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A Better Partnership
February 22, 2013

C Corporations must use the same taxable income for both state and federal returns

The C corporation plaintiff in Lear Corporation v. Department of Treasury sought to treat certain deductible expenses differently for the purposes of his federal and state tax returns. The Court of Appeals held that, under the plain terms of Michigan's Single Business Tax Act, a C corporation's tax base must be identical to its federal taxable income. Therefore, any expenses deducted for federal tax return purposes must be deducted for state tax return purposes in the same manner. The Court reversed the Court of Claims decision to the contrary and remanded the case.

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