction.

URL: http://www.michigan.gov/taxes/0,1607,7-238-43529-227140--,00.html