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State of Michigan Reverses Michigan Court of Appeals Decision in Kmart Case

Clayton & McKervey, P.C. recently alerted you to a decision made by the Michigan Department of Treasury to require taxpayers to file prior year Single Business Tax returns for an entity disregarded for federal income tax purposes. Business leaders, leading attorneys, and other business organizations approached the state legislature looking for opportunities to correct this through the legislative process.

On March 31, 2010, Governor Granholm signed into law House Bill 5937. This important legislation reverses potentially onerous requirements resulting from the Michigan Court of Appeals decision in Kmart Michigan Property Services LLC vs. Michigan Department of Treasury. Published in September of 2009, the Appeals Court decision was interpreted by the Michigan Department of Treasury to essentially require all taxpayers considered as disregarded entities for federal purposes to file amended SBT returns – with no statute of limitations. This legislation is the product of the coordinated efforts of all involved and restores the pre-Kmart status quo – taxpayers not being required to file tax returns for disregarded entities.

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