MI-1040H: Schedule of Apportionment (2024)
Michigan · Michigan Treasury · Used for tax years 2024
Michigan Form MI-1040H is a schedule used to apportion business income taxable both within and outside Michigan. It reports Michigan and total sales, calculates an apportionment percentage, and determines income or loss attributable to other states. It is included with Form MI-10
Who files this form
Use the 2024 MI-1040H to apportion business income from activity that is taxable both within and outside Michigan. The form is used by individual income tax, fiduciary, and composite filers.
Business income is taxable in another state if either:
- You are subject there to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax.
- That state has jurisdiction to impose a net income tax, whether or not it actually does.
For this purpose, “state” includes a foreign country. Michigan business income includes a distributive share of income or loss from a flow-through entity, including portfolio income.
What you'll need
Have the following information available:
- The owner’s name and full nine-digit Social Security number for an individual filer, or the estate, trust, or company name and full FEIN for a fiduciary or composite filer.
- The business entity’s name and FEIN, unless using the combined unitary apportionment election.
- Michigan sales, total sales everywhere, and business income included in adjusted gross income that is subject to apportionment.
If you filed U.S. Form 461 with a current-year federal limitation on business losses, complete Michigan Form MI-461 before Part 2.
For combined unitary apportionment, include a separate schedule showing your computations. Individual taxpayers must also provide a statement identifying the group members, showing the combining calculations, and describing the unitary relationship between the entities.
How to file
Include MI-1040H with Form MI-1040, MI-1041, or Form 807. Type or print in blue or black ink. The supplied text does not give a mailing address or e-file directions.
- Part 1: Enter Michigan sales on line 6 and total sales on line 7. Divide line 6 by line 7 to calculate the apportionment percentage on line 8.
- Part 2: Enter the applicable business income on line 10. Multiply it by line 8 for line 11, then subtract line 11 from line 10 for line 12. Report income from line 12 on Schedule 1, line 13, or a loss on Schedule 1, line 4. Nonresidents and part-year residents include the amount on the appropriate line in Schedule NR, column C.
- Part 3, if electing combined apportionment: Check box 5, write “Unitary” in box 3, and leave box 4 blank. List the unitary entities and include the required supporting computations and statement. If listing more than eight entities, include additional MI-1040H forms with “Unitary” on line 3 and lines 6 through 12 blank.
Common mistakes
- Overlooking throwback sales. Michigan sales may include sales of tangible personal property shipped from Michigan to another state or country where the business is not taxable. Review the throwback-sales instructions before completing line 6.
- Including nonbusiness receipts in the sales factor. Exclude all receipts of nonbusiness income.
- Completing Part 2 before MI-461. If you filed U.S. Form 461 with a current-year federal business-loss limitation, check box 9 and complete MI-461 first.
- Double-counting income on line 10. Exclude amounts already reported and apportioned on MI-461. Also exclude apportioned business capital gains or losses reported on line 3 and/or line 8 of MI-1040D or on MI-461. Include apportionable interest, dividends, and other business income not reported on MI-461.
- Including guaranteed payments to partners on line 10. These are not business income for Michigan purposes.
- Combining multiple forms incorrectly. Michigan residents must total line 12 income and losses separately, not net them together. Nonresidents with multiple MI-1040H forms must net line 12 income and losses before reporting the total in Schedule NR, column C.
- Applying the combined election to only some unitary groups. If you elect combined apportionment, you must use it for every unitary group from which you receive income or loss.
Questions people ask
Do I need a separate MI-1040H for each business?
Use a separate MI-1040H for each business activity requiring apportionment, unless you elect to combine apportionment for entities that are unitary with one another.
Does portfolio income count as business income?
Michigan business income includes portfolio income from a flow-through entity. Portfolio income includes interest, dividends, royalties, and net short-term and long-term capital gains or losses reported on federal Schedule D.
How are service sales assigned to Michigan?
Sales other than tangible personal property, such as services, are Michigan sales if the business activity is performed in Michigan. If it is performed both in Michigan and elsewhere, the sales are assigned to Michigan when a greater proportion of the activity is performed in Michigan, based on cost of performance.
Is combined unitary apportionment a permanent election?
No. The election is made annually. The taxpayer must control the included entities, and the entities must have a flow of value between their operations. An individual may include only entities whose business income or loss is reported in the individual’s adjusted gross income.