Michigan Decouples from 174A, Research Costs Must Be Amortized
On October 7, 2025, Governor Whitmer signed HB 4961 into law, which updates Michigan’s conformity date with the Internal Revenue Code. As part of this legislative update, Michigan formally decoupled from several federal changes enacted under the One Big Beautiful Bill Act (OBBBA). The update includes the new Section 174A provision that allows immediate expensing of domestic research expenditures.
Instead of following Section 174A, Michigan will conform to Section 174 as it existed on December 31, 2024. As a result, taxpayers must amortize domestic research costs over five years and foreign research costs over 15 years for Michigan tax purposes, even if they elect to expense them on the federal level. This change creates permanent federal-state conformity differences, making detailed and state-specific tracking of research costs essential for accurate reporting and compliance.
Taxpayers conducting research in Michigan should evaluate how these changes affect their Michigan tax liability and consider strategies to mitigate the impact, including claiming the newly enacted Michigan R&D Credit. If you would like to discuss the changes to Michigan’s treatment of research expenses or explore planning opportunities, please contact our team.
David Seibel is a Shareholder for the R&D Tax Credit Practice. He combines his knowledge of tax law with his engineering expertise to maximize companies’ research credits and reduce their overall tax burdens.
David ensures clients are receiving studies that meet the highest level of quality. He conducts fieldwork, produces detailed technical calculations, and builds narratives that accurately reflect each company’s research and experimentation activity.
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