Instructions For Form 4567 - Michigan Business Tax Annual Return (Page 5 of 11) in pdf

person not subject to this tax are considered interest paid by a

Payments to a staffing company by a client do not constitute

manufacturer, distributor, or supplier.

purchases from other firms.

For a person that is a securities trader, broker, or dealer or a

Line 17: For taxpayers that fall under SIC major groups 15

person included in the UBG of that securities trader, broker,

(Building Construction General Contractors and Operative

or dealer that buys and sells for its own account, inventory

Builders), 16 (Heavy Construction Other Than Building

includes contracts that are subject to the Commodity

Construction Contractors), and 17 (Construction Special Trade

Exchange Act, 7 USC 1 to 27f; the cost of securities as

Contractors) and do not claim the Small Business Alternative

defined under IRC § 475(c)(2); and for a securities trader, the

Credit (SBAC) under MCL 208.1417, the following payments

cost of commodities as defined under IRC § 475(e)(2); and for

are considered purchases from other firms:

a broker or dealer, the cost of commodities as defined under

• Payments to subcontractors for a construction project under

IRC § 475(e)(2)(b), (c), and (d), excluding interest expense

a contract specific to that project, and

other than interest expense related to repurchase agreements.

As used in this provision:

• To the extent not deducted as inventory and materials and

supplies, payments for materials deducted as purchases

• Broker and dealer mean those terms as defined under

in determining the cost of goods sold for the purpose of

section 78c(a)(4) and (a)(5) of the Securities Exchange Act of

calculating total income on the taxpayer’s federal income tax

1934, 15 USC 78c.

return.

• Securities trader means a person that engages in the trade or

UBGs: This subtraction is only available to a member of the

business of purchasing and selling investments and trading

UBG if the group does not claim the SBAC for the tax year.

assets.

However, for purposes of the SIC code requirement, it is

Inventory does not include any of the following:

sufficient that the UBG member that made the payments listed

above be included in SIC codes 15, 16, or 17. Therefore, the

• Personal property under lease or principally intended for

relevant SIC code is entered in the member’s page of Form

lease rather than sale.

4580 (Part 2A, Line 22), and the SIC code field on Form 4567

• Property allowed a deduction or allowance for depreciation

should be left blank by a UBG.

or depletion under the IRC.

Persons included in SIC codes 15, 16, and 17 include

• Labor costs.

general

contractors

(of

residential

buildings

including

single-family

homes;

industrial,

commercial,

and

Line 14: Enter assets purchased from other firms, including

institutional buildings; bridges, roads, and infrastructure,

the costs of fabrication and installation, acquired during the tax

etc.);

operative

builders;

and

trade

contractors

(such

year of a type that are, or under the IRC will become, eligible

as electricians, plumbers, painters, masons, etc.). See

for depreciation, amortization, or accelerated capital cost

for a more

recovery for federal income tax purposes.

complete list.

Line 15: To the extent not included in inventory or depreciable

A subcontractor is an Individual or entity that enters into a

property, enter materials and supplies, including repair parts

contract and assumes some or all of the obligations of a person

and fuel.

included in SIC codes 15, 16, and 17 as set forth in the primary

contract specific to a project. Thus, payments made to an

Materials and supplies means tangible personal property

independent contractor to provide general labor services to the

acquired during the tax year to be used or consumed in, and

contractor not specific to a particular contract do not constitute

directly connected to, the production or management of

purchases from other firms. However, payments made to a

the taxpayer’s inventory or the operation or maintenance

subcontractor for services and materials provided under a

of depreciable assets owned by the taxpayer. Materials and

contract specific to a particular construction project (such as

supplies includes repair parts and fuel. Fuel means materials

the construction of commercial property on Main Street) do

used and consumed to produce heat or power by burning. Fuel

constitute purchases from other firms. There is no limitation or

does not include electricity.

condition that the subcontractors to whom such payments are

For example, a physician’s or dentist’s purchase of sterilizing

made be licensed.

solution during the tax year that is used to sterilize examination

The taxpayer bears the burden to prove it is entitled to a

equipment, such as an X-ray machine, may be considered

deduction in computing its tax liability. It is presumed that

materials and supplies under MCL 208.1113(6)(c).

good business practice would include documentation such as

Line 16: A staffing company may deduct compensation of

a written contract that would support a deduction from gross

personnel supplied to its clients, including wages, benefits,

receipts for payments to subcontractors as purchases from

workers’ compensation costs, and all payroll taxes paid for

other firms. The supporting information for payments to a

personnel provided to the clients of staffing companies as

subcontractor could be incorporated into the contract for the

defined under MBT. Staffing company means a taxpayer whose

specific project or memorialized in a separate contract with

business activities are included in Industry Group 736 under

a subcontractor specifying the project to which the costs

the Standard Industrial Classification (SIC) Code as compiled

pertain.

by the United States Department of Labor.

Line 18: Enter film rental or royalty payments paid by a

Instructions For Form 4567 - Michigan Business Tax Annual Return Page 5

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