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Complete lines 5 through 10, one column at a time. Complete disqualifier, there is no calculated figure from this form
only columns for years that reported a loss (either generated that feeds to another form. Simply ignore the apparent
or used) and received an SBAC. If the taxpayer did not report disqualification on Form 4893, line 9 and proceed with
a loss or did not receive an SBAC for a tax year, leave that calculating the SBAC on the remainder of Form 4893.
column, lines 5 through 10, blank. If loss adjustment is successfully applied to fully or partially
Line 5: Enter (as a positive number) the negative ABI from the cure an owner’s allocated income disqualifier, this will be
CIT Small Business Alternative Credit (Form 4893), line 9, for demonstrated by the final column of line 9 being zero. In that
tax years where an SBAC was received. event, carry the number from line 12 of this form to Form
4893, line 9, and proceed with the calculation there.
For MBT years, enter the ABI from the Michigan Business Tax
Common Credits for Small Businesses (Form 4571), line 8. Part 3: Current Year Amounts for Shareholder
UBGs: When completing this line for a UBG, enter the sum of Allocated Income Disqualifier
the following: 1) UBG’s negative ABI for tax years it received UBGs, see “Special Instructions for UBGs” on the following
the SBAC, plus, 2) a member’s negative ABI for a tax year page for guidance on completing Part 3.
when it received the SBAC and was not part of the UBG. These
If the taxpayer is not eligible because a shareholder’s allocated
member amounts are calculated initially at the member level
but used and maintained for use in future years on the Group income
exceeds $180,000, complete lines 11 through 23 for the
Copy for ABI. shareholder(s)
creating the disqualifier. The loss adjustment
required is the largest amount needed to eliminate all allocated
Line 6: Enter the amount of loss entered on line 5 that was income disqualifiers.
used as an adjustment in a prior year (including loss adjustment
used in SBT years and MBT years). Reduced SBAC: A reduction of the SBAC is required if
a shareholder or an officer has allocated income after loss
UBGs: If a member’s negative ABI was included on Line 5 adjustment of more than $160,000. This reduction is based on
(the member received an SBAC and was not part of the UBG the officer or shareholder with the largest allocated income.
in the tax year the credit was received), include any loss This is determined at a group level.
adjustment used by that member in a prior year to offset an
ABI disqualifier (including loss adjustment used in MBT and Any UBG that has a shareholder whose income creates a
CIT years). Also enter any groupwide loss used against the partial or complete disqualification, and that has loss available
UBG’s ABI disqualifier in a prior year. to resolve that disqualification in whole or in part, must file
Form 4895. A shareholder or officer must combine all items
Line 7: Subtract line 6 from line 5 to arrive at loss available or allocable to the shareholder or officer by all members
paid
on the current return. If less than zero, enter zero; no loss is the group when calculating the allocated income disqualifier.
of
available.
Complete lines 11 through 16 for the shareholder whose
UBGs: If the group’s membership has not changed, that is, no
allocated income needs to be reduced.
member has joined or left the group since the filing of the prior
year’s return, the amounts calculated on line 7 should equal the NOTE: A shareholder that is paid or allocated items of income
amounts on line 10 of the prior year’s corresponding columns. from more than one member of the UBG must calculate
If membership for this year is different, these amounts may not Part 3 using amounts from the “Loss Adjustment for a
be the same. See the “Supplemental Instructions for Standard Shareholder with Multiple Allocations” worksheet later in these
Members in UBGs” section in Form 4890 for details. instructions.
Line 8: Enter the amount from line 3, in the first column where Line 11: When calculating this line, the shareholder must
a loss is available on line 7. In subsequent columns, enter calculate a pro forma CIT Small Business Alternative Credit
amount from line 9 of the previous applicable column. (Form 4893), lines 3 through 9, using only the information
Line 9: If line 8 is larger than line 7, subtract line 7 from line from the member creating the disqualifier. Enter the calculated
8. Enter here and on line 8 of the next column where a loss is pro-forma amounts from the 4893 line 6 here on line 11.
available on line 7. Line 12: Form 4895 should be calculated initially using
Line 10: If line 7 is larger than line 8, subtract line 8 from line $160,000 as the disqualifier. This calculation will establish
7. This amount is available to use in subsequent years. taxpayer eligibility without the need to reduce the SBAC.
However, if the total loss available for the current year on line
NOTE: To benefit from a loss adjustment, the total loss does not equal or exceed the loss adjustment required on
20
available for the current year, line 7, must equal or exceed the 16, the taxpayer may still calculate a lesser loss adjustment
line
loss adjustment required on line 8. claim a reduced credit.
to
The function of this form is to demonstrate that a taxpayer that
Try the calculation more than once. Substitute the numbers
otherwise would have been disqualified from the SBAC due to
shown on the chart below on line 12 to maximize the claimed
ABI, or fully or partially disqualified due to owner’s allocated
SBAC within the limits of available loss adjustment. If a
income, after application of loss adjustment, is allowed to claim
negative number is reached on line 14, a greater disqualifier
a full or partial SBAC.
amount is needed from the disqualifier chart here on line 12.
If loss adjustment is successfully applied to cure an ABI Begin this calculation with the shareholder with the highest
disqualifier.
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