On Monday the Department of Treasury (Treasury) published a FAQ on the filing options for a fiscal year taxpayer.  The question involves the method of filing a short period return: proration of an annual amount or actual accounting.  The method of filing issue involves the filing of the final SBT return and the first MBT return.

For purposes of the final SBT return, Treasury correctly cited MCL 208.152 Proration which states: 

"The department of treasury shall prorate the liability for the tax imposed under the single business tax act as necessary to impose the equivalent of a tax at the rate of zero on business activity after December 31, 2007."  (Business Tax Repeal, Act 325 of 2006)

The statute requires the final SBT return of a fiscal year filer to prorate only.  However, the statute leaves open the possibility of prorating the tax base by multiplying it by the number of months in the short tax year divided by 12 or by use of a blended tax rate.  However, the statute does not provide actual accounting as a method to compute the final return.

For purposes of the first MBT return, Treasury correctly cited MCL 208.1503 which provides that the taxpayer may elect to compute the tax either by proration of the annual amount or the use of actual accounting.

Treasury incorrectly stated in the last paragraph of the FAQ that "The method the taxpayer employs for its final SBT return must also be used for the initial MBT return."  Neither the SBTA or the MBTA specify or require that the method used must be consistent.  The two acts are separate pieces of legislation that impose two radically different taxes.  The two different statutes stand on their own.  They are not tie barred and there is no transitional legislation that requires a consistent method of filing the short period returns.  Therefore, the filing option provided in MCL 208.1503 does not have to be consistent with the filing method used on the final SBT return.