Michigan Governor Signs R&D Tax Credit Legislation

On January 13, 2025, Michigan Governor Whitmer signed legislation establishing an R&D Tax Credit for the state. The Michigan R&D Tax Credit will enable businesses to claim a credit against their Michigan tax liability for qualified research conducted within Michigan, starting with tax years that begin on or after January 1, 2025.

Qualified research expenditures (QREs) for this credit must meet the criteria outlined in IRC Section 41 and can include wages paid to employees who are engaged in research activities or directly support research at a facility in Michigan. Additionally, QREs can encompass supplies consumed during research activities at a Michigan facility and third-party research performed in Michigan.

For taxpayers with fewer than 250 employees, the credit equals 3% of the QREs up to the base amount and 15% of its QREs exceeding the base amount, capped at $250,000. For taxpayers with more than 250 employees, the credit equals 3% of the QREs up to the base amount and 10% of the QREs exceeding the base amount, capped at $2 million. Additionally, taxpayers collaborating with a research university in Michigan can claim an extra 5% credit, which cannot exceed $200,000.

The budget for this program is set at $100 million per year, with $25 million specifically allocated for small businesses. If the claims exceed these caps, the credits will be prorated. Additionally, the Michigan R&D Tax Credit is refundable, which provides a significant incentive for taxpayers conducting research in the state. To apply for the 2025 tax year, Michigan taxpayers must submit their claims by April 1, 2026. For tax years following 2025, claims must be filed by March 15 of the following year.

If you have questions about the Michigan R&D Tax Credit or any other issue, please contact our R&D Tax Credit Services team.