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HB 5022

AN ACT RELATING TO TOWNS AND CITIES -- AWARD OF MUNICIPAL CONTRACTS

2025 Regular Session Introduced by Marvin Abney and 5 co-sponsors

Michigan updates flow-through entity tax rules: new election deadline; revised quarterly estimates/penalties; mandatory member disclosures; credit verification.

03/06/2025 Committee recommended measure be held for further study
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Bill Summary · HB 5022

Summary — HB 5022 / Public Act 216 of 2024

Title: Corporate income tax: flow‑through entities; modify dates to make election to pay the tax and submit certain information; amend MCL 206.254, 206.675, 206.813, 206.831, 206.839 (as added by 2021 PA 135)

Status: Enacted (Act No. 216, Public Acts of 2024). Approved by Governor Jan 17, 2025. Effective date: April 2, 2025.

Purpose

The act clarifies and modifies administrative rules for Michigan’s flow‑through entity (FTE) tax created by 2021 PA 135. It adjusts the deadline for electing to pay the entity‑level tax, revises estimated‑payment safe harbors and penalty/interest rules, tightens reporting/disclosure timing and format, and authorizes the Department of Treasury to request documentation to verify credits.

Key provisions and changes

  • Election deadline

    • Previously: election to pay the FTE tax generally filed on or before March 15 of the tax year.
    • Now: for tax years beginning on or after Jan 1, 2024, the FTE must file its election on or before the last day of the ninth month after the end of the tax year.
    • Electing is generally irrevocable for the initial year and continues for the next two subsequent tax years; a new election is required thereafter.
    • If the Department denies an election, the taxpayer may file a written notice within 60 days and is entitled to an informal conference under MCL 205.21.

  • Estimated payments, penalties, and interest (applicable beginning with the 2024 tax year)

    • Taxpayers expecting > $800 liability must file quarterly estimated returns as before.
    • Interest and penalties will not be assessed if the taxpayer’s four equal quarterly payments total at least one of:
    • 90% of the current year tax liability, or
    • 100% of the prior year tax liability.
    • No interest/penalty is assessed for any quarterly estimated payment due before the taxpayer made the election to pay the FTE tax for that tax year—unless the Department finds the deficiency resulted from intentional disregard of the law.

  • Required disclosures and reporting

    • For tax years beginning on or after Jan 1, 2024, entities that do not elect to pay the entity tax must report to members the member’s share of FTE tax that was paid on or before the filing date of the entity’s annual return for that tax year (including extensions).
    • Such disclosures must be made in a form and manner prescribed by the Department and must include any other information the Department determines necessary for direct or indirect members’ filing.

  • Verification and credits

    • Members who claim a credit for an allocated share of the FTE tax may be required by the Department to provide “reasonable proof” or other information necessary to administer the credit.

Who is affected

  • Flow‑through entities (S corporations, partnerships, LLCs electing under part 4)
  • Direct and indirect members (individuals, corporations, estates, trusts)
  • Department of Treasury (administration, enforcement, forms)
  • Tax preparers and advisers assisting with election, estimated payments, and member reporting

Fiscal and administrative impact

  • House Fiscal Agency: not expected to have a significant impact on state revenues or Department administrative costs.

Procedural/timeline notes

  • HB 5022 (H‑2) was passed by the House (Dec 11, 2024) and Senate (Dec 20, 2024), presented to Governor Jan 8, 2025; approved Jan 17, 2025; filed with Secretary of State Jan 17, 2025; effective April 2, 2025.
  • Applies to tax years beginning on or after Jan 1, 2024 for several provisions (e.g., election timing, estimated payment safe harbor, disclosure timing).

Related bill: SB 1887 (companion).

Compiled from official sources — confirm details with the bill’s official record.

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