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Flow-through entity means an entity that for the applicable Line 35: Enter overpayment credited from the prior period
tax year is treated as a subchapter S corporation under section return (MBT or CIT, as applicable). When membership of a
1362(a) of the IRC, a general partnership, a trust, a limited UBG changes from one filing period to the next, carryforward
partnership, a limited liability partnership, or a limited liability of an overpayment from the prior return remains with the
company, that for the tax year is not taxed as a C corporation DM’s account. In general this line should be used only on the
for federal income tax purposes. DM’s copy of Form 4897 (credit forward from the group’s prior
return) or that of a new member (credit forward from the new
See the General Information section of the instructions for
member’s final return as a separate filer).
Form 4898 for an explanation of FTEs with which a taxpayer is
not unitary. Total the entry for all members on Form 4987, line 35, and carry
to Form 4891, line 43.
Total the entry for all members on Form 4987, line 31, and carry
to Form 4891, line 26. Line 36: All CIT estimated payments for a UBG should be
made by the DM. Enter estimates paid by the DM on this line of
Line 32: To the extent included in federal taxable income (as
the DM’s copy of Form 4897. If any other member paid estimates
defined for CIT purposes), enter any dividends and royalties
attributable to the group return supported by this form, enter
received from persons other than United States persons
those estimates on that member’s copy of Form 4897. Include
and foreign operating entities, including, but not limited to,
all payments made by that member for any portion of its federal
amounts determined under IRC § 78 or IRC § 951 to § 965.
filing period that is included on the group return. For example, if
Total the entry for all members on Form 4987, line 32, and carry a non-DM member has a 12-month fiscal year beginning April 1,
to Form 4891, line 27. 2013, and is a member of a calendar year UBG throughout that
period, its business activity from April 1, 2013, through March
NOTE: To the extent deducted in arriving at federal taxable
31, 2014, will be reported on the group’s December 31, 2014,
income, any deduction under IRC 250(a)(1)(B) should be added
return. If that member pays CIT quarterly estimates, it will make
back on this line (i.e., netted against subtractions made on this
two estimates during 2013, before the DM’s filing period begins.
line).
Because those estimates are attributable to activity that will be
Line 33: To the extent included in federal taxable income (as reported on the group’s December 31, 2014, return, they should
defined for CIT purposes), deduct interest income derived from be included on the paying member’s copy of Form 4897 for the
United States obligations. December 31, 2014, group return.
Total the entry for all members on Form 4987, line 33, and carry Total the entry for all members on Form 4987, line 36, and carry
to Form 4891, line 30. to Form 4891, line 44.
Line 34: Miscellaneous subtractions only include: Line 37: Report here any payment submitted with an extension
request by this member.
• Income from the production of oil and gas if that production
of oil and gas is subject to the severance tax on oil and gas, NOTE: Only the DM may make a valid request for a filing
1929 PA 48, to the extent that income was included in federal extension for a UBG. If any other member submits an extension
taxable income. Also enter income derived from a mineral to request, it will not create an extension for the UBG, but any
the extent included in federal taxable income. Total the entry payment made with that request can be credited to the UBG by
of income from the production of oil and gas for all members entering that payment on this line of that member’s Form 4897.
on Form 4897, line 34, and carry to Form 4891, line 29. Total the entry for all members on Form 4987, line 37, and carry
• Ordinary and necessary expenses paid or incurred by to Form 4891, line 45.
eligible licensed marihuana trades or businesses may subtract
ordinary and necessary expenses paid or incurred during Line 38:
Report here Michigan Tax withheld for deferred
compensation plans, life insurance and/or lottery annuities
the tax year that would be allowed if section 280E of the
issued to a business account number through MCL 206.703(1).
internal revenue code were not in effect. Under the Michigan
Taxpayers can enter the Michigan Tax withheld reported on the
Regulation and Taxation of Marihuana Act (which allows
W-2G and/or 1099R.
for what is often referred to as “recreational” or “adult use”
marijuana), a marihuana establishment licensed under that Also report any credit for the taxpayer’s allocated share of
act is allowed a deduction from Michigan income tax for Michigan flow-through entity (FTE) tax levied on and paid by
certain expenses not allowed in arriving at federal taxable an electing flow-through entity. Such an electing flow-through
income. IRC 280E prohibits a deduction for any amount paid entity should be indirectly owned by this taxpayer. Include a
or incurred in carrying on a trade or business that consists copy of the Schedule K-1 with the Schedule K-1 notes, or other
of trafficking in Schedule I and II controlled substances (e.g., supporting documentation received from the electing flow-
marihuana). However, the IRC is also structured to recognize through entity, to support the credit claimed on this line.
the cost of goods sold before reaching gross profit, regardless
Total the entry for all members on Form 4987, line 37, and carry
whether taxpayer is in the business of trafficking in marihuana.
to Form 4891, line 46.
Therefore, any expenses related to cost of goods sold (and any
other expenses already allowed in reaching federal taxable
Other Supporting Forms and Schedules
income) may not be subtracted from the Michigan base. Total
Federal Forms: For each member the of UBG, include copies of
the entry of qualified marihuana expenses for all members
these forms with the return.
on Form 4897, line 34, and carry to Form 4891, line 30.
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