Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 72-47

1972-1 C.B. 51

Sec. 164
Sec. 248

IRS Headnote

Franchise fees paid by a corporation to Michigan are deductible as taxes, but filing fees are nondeductible capital expenditures subject to the election to be treated as amortizable deferred expenses under section 248 of the Code; I.T. 3468 superseded.

Full Text

Rev. Rul. 72-47 /1/

Section 21.201 of the Michigan Statutes Annotated, as amended by Act 157, Laws 1964, effective August 28, 1964, Act 122, Laws 1969, effective July 29, 1969, provides as follows:

Sec. 1. (1) The fees to be paid to the Michigan department of treasury by or in behalf of corporations, for the purposes herein specified, shall be as follows:

(a) Filing, examining and certifying articles of domestic corporations, $10.00. . . .

* * * * *

(2) These fees shall be paid by the corporation at the time of filing or when the service is rendered by the Michigan department of treasury. The fees shall be in addition to the franchise fees prescribed in this act, and shall, when collected, be paid into the treasury of the state and credited to the general fund.

Section 21.203 of the Statute, as amended, provides for the above mentioned franchise fees as follows:

Sec. 3. Every cooperative association, domestic corporation hereafter organized for profit and every domestic regulated investment company, except corporations organized under Act No. 50 of the Public Acts of 1887, as amended, being sections 489.1 to 489.40 of the Compiled Laws of 1948, and Act No. 14 of the Public Acts of 1901, being sections 489.201 to 489.210 of the Compiled Laws of 1948, and every foreign corporation for profit and foreign regulated investment company hereafter applying for admission to do business within this state, at the time of filing its articles or apply for admission, shall pay to the Michigan corporation and securities commission, as an organization fee and for the privilege of exercising its franchises within this state, a sum equal to 1/2 mill upon the dollar for each dollar of the authorized capital stock of such corporation. . . .

Held, the filing fees required under section 21.201 of the Statute to be paid by corporations to the Michigan Department of Treasury for filing, examining, and certifying their articles of incorporation are charges imposed as consideration for services rendered by the State of Michigan and are not taxes deductible under section 164(a) of the Internal Revenue Code of 1954. They are organization expenses and therefore constitute a nondeductible capital expenditure within the meaning of section 263 of the Code. However, should a taxpayer elect the provisions of section 248 of the Code such fees would be treated as deferred expenses and shall be allowed as a deduction ratably over a period of not less than 60 months.

Held further, the franchise fees provided under section 21.203 of the Statute and paid by domestic corporations to the Michigan Corporation and Securities Commission at the time of incorporation, or paid by a foreign corporation upon applying for admission, as the case may be, for the privilege of exercising their corporate franchise within the State of Michigan, are deductible as taxes under the provisions of section 164 of the Code.

I.T. 3468, C.B. 1941-1, 231, is superseded, since the position set forth therein is restated under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.