On December 28, 2007, RAB 07-5 was approved and posted to the Treasury website. 

The Michigan Revenue Act (Act 122 of 1941) in Section 3(f) [MCL 205.3(f)] states: “The department may periodically issue bulletins that index and explain current department interpretations of current state tax laws. Beginning October 22, 2003, each bulletin or letter ruling issued by the department on or after August 18, 2000 shall be published and made available to the public in printed and electronic formats.”

Section 6a of the Michigan Revenue Act [MCL 205.6a] specifies that "A taxpayer may rely on a bulletin or letter ruling issued by the department after September 30, 2006 and shall not be penalized for that reliance until the bulletin or letter ruling is revoked in writing. However, that reliance by the taxpayer is limited to issues addressed in the bulletin or letter ruling for tax periods up to the effective date of an amendment to the law upon which the bulletin or letter ruling is based or for tax periods up to the date of a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired that overrules or modifies the law upon which the bulletin or letter ruling is based."

A "Bulletin" is defined to mean a revenue administrative bulletin.  A "Letter ruling" is defined to mean a formal document issued by the department to a specific taxpayer on a specific tax matter related to a future transaction. A taxpayer shall request a letter ruling on a form and in a manner prescribed by the department.

Major Guidance From RAB 07-5

The bulletin provides guidance on two questions:

I.  How does a fiscal year taxpayer calculate its final SBT return?

A fiscal year taxpayer shall file a final return and pay the tax imposed by the SBTA for a
partial year from the end of its fiscal year ending in 2007, to December 31, 2007. The fiscal year
taxpayer may elect to compute the tax for the final taxable year of less than 12 months in
accordance with 1 of the following methods, provided the method does not result in imposition
of SBT for periods subsequent to December 31, 2007:

(i) The tax may be computed as if the SBTA were effective on the final day of the
taxpayer’s annual accounting period and the amount so computed shall be multiplied by a
fraction, the numerator of which is the number of months in the taxpayer’s final taxable year, and
the denominator of which is 12. [Annual Method]

(ii) The tax may be computed by determining the tax base in the final taxable year/short
period in accordance with the method of accounting the taxpayer used in prior fiscal years, which
reflects the actual tax base attributable to the period. [Actual Method]

II.  How should SBT credits be reported for the final SBT return for a fiscal year taxpayer?

A fiscal year taxpayer may claim on the final SBT return only the SBT credits earned and
calculated based on actual payments made or accrued and actions performed from the end of its
fiscal year in 2007 to December 31, 2007. This is correct even if the taxpayer chooses to
calculate the SBT tax base on the annual/pro rata method. All standard practices pertaining to
annualization and proration will apply for the qualification and calculation of credits and
adjustments on the final SBT filing for a period less than 12 months.

Although the fiscal year taxpayer can choose both the method of filing the final SBT return and the first MBT return, the bulletin states "The method, annual or actual, that a fiscal year taxpayer uses to calculate tax liability on its final
SBT return must be the same method the fiscal year taxpayer chooses to calculate tax liability on
its initial MBT return."

It must be noted that there is substantial disagreement among tax practitioners, CPAs and Attorneys with the Treasury policy as stated in RAB 07-5 in regard to the consistency requirement.  The law does not mandate that the method used must be consistent.