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On November 14th, Michigan House Bills 5100-5101 were passed by the Michigan House and are waiting for Governor Whitmer to sign. The bills passed will give tax credits for businesses that are eligible for qualifying R&D expenses. The Michigan tax credit will adopt the federal income tax definition of qualifying R&D expenses.
At this time, there is no timeline for Governor Whitmer to sign.
Details on Michigan’s Qualifying R&D Expenses Tax Credit
The refundable tax credit will be available beginning on or after Jan. 1, 2025.
The Qualified R&D expenses are as follows:
- Wages paid to an employee performing research activities conducted at a facility in Michigan.
- Wages paid to any employees directly supporting or directly supervising an employee performing research activities conducted at a facility in Michigan.
- Supplies used or consumed while performing research activities at a facility in Michigan.
- A portion of 3rd party research was conducted in Michigan.
Employee headcount and financial thresholds will apply to the credit as follows:
- Businesses with 250 or more employees are eligible for 10 percent of its qualified research expenditures (QRE) exceeding its base amount up to $2,000,000
- Businesses with less than 250 employees are eligible for up to 15 percent of its QRE exceeding its base amount up to $250,000
- An additional five percent is available for businesses that partner with a research university within the state to perform QRE
- A business’s base amount is calculated by determining the annual QRE for the three years preceding the year the credit is utilized.
Tentative Credit Claim Requirement:
To qualify for the credit, taxpayers must submit a tentative credit claim using the form specified by the Department of Treasury. For the 2025 calendar year, the deadline to file this claim is April 1, 2026.
For subsequent calendar years, the claim must be filed by March 15 following the year for which the credit is being requested. If the total of all tentative credit claims exceeds the $100 million cap, the Department of Treasury will prorate and reduce the credits accordingly.
The form will require taxpayers to specify whether they are classified as a Small or Large Taxpayer, the amount of qualifying research and development expenses, and if any collaborative university research and development expenses are included in the claim.
To learn more about these bills, click the links below:
As always, if you need help navigating these tax changes, the team at MRPR is here to help. Contact us today to get help with the new Michigan tax credits, or any other tax and accounting help you need.
Author:
Jordan Grant MST, EA