Michigan Senate Passes R&D Tax Credit Bills

Michigan businesses may have a new tax credit to look forward to under bills that passed the state Senate March 19th.

The bills have been written to support economic development with strategic funds. The package as a whole includes bills to create a research and development tax credit, resurrect a jobs program that expired in 2019, and reshape an economic incentives program aimed at attracting large-scale business investment.

As of now, the bill has the following provisions:

  • For tax years beginning on or after January 1, 2024, a nonrefundable tax credit will be available to Michigan taxpayers performing qualified research within Michigan
  • For taxpayers with 250 or more employees, the credit is equal to 10% of its qualified research expenditures (QRE), exceeding the base amount up to a $2,000,000 cap.
  • For taxpayers with less than 250 employees, the credit is equal to 15% of its QRE, exceeding the base amount up to a $250,000 cap.
  • An additional 5% of the QRE exceeding a base amount up to a $200,000 cap is available for taxpayers collaborating with a research university within the state.
  • The base amount is the average annual QRE for the three years preceding the credit year.
  • The annual cap for Michigan’s R&D credit program is $100 million, $25 million of which is set aside for small businesses.
  • The credit is refundable if the state’s R&D credit program annual caps are not reached and only if a taxpayer’s nonrefundable credits have been fully utilized in the credit year.

The state will follow the federal rules in determining what is or is not eligible research. This means activities must meet the IRS’ four part test criteria as detailed in IRC §41. 

Each of Michigan’s surrounding states already has some form of an R&D tax credit, leaving Michigan as one of the few midwestern states without an R&D tax credit.

At present, the bill is cleared for the governor’s signature, although other bills in the package need to return to the House for that chamber to agree to changes the Senate made. 

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

Recent Posts