State & Local Tax Impacts of COVID-19 for Michigan – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Jun 08, 2021

Information current as of April 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Michigan

  • Personal property (including exempt personal property) that’s located on tax day in an alternate location due to the COVID-19 pandemic must be assessed in its ordinary location rather than in that alternate location. This provision applies notwithstanding any provision of the General Property Tax Act to the contrary, including those in Mich. Comp. Laws Ann. Section 211.13(1) and Mich. Comp. Laws Ann. §211.14(1). “Alternate location” means the geographic area of a local tax collecting unit that’s not the ordinary location of an item of personal property but is the location to which the property was moved due to the COVID-19 pandemic. “Ordinary location” means the geographic area of a local tax collecting unit where an item of personal property would have been located for its primary use if not for the need to move it to an alternate location due to the COVID-19 pandemic. Evidence of the ordinary location includes the following: (1) a business location of the owner or other person beneficially entitled to the property or in possession of it, where the property is usually deployed under conditions unaffected by the COVID-19 pandemic; and (2) if applicable, the geographic area of a local tax collecting unit where the property was located on December 31, 2019. “Exempt personal property” means personal property that’s exempt from the collection of taxes under the act, including personal property exempt under Mich. Comp. Laws Ann. §211.7 to Mich. Comp. Laws Ann. §211.7ww and Mich. Comp. Laws Ann. §211.9 to Mich. Comp. Laws Ann. §211.9o.
    • S.B. 1203 (P.A. 352), L. 2020, effective for the 2021 tax year only.
  • Michigan is automatically waiving penalty and interest for businesses affected by the section of the December 7, 2020, Michigan Department of Health & Human Services order prohibiting gatherings on the late reporting or payment of sales, use, and withholding tax for any non accelerated return or payment due on January 20, 2021. The waiver lasts for 33 days; consequently, eligible taxpayers must report and pay the tax due by February 22, 2021. 
    • Michigan Department of Treasury, Notice; January 14, 2021.
  • Michigan updated guidance on the application of city individual income tax while telecommuting to explain that 1) residents’ income while working from home for a company in another city is subject to the tax in their home city; 2) nonresidents with a normal work location in a Michigan city aren’t subject to the tax on wages while telecommuting from outside the city; 3) all wages earned while working in the Michigan city are taxable, and the nonresidents should file using the city’s nonresident income tax return form; 4) employees should keep a log and letter from their employer on days worked outside the city; and 5) employees may be required to submit the log and letter upon request by a city tax administrator.
    • Michigan Department of Treasury, City Income Taxes & Telecommuting FAQ; February 1, 2021.
  • Michigan has extended the deadline for 2020 individual and composite state income tax returns and payments to May 17, 2021. This applies to returns otherwise due on April 15, 2021. The extension is automatic and conforms to IRS Notice 2021-59. Taxpayers don’t need to include any additional information when filing their return or otherwise contact the U.S. Department of the Treasury to obtain the extension. The due date for application and payment of tax related to an extension of time to file the annual return also has been extended to May 17, 2021. However, the extended annual return will remain due on October 15, 2021. First-quarter estimates for tax year 2021 remain due on April 15, 2021. The extension also doesn’t apply to fiduciary returns or corporate income tax returns.
    • Michigan Department of Treasury, News Release; March 19, 2021.
  • Michigan issued guidance on the state tax effect of the unemployment compensation exclusion in the federal American Rescue Plan Act of 2021 (ARPA). For tax year 2020 Michigan state income tax purposes, the state will follow the federal exclusion. Taxpayers who already filed their federal and Michigan income tax returns and didn’t take the unemployment compensation exclusion on their federal return should wait to amend their Michigan return, pending further IRS and state guidance on the automatic adjustment.
    • Michigan Department of Treasury, Notice: Treatment of Unemployment Compensation; April 1, 2021.
  • Michigan announced that taxpayers who filed their individual income tax returns and collected unemployment benefits in 2020 should consider filing an amended return if they haven’t yet received their entitled tax relief. The federal ARPA excludes unemployment benefits up to $10,200 from income for tax year 2020 for those within certain income brackets, providing tax relief on both federal and state income taxes. Taxpayers who may have anticipated owing taxes may now be entitled to a refund or a lesser payment. Taxpayers who e-filed their original return should e-file their amended return. Individuals who desire to file a paper return should do so by checking the “Amended Return” box on Form MI-1040 and outlining the reason for the amended return on Schedule AMD.
    • Michigan Department of Treasury, Notice; April 27, 2021.
  • Michigan issued a notice outlining the state’s conformity to the federal tax treatment of loans issued under the Paycheck Protection Program (PPP). The Treasury includes that 1) forgiven PPP loans that are excluded from the federal income tax computation are similarly excluded from the computation of the state tax base; 2) business expenses paid for by PPP loans that are deductible at the federal level remain deductible at the state level; 3) the PPP loans aren’t included in either the numerator or the denominator of the sales factor computation for corporations; 4) a PPP loan that’s forgiven is excluded from the computation of the tax base under both the individual income and corporate income tax; and 5) any portion of a PPP loan that isn’t forgiven is excluded from total household resources to determine eligibility for various individual income tax credits. 
    • Michigan Department of Treasury, Notice; April 19, 2021.
  • Michigan legislation formally extends the state and city income tax return payment deadlines to May 17, 2021. The Michigan Department of Treasury had previously followed the IRS and extended the filing date for tax year 2020 income tax returns from April 15, 2021, to May 17, 2021. However, the Department’s waiver of penalties and interest for 2020 didn’t automatically extend to city income taxes. 
    • Michigan H.B. 4569 (P.A. 7) and H.B. 4571 (P.A. 8), effective April 22, 2021.
    • Michigan Department of Treasury, Notice; April 28, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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