The Michigan Legislature has passed Public Act 282 of 2014 that retroactively repeals the Multistate Tax Compact (MTC) and makes changes to the Michigan Business Tax (MBT). More so, the legislation negates the effect of Michigan's Supreme Court's recent ruling in the IBM case (International Business Machines v. Michigan Dept. of Treasury ("IBM") and the potential refund claims resulting from the court decision. The court held that IBM could elect to compute the MBT apportionment using the MTC three-factor apportionment formula (property, payroll and sales) in lieu of the single sales factor formula as prescribed by the MBT Act. The three-factor approach is viewed as a more reasonable approximation of the share of a company's profit that arises from doing business in a state, based on both the demand for company output in the state (the sales factor) and the production activity in that state (the property and payroll factors). With Act 282, the legislature has repealed elements of the MTC retroactively, effective January 1, 2008. Additional legislative changes (listed below) are retroactive to January 1, 2010.
The Act also provides for changes to the MBT, which include the following: