Michigan Re-Establishes R&D Tax Credit Program to Spark Investment

A highly-supported bipartisan bill to re-establish a state tax credit research and development for research spending is moving quickly through state Congress. The program would limit total credit amounts to $100 million per year starting in the 2024 tax year and reserve at least $25 million of that for small businesses with fewer than 250 employees. Representatives have shared that a lack of an R&D credit program discourages companies from investing in Michigan. As it passes through the House and the Senate, updates have been made but the program has remained largely intact.

Provisions of the R&D tax credit

Legislators are hoping for a simple, streamlined process that would be administered by the state Department of Treasury so that more businesses would be eligible, but the bill has some specifics.

• Businesses with less than 250 employees would be eligible to claim a credit for 15% of R&D expenditures above their base, with a maximum of $250,000 per year.
• Businesses with 250 employees or more would be able to claim a credit for 10% of R&D expenditures above base, with a maximum of $2 million per year.
• There is an additional opportunity for companies that partner with a research university. Those companies would be eligible to claim an extra 5% that would be limited to $200,000 per year.

Once the $100 million threshold is reached, claims from qualifying companies would be evaluated and reduced on a proportional basis.

Movement of the credit

The two bills that comprise the credit program cleared the Democratic-led House and are being sent to the Senate. Once approved by the Senate, the bill would move to Governor Gretchen Whitmer, who supports an R&D credit.

11/02/2023