Michigan Loss Adjustment Worksheet for the Small Business Alternative Credit

Loss Adjustment Worksheet for the Small Business Alternative Credit
4575, 2024 Michigan Business Tax Loss Adjustment for the Small Business Alternative Credit
Attachment 09

Michigan Department of Treasury
4575 (Rev. 04-24)

2024 MICHIGAN Business Tax Loss Adjustment
for the Small Business Alternative Credit
Issued under authority of Public Act 36 of 2007.

Taxpayer Name (If Unitary Business Group, Name of Designated Member)

Federal Employer Identification Number (FEIN) or TR Number

Unitary Business Groups Only: Name of Unitary Business Group Member Reporting on This Form

Federal Employer Identification Number (FEIN) or TR Number

INSTRUCTIONS: Use this worksheet to qualify for an otherwise disallowed Small Business Alternative Credit by adjusting current year
adjusted business income. This is available only if a taxpayer had a negative adjusted business income in any of the five tax years
immediately preceding this tax year and received an MBT Small Business Alternative Credit in the loss year. Partnerships and members of
Unitary Business Groups, see instructions before completing.

PART 1:  CURRENT YEAR AMOUNTS
Use this section to determine amount of loss adjustment to business income needed to qualify for the Small Business Alternative Credit.
Adjusted Business Income Disqualifier
1. Adjusted Business Income from Form 4571, line 8....................................................................................

1.

00

2. Business Income Disqualifier.
Enter $180,000 for individuals, or $1,843,400 for all other organization types..........................................

2.

00

3. Loss adjustment required. Subtract line 2 from line 1. If less than zero, enter zero...................................

3.

00

4. Enter the amount from Form 4571, line 5...................................................................................................

4.

00

5. Shareholder Income Disqualifier (See chart in instructions)......................................................................

5.

00

6. Enter compensation and director fees from Form 4577, column L, of the shareholder creating the
disqualifier or reduction*.............................................................................................................................

6.

00

7. Subtract line 6 from line 5. If less than zero, see instructions....................................................................

7.

00

8. Divide line 7 by the percent of ownership from Form 4577, column G, for the shareholder on line 6........

8.

00

9. Loss adjustment required. Subtract line 8 from line 4................................................................................

9.

00

Shareholder Income Disqualifier: $180,000

* Note: If compensation exceeds $180,000 for any C Corporation shareholder or officer, a Small Business Alternative Credit cannot be claimed nor can a
loss adjustment be used to reduce compensation from Form 4577, column L.

PART 2:  AVAILABLE LOSS

Read instructions before completing Part 2. Use Part 2 to determine the loss available from the five preceding periods. Do not enter a
negative sign in front of the loss amounts in lines 11 through 16.
Complete line 10 for the five immediately preceding tax years (oldest to the left). Then complete lines 11 through 16, one column at a time
beginning with the oldest, but completing only those columns representing periods that reported a loss (either generated or used) AND
received a Small Business Alternative Credit.
10.
11.
12.
13.
14.
15.
16.

+

Tax year end date (MM-DD-YYYY)...........
Adjusted business income........................
Loss used on prior returns........................
Loss available for current return...............
Loss adjustment required.........................
Remaining loss adjustment required........
Loss adjustment carryforward..................

0000 2024 43 01 27 0

Instructions for Form 4575, Michigan Business Tax (MBT) Loss Adjustment
for the Small Business Alternative Credit
Purpose
To reduce the adjusted business income (ABI) or shareholder
allocated income to qualify for the Small Business Alternative
Credit (SBAC) or minimize the reduction percentage required.
If the ABI was less than zero in any of the five years
immediately preceding the tax year for which a credit is being
claimed, and the taxpayer received an SBAC under MBT for
that same year, the taxpayer may adjust for the loss before
figuring eligibility for the SBAC. Business income for credit
purposes is adjusted by using available loss from prior years
on a first-in, first-out basis until those losses are extinguished.
A loss adjustment will not affect a reduction to the SBAC
based on gross receipts that exceed $19,000,000. Also, it will
not change the amount of compensation in column L for a C
Corporation on the MBT Schedule of Shareholders and Officers
(Form 4577).
NOTE: Although this form is formatted for Corporations, it
can be used by other types of entities with minor adjustments.
See instructions for further details.

Special Instructions for Unitary Business
Groups (UBGs)
The ABI disqualifier must be calculated by the UBG by
combining the ABIs of its members. Likewise, to reduce
an ABI disqualifier of the UBG, loss adjustment must be
calculated on a group level and used against the group’s ABI.
Generally, a UBG will file only one copy of this form, the
“Group Copy for ABI.”
Members Not Included in UBG for Entire Lookback
Period
For years in which a member was not part of the UBG, the UBG
will use that member’s available loss from those separate years
on a first-in, first-out basis until those losses are extinguished.
These amounts are calculated initially at the member level but
used and maintained for use in future years on the Group Copy
for ABI. Supporting 4575 forms must be filed by each member
that has a loss available from the separate years that is used
against the UBG’s ABI disqualifier (member forms). Only Part
2, lines 10 through 13, of Form 4575 need to be completed on the
member form.
Adjusted Business Income Disqualifier
This disqualifier is calculated at the group level. If the UBG
has ABI in excess of $1,843,400, the UBG must complete one,
group Form 4575. The groupwide Form 4575 will calculate loss
available from the UBG’s prior tax years as well as organize
the members’ available loss that may be used against this
disqualifier. These member amounts are calculated initially
at the member level but used and maintained for use in future
years on the Group Copy for ABI.
In the Taxpayer Name field at the top of the page, enter the
Designated Member’s (DM’s) name followed by the DM’s
Federal Employer Identification Number (FEIN) or Michigan

Department of Treasury (TR) assigned number. In the Unitary
Business Groups Only field, enter “GROUP COPY FOR ABI,”
and leave FEIN or TR Number field blank. On this group copy
of Form 4575, enter groupwide data for lines 1 through 3.
Leave lines 4 through 9 blank. Complete lines 10 through 16
following line-specific instructions.
To reduce the UBG’s ABI disqualifier, the group will use its
available loss from a prior tax period when the UBG received
the SBAC, as well as a member’s available loss from a tax
year when it received the SBAC and was not part of the UBG
(member’s separate year). However, the group may not use
a member’s separately calculated available loss for a tax year
when the member was part of the UBG to reduce the group’s
ABI disqualifier.
For the purposes of completing Part 2, if a member’s separate
year does not share a common year end with the UBG, use a
separate column for that member. If some members’ separate
years share a common year end, total the amount of those
members’ available loss in a single column. Arrange all of
the columns in chronological order. If additional columns are
needed to accommodate the five preceding periods, create and
attach a table comparable to that found in lines 10 through 16.
Apply to that custom table the calculations described in the
form text and instructions for lines 10 through 16.
Lines 14 through 16 on the Group Copy for ABI will reflect
the usage of loss adjustment to resolve the ABI disqualifier
and the maintenance of loss adjustment available for future
years (within the five year statutory period). Loss adjustment
used for the ABI disqualifier is not recorded on the member
copy of Form 4575. However, loss adjustment used for the ABI
disqualifier from a member’s separately filed years should be
tracked in the taxpayer’s records. Any ABI loss adjustment
remaining from a member’s separately filed years will be
available to that member in the event the member leaves the
UBG prior to complete usage of the loss adjustment available
by the UBG. See the “Supplemental Instructions for Standard
Members in UBGs” section in the MBT Forms and Instructions
for Standard Taxpayers (Form 4600) for details.
NOTE: If the UBG still has a disqualification on this basis
(greater than $1,843,400) after completing the group’s Form
4575 as described above, the UBG is disqualified from the
SBAC. Do not proceed with these instructions.

Line-by-Line Instructions
Lines not listed are explained on the form.
Dates must be entered in MM-DD-YYYY format.
Name and Account Number: Enter name and account number
as reported on page 1 of the MBT Annual Return (Form 4567).
UBGs: Generally, only one form will be filed per UBG. See
“Special Instructions for UBGs” above for exceptions. Enter
the DM’s name in the Taxpayer Name field and FEIN in the
first identification line, and “GROUP COPY FOR ABI” and no
FEIN in the second identification line.

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Part 1: Current Year Amounts
Use Part 1 to determine the amount of loss adjustment
necessary to qualify for the SBAC.
If the taxpayer is not eligible for the credit because the ABI
exceeds $1,609,400 ($180,000 for individuals), complete lines 1
through 3.
If the taxpayer is not eligible because a shareholder’s
allocated income exceeds $180,000, or a partner’s distributive
income exceeds $180,000, complete lines 4 through 9 for the
shareholder(s) or partner(s) creating the disqualifier. The loss
adjustment required is the largest amount needed to eliminate
all allocated income disqualifiers.
Partnerships: Form 4575 is formatted for Corporations. To use
it for a Partnership, make these changes:
•	 Enter on line 6 any guaranteed payments made to the
partner creating a $180,000 disqualifier.
•	 On line 8, divide by the percentage of ownership from
column C of the MBT Schedule of Partners (Form 4578).
Reduced SBAC: A reduction of the SBAC is required if
an Individual, a partner in a Partnership, a shareholder of
a Corporation, or an officer of a C Corporation has allocated
income after loss adjustment of more than $160,000. This
reduction is based on the Individual/partner/officer/shareholder
with the largest allocated income.
Complete lines 4 through 9 for the shareholder or partner
creating the need to reduce the SBAC.
Form 4575 should always be calculated initially using $160,000
on line 5. This calculation will establish taxpayer eligibility
without the need to reduce the SBAC. However, if the total
loss available for the current year on line 13 does not equal or
exceed the loss adjustment required on line 9, the taxpayer may
still calculate a lesser loss adjustment to claim a reduced credit.
Try the calculation more than once. Substitute the numbers
shown on the chart in the instructions for line 5, in order to
maximize the claimed SBAC. If a negative number is reached
on line 7, a greater disqualifier amount is needed from the
disqualifier chart here on line 5.
Tax Year Less Than 12 Months: Business income and
shareholder disqualifiers must be calculated on an annualized
basis. Enter annualized numbers on lines 1, 4, and 6. Part-year
shareholders also must annualize compensation and report that
figure on line 6.
Annualizing
To annualize, multiply each applicable amount, ABI, or
shareholder compensation, by 12 and divide the result by the
number of months the business operated. Generally, a business
is considered in business for one month if the business operated
for more than half the days of the month.
NOTE: If the business was in operation for less than a month it
is considered to have been in business for 1 month.
UBGs: For UBG members reporting a period of less than 12
months with the group return, annualization is done using the
member’s number of months in the group’s tax year. Sum the

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annualized member figures (when applicable) to get the group’s
total annualized figure.
Line 5: Form 4575 should always be calculated initially using
$160,000. This calculation will establish taxpayer eligibility
without the need to reduce the SBAC. However, if the total
loss available for the current year on line 13 does not equal or
exceed the loss adjustment required on line 9, the taxpayer may
still calculate a lesser loss adjustment to claim a reduced credit.
Line 5

Eligible % of Credit

$ 160,000

100% - no reduction

$164,999

80%

$169,999

60%

$174,999

40%

$180,000

20%

Line 7: If a negative number is reached, some reduction of
credit is necessary. Return to line 5 and enter the higher
disqualifier amount from the chart. Continue this process
until line 7 is greater than or equal to zero. This calculation
establishes the maximum allowable SBAC.
Part 2: Available Loss
Use Part 2 to determine the loss available from the five preceding
periods. Do not enter a negative sign in front of the loss amount.
Complete lines 11 through 16, one column at a time. For
those lines, complete only columns for years that reported a
loss (either generated or used) and received an SBAC. If the
taxpayer did not report a loss or did not receive an SBAC for a
tax year, leave that column, lines 11 through 16, blank.
Line 10: Enter the five most recent tax years, beginning with
the oldest year in the left column, including years in which
there was no loss or no SBAC credit taken. Then complete lines
11 through 16, one column at at time, for each year in which a
loss was generated or used and an SBAC was claimed.
Line 11: Enter (as a positive number) the negative ABI from
Form 4571, line 8, for tax years where an SBAC was received.
UBGs: When completing a member’s form (see “Special
Instrutions for UBGs” so circumstances in which a member
form is needed), this line is calculated using member specific
(pro forma) data. Note, however, the member cannot enter an
ABI amount for a tax year that it was part of the UBG and the
UBG did not receive the SBAC. The member may, however,
enter an ABI amount for a tax year that it was not a member of
the UBG and it received the SBAC, regardless of whether the
UBG received the credit in that same year.
When completing the Group Copy for ABI, enter the sum of the
following: 1) UBG’s negative ABI for tax years it received the
SBAC, plus, 2) a member’s negative ABI for a tax year when it
received the SBAC and was not part of the UBG. These member
amounts are calculated initially at the member level but used and
maintained for use in future years on the Group Copy for ABI.
Line 12: Enter the amount of loss entered on line 11 that was
used as an adjustment in a prior period.

UBGs: When completing the Group Copy for ABI, if a
member’s negative ABI was included on Line 11 (the member
received a credit and was not part of the UBG in the tax year
the credit was received), include any loss adjustment used by
that member in a prior period to offset an ABI disqualifier.
Also enter any groupwide loss used against the UBG’s ABI
disqualifier in a prior period.
Line 13: Subtract line 12 from line 11 to arrive at loss available
on the current return. If less than zero, enter zero; no loss is
available.
UBGs: On the Group Copy for ABI, if the group’s membership
has not changed, that is, no member has joined or left the
group since the filing of the prior year’s return, the amounts
calculated on line 13 should equal the amounts on line 16 of
the prior year’s corresponding columns. If membership for this
year is different, these amounts may not be the same. See the
“Supplemental Instructions for Standard Members in UBGs”
section in Form 4600 for details.
Line 14: Enter the amount from line 3 or line 9, whichever
is larger, in the first column where a loss is available on line
13. In subsequent columns, enter amount from line 15 of the
previous applicable column.
Line 15: If line 14 is larger than line 13, subtract line 13 from
line 14. Enter here and on line 14 of the next column where a
loss is available on line 13.
Line 16: If line 13 is larger than line 14, subtract line 14 from
line 13. This amount is available to use in subsequent periods.
NOTE: To benefit from a loss adjustment, the total loss
available for the current year, line 13, must equal or exceed the
loss adjustment required on line 14.
The function of this form is to demonstrate that a taxpayer
that otherwise would have been disqualified from the SBAC
due to ABI, or fully or partially disqualified due to an owner’s
allocated income is, after application of loss adjustment,
allowed to claim a full or partial SBAC.
If loss adjustment is successfully applied to cure an ABI
disqualifier, there is no calculated figure from this form
that feeds to another form. Simply ignore the apparent
disqualification on Form 4571, line 8 and proceed with
calculating the SBAC on the remainder of Form 4571.
If loss adjustment is successfully applied to fully or partially
cure an owner’s allocated income disqualifier, this will be
demonstrated by the final applicable column of line 15 being
blank. In that event, carry the number from line 5 of this form
to Form 4571, line 11 and proceed with the calculation there.
Include completed Form 4575 as part of the tax return filing.

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