The Michigan Business Tax Act (MBTA) provides an exclusion of gross receipts derived from investment activities in MBTA Section 111(1)(x).  [MCL 208.1111(1)(x)]  However, the exclusion has two limitations.

A taxpayer may not be able to exclude from “gross receipts” the receipts derived from investment activities under MBTA Section 111(1)(x) because the exclusion is limited to:

“a person that is organized exclusively to conduct investment activity and that does not conduct investment activity for any person other than an individual or a person related to that individual …”

“a person is related to an individual if that person is a spouse, brother or sister whether of the whole or half blood or by adoption, ancestor, lineal descendent of that individual or related person, or a trust benefiting that individual or 1 or more persons related to that individual.”

First we have the "organized exclusively to conduct investment activity" limitation and then the "does not conduct investment activity for any person other than an individual or a person related to that individual".  Only if both situations exist will the exclusion apply.

Gross receipts derived from investment activities could be excluded under MBTA Section 111(1)(w)(ii)(a) as “Receipts derived from investment activity … if the investment activity is not part of the taxpayer’s trade or business”.  You must satisfy the “organized for estate or gift planning purposes” requirement of MBTA Section 111(1)(w).  This requirement must be documented.

The MBTA attempts to exclude gross receipts and income from investment activities.  However, there are limitations.  It is very important to segregate the investment activities from those of a trade or business, otherwise they would be included in the MBT tax base.