Michigan Combined Reporting Allowed for Unitary Business Group for Insurance Company

In declining to review a lower court case, the Michigan Supreme Court allowed a group of unitary insurance companies to file combined premium and retaliatory tax returns. Filing a group return allowed the taxpayer to share credits and reduce retaliatory taxes among the legal entities.

On January 16, 2026, the Michigan Supreme Court declined to review the Court of Appeals court case of Nationwide Agribusiness Insurance Co. v. Michigan Department of Treasury¹ after hearing oral arguments last fall. The dispute involved a unitary business group (UBG) of insurance companies filing amended premium and retaliatory tax returns to calculate the insurance premium taxes for the companies on a combined basis.

Just the Facts

Nationwide Agribusiness Insurance Company (“Agribusiness”) is an Ohio-based affiliate of Nationwide Mutual Insurance Company (“Mutual”). After filing separate premium/retaliatory tax returns for Agribusiness for 2014 and 2015, Mutual amended these tax returns to include all their insurance subsidiaries in its UBG in a combined filing, reporting its gross premiums, subtractions, and credits as a unitary group. As there was no specific combined form required, the company provided a schedule showing how the premium taxes, credits, and retaliatory taxes were being calculated and applied at the UBG level. According to both parties in the dispute, the schedule calculated the group’s Michigan tax liability, after credits, in a manner that is consistent with other UBG income-based combined filings.

These amended returns were initially accepted by the Department of Treasury (“the Department”), and refunds of approximately $3.3 million were issued. The Department later issued notices seeking to recover the refunds already paid, treating some members of the group as separate filers and denying other refunds. The Department ultimately rejected the group’s attempt to file combined returns and instead treated each insurance company separately.

What About the Law?

One issue of contention in the case was the application of Michigan’s “retaliatory tax” as it would apply to a UBG combined filing. The purpose of the retaliatory tax under MCL 500.476a(2) “is to promote the interstate business of domestic insurers by deterring other states from enacting discriminatory or excessive taxes.” The retaliatory tax is calculated by comparing the aggregate tax burden that a foreign state imposes on a Michigan insurer doing business in that state to the aggregate tax burden that Michigan imposes on an insurer from that state doing business in Michigan. If another state charges a higher tax on Michigan-based companies doing business in that state, the retaliatory tax requires insurance companies from that state doing business in Michigan to pay the higher of the two amounts.

The Department argued that this retaliatory tax will be difficult—if not impossible—to calculate in a single filing by a UBG of insurance companies from different states. They argued that retaliatory tax can only be calculated by comparing Michigan’s rates to one foreign state’s rate. The Department stated that it is not clear how this rate can be calculated for a UBG made up of insurance companies from multiple different states. The Department further argued that even if it can be calculated—meaning that Michigan receives the same amount in retaliatory taxes from the insurance company UBG as it would have if the insurance companies had filed individually—insurance company UBGs appear to be able to undermine the purpose of the retaliatory tax. Insurance company UBGs may be able to spread the cost of Michigan’s retaliatory taxes among its members. This means that individual insurance companies within a UBG can potentially reduce their retaliatory tax that they would otherwise owe had they not filed as a UBG. In short, it appears that allowing insurance company UBGs to file collectively for premium and retaliatory tax purposes may reduce the retaliatory tax. The Department argued that the retaliatory tax cannot function if it in fact cannot retaliate.

Ultimately, the Supreme Court found there were no grounds to appeal and the Court of Appeals’ reasoning that a group of insurance companies that meets the statutory definition of a UBG must follow the provision in Michigan’s tax act, which states that “a unitary group shall file a combined return.” Further, the statute is clear that the combined filing requirement includes insurance companies.

Note that while some UBGs of companies may reduce their overall premium and retaliatory tax by filing combined, this only occurs in groups where some members are in a separate company retaliatory tax position, and some are not. Michigan has one of the lowest premium tax rates in the United States, and most companies end up paying a retaliatory tax.

The Consequences

In denying review of this case, the Supreme Court noted that the decision might negate the retaliatory tax provision and specific requirements for insurance tax filings. The Court stated that the goal of the retaliatory tax to tax out-of-state insurance companies in the same manner they tax Michigan insurance companies may require further legislative action to attain.

For assistance in applying this ruling to your business, please contact our Ryan tax professionals.

¹ Nationwide Agribusiness Ins. Co. v. Mich. Department of Treasury, ___ Mich App ___ (June 20, 2024) (Docket No. 364790).

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