4893: Small Business Alternative Credit* (2024)
Michigan · Michigan Treasury · Used for tax years 2024
Michigan Form 4893 calculates the 2024 Corporate Income Tax Small Business Alternative Credit. It reports gross receipts, adjusted business income, and any credit reductions, with the resulting credit carried to the CIT Annual Return (Form 4891).
Who files this form
Use Form 4893 to calculate and claim the 2024 Michigan Corporate Income Tax Small Business Alternative Credit (SBAC). Include Form 4894, Schedule of Shareholders and Officers, with the return.
Financial institutions and insurance companies are not eligible. The credit is also unavailable if any of these conditions apply:
- Gross receipts exceed $20,000,000.
- Adjusted business income after loss adjustment exceeds $1,742,000.
- Any shareholder or officer has allocated income after loss adjustment over $180,000.
- A shareholder’s or officer’s compensation and director fees exceed $180,000.
The credit must be reduced if gross receipts exceed $19,000,000 but do not exceed $20,000,000, or if any shareholder or officer has allocated income after loss adjustment over $160,000 but not over $180,000.
What you'll need
Have these forms and figures available:
- Form 4891, CIT Annual Return: provides taxpayer information, gross receipts, business income, federal net operating loss amounts, and tax liability before this credit.
- Form 4894, Schedule of Shareholders and Officers: provides compensation, director fees, and allocated income. This form must be included with the return.
- Federal Form 1120, Schedule D, if applicable: provides capital loss carryback or carryover amounts deducted in determining federal taxable income for CIT purposes.
- Form 4895, if claiming a loss adjustment: provides the Small Business Alternative Credit loss adjustment details.
- Form 4897, for unitary business groups: provides member business income and capital loss information.
- Form 4898, if applicable: reports excluded distributive shares of business income from flow-through entities that file Michigan Business Tax returns for the period described in the instructions.
How to file
Include completed Form 4893 as part of your tax return filing, along with Form 4894.
Calculate the credit on Form 4893 and carry it to Form 4891, line 39:
- If gross receipts on line 1 are $19,000,000 or less, carry the amount from line 14.
- If gross receipts are more than $19,000,000 but not more than $20,000,000, complete lines 15 through 18 and carry the amount from line 18.
A unitary business group completes one Form 4893 for the group using the Designated Member’s name and account number. Each group member that is a corporation under the CIT must file Form 4894.
The supplied text does not provide a mailing address or e-filing directions.
Common mistakes
- Leaving out Form 4894: the credit will be denied if this form is not included with the return.
- Skipping required entries: line 1 must be completed, and all taxpayers must complete line 14. Line 12 requires the specified allocated income amount even if it is $160,000 or less.
- Overlooking compensation paid through a professional employer organization: include compensation of the operating company’s officers and compensated shareholders when determining eligibility.
- Using annualized adjusted business income to calculate the credit: the adjusted business income eligibility test uses annualized amounts, but the credit calculation uses actual adjusted business income.
- Treating a federal disregarded entity differently for CIT filing: the text says an entity disregarded for federal income tax purposes is also disregarded for filing the CIT annual return.
Questions people ask
How is the credit calculated before reductions?
Multiply adjusted business income on line 9 by 1.8% to calculate the Small Business Alternative Tax on line 10. Subtract line 10 from the tax liability on line 2 to calculate the credit on line 11. Enter zero if either calculation produces a result below zero.
Whose allocated income determines the income-based reduction?
The reduction is based on the shareholder or officer with the largest allocated income. Allocated income is the greater of compensation and director fees from Form 4894, column L, or compensation, director fees, and the shareholder’s share of business income or loss after loss adjustment from column N.
What if the tax year is shorter than 12 months?
Annualize gross receipts, adjusted business income, and shareholders’ and officers’ allocated income to determine eligibility and the reduction percentage. For line 1, non-group taxpayers annualize Form 4891, line 10a. Unitary business groups use Form 4891, line 10a, which already reflects the required annualization.
Can a past loss help me qualify?
Possibly. If adjusted business income was below zero in one of the five immediately preceding tax years and the taxpayer received an SBAC for that year, a loss adjustment may reduce current-year adjusted business income or allocated income. See Form 4895. A loss adjustment cannot prevent a reduction or elimination caused by gross receipts over $19,000,000 or compensation reported in Form 4894, column L.