M&A Advisory in Michigan

Michigan's flat individual rate is 4.25% for both 2025 and 2026. The Michigan FTE tax under MCL 206.813 allows S-corps, partnerships, and LLCs to elect entity-level taxation at 4.25%, generating a federal SALT-cap workaround. Public Act 216 of 2024 extended the election deadline from March 15 to September 30 for calendar-year filers — meaning a 2025 election can be made through Sept. 30, 2026, giving sellers far more time to model deal proceeds before committing to the 3-year binding election. Combined federal LTCG plus NIIT plus 4.25% MI produces approximately 28.05% all-in.

Michigan does not have a separate capital gains regime — long- and short-term gains are taxed at the flat 4.25% rate with no surtax. Michigan calculates state taxable income starting from federal AGI, and because Section 1202 QSBS gain is excluded above the line in arriving at federal AGI, the exclusion flows automatically to Michigan with no state-level add-back. Qualifying C-corp founders can exclude up to the greater of $10M (pre-OBBBA) or $15M (post-July 4, 2025 OBBBA stock) on both federal and Michigan returns after a 5-year hold, with new 50%/75% tiered exclusions at 3/4 years for post-OBBBA stock.

Michigan has no state estate tax and no state inheritance tax for 2025-2026. Although the Michigan Estate Tax Act technically remains on the books, it has been non-collectable since 2005 when the federal state-death-tax credit was eliminated; the inheritance tax was effectively repealed for decedents dying after September 30, 1993. Only the federal estate tax applies — exemption of $13.99M per person in 2025 rising to $15M per person in 2026 under OBBBA. This makes Michigan highly favorable for pre-sale estate planning (GRATs, IDGTs, SLATs, gifting) without any state-level transfer tax.

Michigan imposes a 6% sales tax on transfers of tangible personal property, but the "isolated or occasional sale" exemption generally exempts a one-time sale of a business's operating assets outside the ordinary course. Successor liability under MCL 205.27a(1) is a material concern: a purchaser becomes personally liable for the seller's unpaid Michigan taxes unless it complies with the escrow/tax clearance procedure. Best practice is for the buyer to request Form 5156 tax clearance from Treasury and escrow a portion of proceeds — sellers should plan a 60-day Treasury response window (RAB 2025-5) into the closing timeline.

Michigan's Corporate Income Tax is a flat 6% on C-corp federal taxable income apportioned to Michigan, with a small business alternative credit reducing the effective rate to 1.8% for qualifying small businesses. The CIT replaced the Michigan Business Tax (MBT) effective May 25, 2011. Legacy MBT certificated credits (MEGA, brownfield) can still be claimed by electing taxpayers. For C-corp sellers, the 6% CIT on entity-level gain plus the 4.25% individual rate on distribution drives most lower/middle market transactions toward stock or §338(h)(10)/§336(e) structures to minimize double-tax friction.

PFOA/PFOS were designated as CERCLA hazardous substances on July 8, 2024, making PFAS sampling now required beyond standard ASTM E1527-21 Phase I scope for Michigan industrial properties. Under NREPA Part 201, a "facility" designation requires a Baseline Environmental Assessment (BEA) filed with EGLE within 6 months of purchase to preserve the buyer's due-care liability protection under MCL 324.20116. Pre-marketing PFAS testing and voluntary BEA compliance convert this deal risk into a quantified, escrowed item — sellers who wait face price chips of 0.5-1.0x EBITDA or deal failure.