Michigan Excess Business Loss

Excess Business Loss
2023, MICHIGAN  Excess Business Loss Continuation Schedule
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Michigan Department of Treasury
5595 (Rev. 02-23)

2023 MICHIGAN Excess Business Loss MI-461

Issued under authority of Public Act 281 of 1967, as amended.

Attachment 27

Type or print in blue or black ink.
1. Filer’s Name Shown on Tax Return

2. Identifying Number

ALLOWABLE AND EXCESS BUSINESS LOSS
If additional space is needed, complete the Excess Business Loss Continuation Schedule (Form 5606).

A

Business Name

B

C

D

E

Federal Employer Apportionment
Federal Income
Identification
Percentage from
(Loss)
Number
MI-1040H, line 8
(Amount included in
(FEIN or SSN)
(if applicable)
U.S. Form 461, line 14)

Michigan Income
(Loss)

(Amount in column D
attributable to business
activity in Michigan)

F

Non-Michigan Income
(Loss)

(Amount in column D
attributable to business
activity outside of Michigan)

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

%

00

00

00

Business Loss Continuation Schedule, Form 5606 (if applicable) ........

00

00

00

%

%

%

5. Federal Allowable Business Loss.....................................................

00

00

00

6. Guaranteed payments adjustment....................................................

00

00

00

7. Subtotal ...............................................................................................

00

00

00

00

00

00

00

00

00

3. TOTAL. Add columns D, E and F. Include amounts from Excess

Important. To complete lines 4 through 10, you must use the line-by-line instructions.
4. Percentage of Total Loss. Divide the total of each column on line 3

by column D, line 3. ..............................................................................

100

8. Adjustment when either line 7, column E or line 7, column F is a

positive number ....................................................................................

9. Apportioned Allowable Business Loss as adjusted ........................
10. Excess Business Loss.......................................................................

00

2023 5595, Page 2

Instructions for Form MI-461, Excess Business Loss

Federal Excess Business Loss

Required Supporting Documentation

The federal 2017 Tax Cuts and Jobs Act (TCJA) enacted a
limitation on federal business losses that are included in
adjusted gross income (AGI). The limitation is computed
by aggregating federal business income and federal
business loss. If the computation results in a loss, the
Internal Revenue Code (IRC) 461(l) limits such business
loss in excess of business income. The limits are adjusted
for inflation each year. For 2023, the limitation is $289,000
for filers who are single or married filing separately or
$578,000 for joint filers. The limitation for fiduciary filers
is $289,000. The excess business loss that is excluded from
AGI becomes a net operating loss (NOL) in the following
tax year.
Michigan Excess Business Loss

Include a copy of the federal income tax return with
applicable schedules and statements to substantiate the
excess business loss:
• U.S. Form 1040
• U.S. Form 1040 Schedule(s) 1, B, C, D, E, F
• U.S. Form 461
• U.S. Form 4797
• U.S. Form 4835
• Schedule K-1(s)
• Any other applicable documentation
Provide a statement indicating the type and location (city
and state) of the business activity for each source of income
or loss. For assistance, refer to the “Business, Rental &
Royalty Activity Worksheet” and its instructions available
on Treasury’s Web site. If there is income or loss subject to
apportionment, include a Form MI-1040H.
Line-by-Line Instructions
Lines 1 and 2: For individual income tax filers, enter the
filer’s name and full nine-digit Social Security number at
the top of the form. For fiduciary filers, enter the name of
the estate or trust and full Federal Employer Identification
Number (FEIN).
Allowable and Excess Business Loss Table: Report all
amounts included in U.S. Form 461, line 14. Enter income
as a positive number. Enter loss as a negative number. If
you have more than 12 entries, continue those entries on
the 2023 Michigan Excess Business Loss Continuation
Schedule (Form 5606).
Columns A and B: Enter the business entity name and
FEIN. Include all entities whose income or loss is included
in U.S. Form 461, line 14. If the business entity is a sole
proprietorship, enter the filer’s Social Security number.
Combine guaranteed payments that are included in U.S.
Form 461, line 14, as one entry. In column A, enter the
applicable description instead of a business name. In
column B, enter the filer’s Social Security number. See
Example 1.
Column C: Enter the apportionment percentage determined
on Form MI-1040H, line 8 for each business subject to
Michigan apportionment. For entities with business activity
only in Michigan, enter 100%. For entities with no business
activity in Michigan, enter 0%. Refer to Form MI-1040H
instructions for assistance in determining whether business
activity is within and/or outside Michigan.
For guaranteed payments that were entered on a separate
line in column A, leave column C blank.
Column D: Enter federal business income or loss for each
entity after applying passive loss limitation and before
applying the federal excess business loss limitation. Report
all income or loss included in U.S. Form 461, line 14. Do
not enter any additional income or loss that is not included
in U.S. Form 461, line 14.
For guaranteed payments that were reported on a separate
line in column A, enter the total amount included in U.S.
Form 461, line 14, in column D. Also report this amount as
a negative number on line 6, column D.

The Michigan Department of Treasury (Treasury) will refer
to the amount in excess of the limitation as “excess business
loss” for the purpose of this form. Taxpayers who have
a federal excess business loss limitation must file Form
MI-461 to determine the Michigan portion of federal
business income or loss included in AGI. Additionally, the
form will determine the possible Michigan portion of the
excess business loss that is treated as a Michigan NOL in
the following tax year.
Michigan Taxation of Business Income
Michigan’s definition of business income differs from the
federal definition of business income. Michigan defines
business income as all income arising from transactions,
activities, and sources in the regular course of the
taxpayer’s trade or business. Michigan business income
includes the distributive share of income from a flowthrough entity, including portfolio income. Guaranteed
payments to partners are not considered business income
for Michigan purposes. Taxpayers may subtract from AGI
any business income that is not allocated or apportioned to
Michigan. Conversely, any loss not allocated or apportioned
to Michigan must be added to AGI. Business income is
apportioned by using a sales factor computed on a Schedule
of Apportionment (Form MI-1040H). Due to the differences
in the business income reported for federal purposes, the
federal business income and loss reported on Form MI-461
may not include all business income or loss for Michigan
purposes (e.g., interest and dividends). Business income or
loss not reported on Form MI-461 that is not attributable
to Michigan must be separately adjusted on Michigan
Schedule 1 or Schedule NR.
How to Claim a Michigan NOL Created from a
Michigan Excess Business Loss
The Michigan excess business loss becomes a Group
2 TCJA NOL (created in 2022 and future tax years)
available to claim in the subsequent year. See Form 5674
and instructions for more information. For assistance
in tracking the excess business loss NOL, refer to the
“Michigan NOL Carryover Worksheet” available on
Treasury’s Web site.

2023 5595, Page 3

Column E: Multiply the amount in column D by the
percentage in column C.
Guaranteed payments received by a Michigan resident are
taxable to the State of Michigan, no matter where they were
earned.
Guaranteed payments received by a Michigan nonresident
for services performed in Michigan are taxable to the State
of Michigan, unless the taxpayer resides in a reciprocal
state (Illinois, Indiana, Kentucky, Minnesota, Ohio and
Wisconsin).
For guaranteed payments entered on a separate line in
column A enter the portion that is sourced to Michigan in
column E. Also report this amount as a negative number on
line 6, column E.
Column F: Subtract the amount in column E from the
amount in column D.
Michigan nonresidents only, for guaranteed payments
entered on a separate line in column A, enter the portion
that is not taxable to Michigan in column F. Also report this
amount as a negative number on line 6, column F.
Line 3: Enter the total for columns D, E and F, including
amounts from Form 5606, if applicable. If filing multiple
Forms 5606 combine the amounts from all forms. The
amount on line 3, column D must match U.S. Form 461,
line 14.
Line 4: If the computed percentage is less than zero,
enter zero. If the computed percentage is greater than 100,
enter 100.
Line 5: Enter the federal allowable business loss as follows:
Column D: Enter the federal allowable business loss as
a negative number: $289,000 for filers who are single,
married filing separately, or fiduciary filers; $578,000 for
joint filers.
Column E: Multiply the amount on line 5, column D by the
percentage on line 4, column E. Enter the result on line 5,
column E.
Column F: Multiply the amount on line 5, column D by the
percentage on line 4, column F. Enter the result on line 5,
column F.
Line 6: For guaranteed payments reported on a separate
line in the table above, enter in their respective columns as
a negative number. See Example 1.
Line 7: Subtotal each column as follows:
Column D: Add lines 5 and 6.
Column E: If line 3 is negative, add lines 5 and 6. If line 3
is positive, add lines 3 and 6.
Column F: If line 3 is negative, add lines 5 and 6. If line 3
is positive, add lines 3 and 6.
Lines 8 and 9: Determine the required adjustment, if any:
• For line 9, column D enter the amount from line 7
• If line 3, columns E and F are both negative or one is
zero (see Example 1):
• Step 1: Skip line 8 and enter the amounts from line 7
on line 9. Continue to instructions based on
residency.
• If line 3, column E is positive (see Example 2):
• Step 1: Skip line 8, column E
• Step 2: For line 9, column E, enter line 7, column E
• Step 3: For line 8, column F, enter line 3, column E
as a negative number

• Step 4: For line 9, column F, enter the sum of lines 7
and 8, column F. Continue to instructions based on
residency.
• If line 3, column F is positive (See Example 3):
• Step 1: Skip line 8, column F
• Step 2: For line 9, column F, enter line 7, column F
• Step 3: For line 8, column E, enter line 3, column F
as a negative number
• Step 4: For line 9, column E, enter the sum of lines 7
and 8, column E. Continue to instructions based on
residency.
Michigan Resident Instructions:
• If line 9, column F is a positive number, carry the
amount to Schedule 1, line 13 and combine with
other amounts reported on that line. Do not duplicate
adjustments for the same income or loss on the
Schedule 1.
• If line 9, column F is a negative number, carry this
amount as a positive number to Schedule 1, line 4 and
combine with other amounts reported on that line. Do
not duplicate adjustments for the same income or loss
on the Schedule 1.
Nonresident and Michigan Part-Year Resident
Instructions:
Combine amounts carried to the Schedule NR with other
amounts reported on those lines. Do not report the same
income or loss more than once on the Schedule NR.
• Carry guaranteed payments included in the adjustment
on line 6 to the appropriate columns on line 9 of the
Schedule NR.
• Carry line 9, columns D, E, and F to the appropriate
columns on line 11 of Schedule NR.
Michigan Resident Estate or Trust Instructions:
• If line 9, column F is a positive number, carry the
amount to the Michigan Fiduciary Income Tax Return
(Form MI-1041), line 38 and combine with other
amounts reported on that line.
• If line 9, column F is a negative number, report the
amount as a positive number on Form MI-1041, line 33
and combine with other amounts reported on that line.
Line 10: For either column E or F, if line 9 is negative,
subtract lines 5 and 8 from line 3. If line 9, column E is
positive, you do not have a Michigan excess business loss.
Column E: This amount is a Michigan excess business
loss NOL. It becomes a Group 2 NOL in the following
year when it becomes available to claim. See Form 5674
for more information. If zero or greater, you do not have a
Michigan excess business loss NOL.
Column F: This amount is not attributable to Michigan and
is not a Michigan NOL.
Nonresident Estate or Trust Instructions:
Carry the excess business loss from line 10, columns E
and F as positive numbers to the appropriate columns on
Michigan Fiduciary Nonresident Schedule (Form MI-1041
Schedule NR), line 8 and combine with other amounts
reported on that line.

2023 5595, Page 4

Examples

The taxpayers in these examples have a federal excess business loss limitation. These examples illustrate how the Michigan
allowed and excess business losses are computed.
Example 1: Michigan resident, single filer with Michigan and non-Michigan losses
Heather, a Michigan resident, is a single filer with a business loss that exceeds her business income by more than the $289,000
limitation for a single filer. Her business activity and guaranteed payments attributable to Michigan netted to a $235,000 loss.
Business activity in other states created a $115,000 loss. The Michigan share of the allowable loss is $244,035. The non-Michigan
share of the allowable loss is $94,965, which must be added back on Schedule 1. Heather creates a Michigan excess business loss
NOL carryforward of $40,965, which may be combined with other Group 2 NOLs available to be deducted on Form 5674 in the
following year.
A
Business Name

B

C

D

E

Federal Employer Apportionment
Federal Income
Identification
Percentage from
(Loss)
Number
(Amount included in
MI-1040H, line 8
(FEIN or SSN)
U.S. Form 461, line 14)
(if applicable)

Michigan Income
(Loss)

(Amount in column D
attributable to business
activity in Michigan)

F

Non-Michigan Income
(Loss)

(Amount in column D
attributable to business
activity outside of Michigan)

Guaranteed payments

111-11-1111

%

50,000 00

50,000 00

00

Company A

22-2222222

77 %

(500,000) 00

(385,000) 00

(115,000) 00

Company B

33-3333333

100 %

3. TOTAL. Add columns D, E and F. Include amounts from Excess
Business Loss Continuation Schedule, Form 5606 (if applicable) ........

100,000 00

100,000 00

00

(350,000) 00

(235,000) 00

(115,000) 00

4. Percentage of Total Loss. Divide the total of each column on line 3
by column D, line 3 ................................................................................

100

%

67.14 %

32.86 %

5. Federal Allowable Business Loss.....................................................

(289,000) 00

(194,035) 00

(94,965) 00

Guaranteed payments adjustment....................................................

(50,000) 00

(50,000) 00

00

7. Subtotal ................................................................................................
8. Adjustment when either line 7, column E or line 7, column F is a
positive number ....................................................................................

(339,000) 00

(244,035) 00

(94,965) 00

00

00

9. Apportioned Allowable Business Loss as adjusted ......................

(339,000) 00

(244,035) 00

(94,965) 00

(40,965) 00

(20,035) 00

6.

10. Excess Business Loss.......................................................................

Example 2: Michigan resident, single filer with Michigan gains and non-Michigan losses

Joe, a Michigan resident, is a single filer with a business loss that exceeds his business income by more than the $289,000 limitation
for a single filer. His business activity in Michigan generated $30,000 in income while his business activity in other states created a
$340,000 loss. The allowable loss is comprised of $30,000 in Michigan income and a limited non-Michigan loss of $289,000. The
non-Michigan loss of $319,000 must be added back on Schedule 1. Joe did not incur a Michigan excess business loss NOL.
A
Business Name

Company A
Evan’s Consulting

B

C

D

E

Federal Employer Apportionment
Federal Income
Identification
Percentage from
(Loss)
Number
MI-1040H, line 8
(Amount included in
(FEIN or SSN)
(if applicable)
U.S. Form 461, line 14)

Michigan Income
(Loss)

(Amount in column D
attributable to business
activity in Michigan)

F

Non-Michigan Income
(Loss)

(Amount in column D
attributable to business
activity outside of Michigan)

11-1111111

15 %

(400,000) 00

(60,000) 00

(340,000) 00

222-22-2222

100 %

3. TOTAL. Add columns D, E and F. Include amounts from Excess
Business Loss Continuation Schedule, Form 5606 (if applicable) ........

90,000 00

90,000 00

00

(310,000) 00

30,000 00

(340,000) 00

4. Percentage of Total Loss. Divide the total of each column on line 3
by column D, line 3. ...............................................................................

100

%

0.00 %

100.00 %

5. Federal Allowable Business Loss....................................................

(289,000) 00

00

(289,000) 00

6. Guaranteed payments adjustment....................................................

00

00

00

7. Subtotal ................................................................................................
8. Adjustment when either line 7, column E or line 7, column F is a
positive number ....................................................................................

(289,000) 00

30,000 00

(289,000) 00

00

(30,000) 00

9. Apportioned Allowable Business Loss as adjusted ......................

(289,000) 00

30,000 00

(319,000) 00

00

(21,000) 00

10. Excess Business Loss.......................................................................

2023 5595, Page 5

Example 3: Michigan residents, joint filer with Michigan losses and non-Michigan gains

Robert and Kelli, Michigan residents, are joint filers with a business loss that exceeds their business income by more than the
$578,000 limitation for joint filers. Their business activity in Michigan created a loss of $771,000 and income attributable to other
states was $49,000. The allowable loss is comprised of a limited Michigan loss of $578,000 and non-Michigan income of $49,000.
The non-Michigan income of $49,000 must be subtracted on Schedule 1. Robert and Kelli create a Michigan excess business loss
NOL carryforward of $144,000, which may be combined with other Group 2 NOLs available to be deducted on Form 5674 in the
following year.
A

Business Name

B

C

D

E

Federal Employer Apportionment
Federal Income
Identification
Percentage from
(Loss)
Number
MI-1040H, line 8
(Amount included in
(if applicable)
(FEIN or SSN)
U.S. Form 461, line 14)

Michigan Income
(Loss)

(Amount in column D
attributable to business
activity in Michigan)

F

Non-Michigan Income
(Loss)

(Amount in column D
attributable to business
activity outside of Michigan)

Company A

11-1111111

85 %

(900,000) 00

(795,000) 00

(105,000) 00

Company B

22-2222222

0 %

82,000 00

00

82,000 00

Company C

33-3333333

25 %

3. TOTAL. Add columns D, E and F. Include amounts from Excess
Business Loss Continuation Schedule, Form 5606 (if applicable) ........

96,000 00

24,000 00

72,000 00

(722,000) 00

(771,000) 00

49,000 00

4. Percentage of Total Loss. Divide the total of each column on line 3
by column D, line 3 ................................................................................

100

%

100.00 %

0.00 %

5. Federal Allowable Business Loss ...................................................

(578,000)

00

(578,000) 00

00

00

00

00

00

(578,000) 00

49,000 00

(49,000) 00

00

(627,000) 00

49,000 00

(144,000) 00

00

6. Guaranteed payments adjustment....................................................
7. Subtotal ................................................................................................
8. Adjustment when either line 7, column E or line 7, column F is a
positive number ....................................................................................

(578,000)

9. Apportioned Allowable Business Loss as adjusted ......................

(578,000)

10. Excess Business Loss.......................................................................

00