Michigan Net Operating Loss Deduction

Net Operating Loss Deduction
5674, 2023 Michigan Net Operating Loss Deduction
Reset Form
Michigan Department of Treasury
5674 (Rev. 05-23), Page 1

2023 MICHIGAN Net Operating Loss Deduction
Issued under authority of Public Act 281 of 1967, as amended.

Type or print in blue or black ink.
Include with Form MI-1040 and Schedule 1. All NOL deductions must be supported by MI-1045(s).

Attachment 30

Filer’s First Name

M.I.

Last Name

Filer’s Full Social Security No. (Example: 123-45-6789)

If a Joint Return, Spouse’s First Name

M.I.

Last Name

Spouse’s Full Social Security No. (Example: 123-45-6789)

1.

Check the box and see instructions if there was a change in filing or marital status in any of the years since an NOL was
created.

2. Enter Total Group 1 NOLs as a positive number .........................................................................

2.

00

3. Enter Total Group 2 NOLs as a positive number (see instructions).............................................

3.

00

4. Adjusted Gross Income from MI-1040, line 10 ........................................................................

4.

00

5. Additions from Schedule 1, line 9 .............................................................................................

5.

00

6. Subtractions from Schedule 1, line 29 (enter as a negative number).......................................
7. Income subject to tax before Michigan NOL deduction. Combine lines 4 through 6. If
negative, enter “0” here and skip to line 12. ...............................................................................

6.

00

7.

00

8. Multiply line 7 by 80% (0.80) ......................................................................................................

8.

00

9. Allowable Group 2 NOL. Enter the lesser of line 3 or line 8.....................................................

9.

00

10. Tentative Michigan NOL Deduction. Add lines 2 and 9. ......................................................... 10.
11. 2023 Michigan NOL Deduction. Enter the lesser of line 7 or line 10 here and on Schedule 1,
line 30. Do not complete line 12 ................................................................................................. 11.

00

12. Combine lines 2 and 3. Enter here and on Schedule 1, line 30 .................................................

00

+ 0000

2023 98 01 27 7

12.

00

2023 Form 5674, Page 2

Instructions for Michigan Net Operating Loss Deduction (Form 5674)
Purpose
Form 5674 is used to compute the current year Michigan
net operating loss (NOL) deduction from available
Group 1 and/or Group 2 NOLs. Form 5674 is required
when claiming an NOL deduction on the Michigan
Schedule 1. Both the Schedule 1 and Form 5674 must
be included with the MI-1040 when claiming an
NOL deduction. This form is supported by Schedule
MI-1045 for the loss year. For more information on
NOLs, see Michigan Net Operating Loss Schedule
(Schedule MI-1045) instructions.
Group 1 NOLs
Group 1 NOLs are those created in 2017 and prior. A
Group 1 NOL has a carryforward period that is limited to
20 consecutive years following the loss year.
Group 2 NOLs
Group 2 NOLs consist of Group 2 CARES and
Group 2 TCJA and are created in 2018 and future years. A
Group 2 NOL can be carried forward indefinitely.
Michigan follows IRC 172, therefore, any carryforward of
a Group 2 NOL beginning January 1, 2021 is limited to
the lesser of the Michigan NOL deduction or 80 percent
of Michigan taxable income before exemptions. Group 2
NOLs also include any Michigan excess business loss
from the previous year, if applicable. The Michigan excess
business loss may only be carried forward.

NOL Carryforward
To claim a carryforward of a Group 1 NOL(s) and/or a
Group 2 NOL(s), complete Form 5674 to determine your
Michigan NOL deduction. The NOL deduction computed
on Form 5674 is entered on Schedule 1 as a subtraction.
For tracking purposes, required modifications are applied
to Group 1 NOLs first, then to Group 2 NOLs after
Group 1 is exhausted or expired. After modifications any
unused NOLs are combined in their respective group,
Group 1 or Group 2. All NOLs must be substantiated
on a Schedule MI-1045 with required supporting
documentation for each loss year (see “Required
Supporting Documentation”). The NOL carryforward
must be reported in consecutive years including those
without Michigan taxable income before exemptions.
A schedule demonstrating how the Michigan NOL was
absorbed must be included. For assistance, refer to the
“Michigan NOL Carryover Worksheet” available on
Treasury’s website.
The amount of the combined Michigan NOL carryover
must be reduced by any Michigan sourced excess capital
loss and other modifications required under IRC 172
or elections under IRC 965 claimed in the previous
carryover year. For example, if excess capital loss was in
your 2022 adjusted gross income (AGI) and was used to
reduce Michigan taxable income, your NOL carryforward
claimed in 2023 must be reduced by the Michigan sourced
excess capital loss to the extent the deductions reduced
2022 Michigan taxable income before exemptions. Due
to ordering rules, an NOL must be used first to reduce
Michigan taxable income before an excess capital loss.
Keep all records that substantiate an NOL for 6 years
after the NOL expired or was absorbed.

Line-by-Line Instructions for Form 5674
Lines not listed are explained on the form.

Line 1: If there was a change in filing or marital status
in any years since an NOL was created, the allowed NOL
deduction may be affected. See IRS Publication 536 to
determine how to compute your share of a Michigan NOL
and/or how to recompute your Michigan income subject
to tax, in accordance with your situation for purposes of
this form. Complete Form 5674 according to the form
instructions, except when instructed differently below.
If your situation requires you to recompute your Michigan
NOL: Enter any recomputed Group 1 NOL(s) on line 2.
Enter any recomputed Group 2 NOL(s) on line 3. Include
a separate computation showing how the Group 1 and/or
Group 2 NOL(s) were recomputed.
If your situation requires you to recompute your Michigan
income subject to tax on this form: Enter your share of
AGI included in MI-1040, line 10 on line 4. Enter your
share of additions included in Schedule 1, line 9 on
line 5. Enter your share of subtractions included in
Schedule 1, line 29, as a negative number, on line 6.

Include a separate statement detailing which items of
income or loss included in AGI are yours, include the type
and location for each item listed. Do not include a loss
created in the current year.
Line 3: Enter your Group 2 NOLs here. The CARES Act
temporarily suspended the federal excess business loss
limitation for tax years 2018, 2019 and 2020. If you did not
amend your return to absorb the excess business loss in
the year(s) in which it occurred, the excess business loss
becomes a Group 2 NOL.
Line 12: If income subject to tax before any Michigan
NOL deduction (line 7) is zero or less, there is no income
to be offset by a Michigan NOL deduction. This line
combines the Group 1 and Group 2 NOL(s) to report the
NOL carryforward. However, after required modifications,
any unused NOLs are combined in their respective group,
Group 1 or Group 2.

Required Supporting Documentation
To help reduce processing delays, review the following to ensure all supporting documents
are included when claiming an NOL deduction.
r

MI-1045 and all supporting documentation (if not already provided to the Michigan
Department of Treasury for the loss year). See Michigan Net Operating Loss Schedule
(Schedule MI-1045) instructions.

r

A schedule demonstrating how the Michigan NOL was absorbed. For assistance, see
“Michigan NOL Carryforward Worksheet” available on Treasury’s website.

r

If the box on Form 5674, line 1 is checked, provide the calculation showing how you
redetermined your Michigan NOL and/or Michigan income subject to tax.