Background

The Michigan Corporate Income Tax is composed of three distinct taxes: (1) a tax on C corporations; (2) a tax on financial institutions; and (3) a tax on insurance companies. The general insurance company tax under Chapter 12 of the Michigan Income Tax Act is a 1.25% tax on insurance premiums written on property or risk located in Michigan. Insurance companies pay either the general insurance company tax or the so-called “retaliatory tax” imposed under Mich. Comp. Laws Ann. § 500.476a of the Michigan Insurance Code, whichever is greater.

The Nationwide opinion arose from a dispute between the Department and a group of out-of-state insurance companies affiliated with Nationwide Mutual Insurance Company dating back to the 2014 and 2015 tax years. In an opinion reversing a decision by the Michigan Tax Tribunal, the court of appeals interpreted Mich. Comp. Laws Ann. § 206.611(5), which defines “taxpayer,” to require that “when a group of companies qualify as a UBG, the UBG, and not the individual companies within the UBG, is the taxpayer and the UBG is required to file a unitary tax return.” Accordingly, the court ultimately held that, with respect to both the premiums tax and retaliatory tax liability, UBGs are required to file on a unitary basis, calculating and imposing these taxes at the UBG level.

To dig deeper, visit the original article on the Thomson Reuters blog.