Michigan House OKs $100M annual research and development credit

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(The Center Square) – The Michigan House passed bills aiming to create a state-level tax credit to encourage research and development.

House Bills 5099, 5100, 5101, and 5102 could allow a research and development tax credit for certain businesses up to $100 million in a single calendar year, according to the nonpartisan House Fiscal Agency. Of that amount, at least $25 million would reserved for eligible businesses that applied for the credit with fewer than 250 employees.

Rep. Matt Hall, R-Richland Township, welcomed the plan. He said Republican pushback changed the program’s oversight authority from the Michigan Strategic Fund to the Treasury Department.

“This legislation originally called for an unfair, convoluted grant program at the whim of Gov. Whitmer’s political allies,” Hall said in a statement. “Because of House Republican efforts, the final plan creates a fair, streamlined tax credit to incentivize businesses to invest in Michigan-based research. The new plan will not only help businesses launch new research projects and create high-paying careers, but thanks to House Republicans, it will also help keep ongoing research and development here in Michigan.”

For HB 5102, if the amount of the allowed credit exceeded the tax liability of an applicant for the tax year, that portion of the credit that exceeded the tax liability would be refunded.

The credits would be available for seven years under a single agreement, beginning January 1, 2024.

To be eligible for the credit, a business would have to propose to increase research and development spending in Michigan through projects with the potential for significant technological advancements, job creation, and positive economic impact.

Qualified research would mean the research expenditures may be treated as expenses, the application of the research is intended to be useful in the development of a new or improved business component, and substantially all of the research activities constitute experimentation for a new or improved function, performance, reliability, or quality.

A business with at least 250 employees would have to propose to increase R&D spending by at least $500,000 per year above its base amount, and a business with fewer than 250 employees would have to propose an increase of at least $100,000 per year above its base amount.

The proposal moves to the Senate.

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