Michigan has a structured taxation system that covers both corporations and pass-through entities. The state applies the Corporate Income Tax (CIT) at a flat 6% rate to C corporations, insurance companies, financial institutions, and unitary business groups. Businesses crossing gross receipt thresholds must file annual returns, pay estimated taxes if liability is expected to exceed USD 800, and comply with strict due dates. Penalties and interest apply to delays in filing or payment.
Pass-through entities, such as S corporations, partnerships, and LLCs taxed as partnerships, may elect to pay the Flow-Through Entity (FTE) tax. This is assessed at the same rate as individual income tax and comes with its own filing, extension, and estimated payment rules. Together, these provisions ensure all entities with business activities in Michigan contribute to the state’s tax system.
This blog breaks down the corporate income tax and flow-through entity tax in detail, highlighting filing requirements, payment deadlines, penalties, and compliance expectations.
Corporate Income Tax
Under Michigan’s Corporate Income Tax (CIT), the term taxpayer applies broadly to:
- C Corporations
- Insurance companies
- Financial institutions
- Unitary Business Groups (UBGs)
These taxpayers are liable for tax, interest, and penalties as determined by the state.
Filing Requirement:
Any taxpayer, other than financial institutions and insurance companies, must file a CIT Annual Return if:
- Their apportioned or allocated gross receipts equal USD 350,000 or more, and
- Their CIT liability is greater than USD 100.
The primary form for this filing is Form 4891 – Corporation Annual Return.
Tax Rate:
The CIT rate is 6% on the taxable base. This rate applies uniformly, simplifying the calculation compared to tiered systems in other states.
Due Date:
The annual CIT return is due by the last day of the fourth month following the close of the tax year. For most calendar-year taxpayers, this means April 30.
Extension:
If additional time is required, taxpayers can file Form 4 – Application for Extension of Time to File Michigan Tax Returns. This grants extra time to submit paperwork but does not extend the deadline for paying taxes due.
Michigan enforces estimated tax payment rules and penalty provisions for corporate taxpayers.
Penalty and Interest:
- For late filing, the penalty is 5% of unpaid tax for the first two months.
- After two months, an additional 5% is assessed each month on the unpaid balance.
- The maximum penalty is 25% of unpaid tax.
- Interest is added by multiplying the unpaid tax by the current interest rate.
Estimated Tax Payments:
Taxpayers expecting their liability to exceed USD 800 must make estimated payments. Options include:
- Quarterly payments by check using Form 4913 – CIT Quarterly Return
- Electronic Funds Transfer (EFT) for monthly or quarterly payments (Form 4913 not required in this case)
Payments are due on or before the 15th day of the 4th, 7th, 10th, and 1st months of the taxable year.
These requirements are designed to ensure corporations pay as they earn, preventing large unpaid balances at year-end.
Flow through entity Tax
Michigan also imposes a Flow-Through Entity (FTE) tax, which applies to entities taxed as partnerships or S corporations under federal law. This allows certain entities to elect to pay state income tax at the entity level.
Eligible Entities:
- Limited Liability Companies (LLCs) taxed as partnerships
- Partnerships (general partnerships, limited partnerships, and LLPs)
- S Corporations
Tax Rate:
The Michigan FTE tax is imposed at the same rate as the individual income tax. This aligns the entity tax with what individual owners would otherwise pay on their distributive share of income.
Filing Requirement:
Electing flow-through entities must file Form 5772 – Flow-Through Entity Tax Return, along with:
- Form 5773 – Schedule for Reporting Non-electing FTE Income
- Form 5774 – Schedule for Reporting Member Information
Due Date:
The FTE return is due on the last day of the third month following the end of the tax year.
Extension:
Entities may request a six-month extension if submitted before the due date. As with CIT, extensions apply to filing, not to tax payment obligations.
Michigan requires electing pass-through entities to make estimated payments, with penalties and interest applied for delays.
Estimated Tax Payments:
FTEs with expected annual liability greater than USD 800 must make estimated payments in equal installments. The due dates follow a quarterly cycle:
- April 15
- June 15
- September 15
- January 15 of the following year
Penalty and Interest:
The rules mirror those for corporate taxpayers:
- 5% penalty on unpaid tax for the first two months
- Additional 5% per month thereafter
- Maximum penalty capped at 25% of unpaid tax
- Interest calculated based on the current rate applied to the unpaid balance
This system reinforces the importance of timely compliance, regardless of entity type.
Conclusion
Michigan’s tax framework balances corporate obligations with those of pass-through entities. C corporations, insurance companies, financial institutions, and unitary business groups face a flat 6% Corporate Income Tax if they meet revenue thresholds, with mandatory estimated payments and penalties for noncompliance. Similarly, S corporations, partnerships, and LLCs can elect to pay the Flow-Through Entity tax, aligning with the state’s individual income tax rate.
Key compliance points include:
- CIT Filing: Form 4891, due by the last day of the fourth month after year-end.
- Estimated Payments: Required if liability exceeds USD 800, due quarterly.
- Penalties: Up to 25% for late payment or filing, plus interest.
- FTE Tax Filing: Form 5772 with supporting schedules, due by the last day of the third month.
By understanding and following these rules, businesses operating in Michigan can avoid penalties, manage their tax liabilities effectively, and stay compliant with state requirements.
