Michigan Senate Passes R&D Credit Legislation

On March 19, 2024, Michigan’s Senate passed a series of bills that would advance the potential for a research and development tax credit in Michigan for the first time since 2011. The bills passed the Michigan House of Representatives on October 31, 2023, and are supported by Michigan Governor Gretchen Whitmer in her FY2025 Executive Budget Recommendation. The Senate modified two bills, which will move back to the House for a vote. The earliest possible date for addressing the modified bills is April 8, 2024, the start of the next House session.

If enacted, the Michigan R&D tax credit would allow businesses to claim a credit against their Michigan tax liability for qualified research performed within Michigan for tax years beginning on or after January 1, 2024. Qualified research expenditures (QREs) for the Michigan R&D credit, aside from meeting the criteria in IRC Section 41, can include wages paid to an employee performing research activities or directly supporting research activities at a facility in Michigan, supplies consumed while performing research activities at a facility in Michigan, or third-party research conducted in Michigan.

For taxpayers with less 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 $2,000,000. An additional credit can be claimed for taxpayers working with a research university In Michigan.

The budget for this program is currently $100 million, with $25 million reserved for small businesses. To apply, a Michigan taxpayer must submit a claim by March 15 of the following year. If the $100 million cap is reached, the credits would be prorated.

If you have questions about the Michigan Research & Development tax credit or any of our other services, please contact our R&D Tax Credit team.