4898: Non-Unitary Relationships with Flow-Through Entities* (2024)
Michigan · Michigan Treasury · Used for tax years 2024
Michigan Form 4898 is a 2024 Corporate Income Tax schedule for reporting income or loss from directly or indirectly owned flow-through entities that are not unitary with the taxpayer for apportionment purposes. It lists each entity and reports the taxpayer’s distributive share of
Who files this form
A Michigan Corporate Income Tax (CIT) taxpayer must file Form 4898 if it has a distributive share of income or loss from a flow-through entity (FTE) that is not unitary with it for apportionment purposes. This includes directly and indirectly owned FTEs.
For a Unitary Business Group (UBG), each member with a distributive share of income or loss from an FTE that is not unitary with the UBG must complete a separate form.
Use Form 4900 instead for FTEs that are unitary with the taxpayer for apportionment purposes.
What you'll need
Have the following information available to complete Form 4898:
- The taxpayer’s name and identification information as reported on page 1 of the CIT Annual Return, Form 4891.
- For a UBG, the Designated Member’s name and FEIN, plus the reporting member’s name and FEIN.
- Each non-unitary FTE’s name, FEIN, and distributive share of income or loss.
- Amounts attributable to each FTE on Form 4891, lines 12, 13, 14c, 18, 19, 20, 21, 22, 23, 27, 28, 29, and 30, to calculate Column C.
- Each FTE’s Michigan sales and total sales everywhere to calculate its apportionment percentage, unless the MBT exemption applies.
- Information about whether an FTE elected to remain subject to Michigan Business Tax (MBT) and files an MBT return for a tax year ending with or within the taxpayer’s tax year.
UBG members also use Form 4897, line 32, to check their Column C totals. The instructions refer to Form 4891 for what counts as a sale and the “Sourcing of Sales to Michigan” section of Form 4890 for determining Michigan sales.
How to file
Include the completed Form 4898 as part of the tax return filing. The supplied text does not specify a mailing address or an e-file method.
If you need more space, use additional copies of Form 4898. Repeat the taxpayer’s name and FEIN, and the UBG member’s name and FEIN if applicable, at the top of every copy.
Common mistakes
- Reporting unitary FTEs on this form. Form 4898 is only for non-unitary FTEs. Use Form 4900 for unitary FTEs.
- Filling in Columns D and E for an exempt MBT filer. If an FTE made an MBT election and files an MBT return for a tax year ending with or within the CIT taxpayer’s tax year, report the exempt distributive income or loss in Column C and leave Columns D and E blank.
- Leaving identifying information off extra copies. Repeat the taxpayer’s and, if applicable, UBG member’s name and FEIN on every copy.
- Adding a percent symbol in Column D. Enter the percentage to four decimal places, without the % symbol.
- Not checking totals. Column C totals, including all applicable UBG members, should equal Form 4891, line 26. Column E totals, including all applicable UBG members, should equal Form 4891, line 34.
Questions people ask
What is a flow-through entity?
The instructions list S corporations, general partnerships, trusts, limited partnerships, limited liability partnerships, and limited liability companies that are not taxed as C corporations for federal income tax purposes for the applicable tax year.
How do I know whether an FTE is non-unitary?
A unitary relationship requires both an ownership test and a business relationship test. The taxpayer must own or control, directly or indirectly, more than 50% of the interests with voting or comparable rights. The activities or operations must also meet the flow-of-value or business-integration test described in the instructions. If either test is not met, the FTE is non-unitary. For a UBG, the ownership test uses the group’s combined ownership.
How do I report a loss?
Enter a distributive loss as a negative amount in Column C. Column E is calculated by multiplying Column C by the apportionment percentage in Column D, unless the MBT exemption requires Columns D and E to remain blank.
How do I handle an indirectly owned FTE?
Report the distributive share attributable to the indirectly owned non-unitary FTE separately. For the directly owned FTE, subtract income or loss attributable to indirectly owned FTEs so that only the directly owned FTE’s own income or loss is reported on its line.