MI HB4288

Creates new flow-through entity tax effective January 1, 2021, imposed on S corporations and partnerships that elect to pay the tax at the same rate as the individual income tax rate (currently 4.25%) on business income after allocation and apportionment to Michigan.

Allows flow-through entities to make an irrevocable 3-year election to file a return and pay the entity-level tax rather than pass income through to individual members, with elections filed by the fifteenth day of the third month of the tax year.

Provides credits against individual income tax and corporate income tax for members of electing flow-through entities equal to their allocated share of the entity-level tax paid, with excess credits refundable.

Excludes flow-through entity business income allocable to corporate, insurance company, and financial institution members from the entity-level tax; only income allocable to individual members, estates, and trusts is subject to tax.

Distributes tax revenue with 1.012% divided by the tax rate going to the state school aid fund, with remaining revenue deposited in the general fund; applies retroactively to tax years beginning January 1, 2021 and takes immediate effect.