Bill > HB5101

This bill, by adding section 717 to Public Act 281 of 1967, establishes a new research and development credit for certain small employers in Michigan, effective for tax years beginning on or after January 1, 2025. An "authorized business," defined as a flow-through entity subject to withholding requirements and incurring qualifying research and development expenses (defined similarly to federal qualified research expenses but only for research conducted within Michigan), can claim this credit against taxes they withhold and remit to the state. The credit amount varies based on the number of employees: businesses with 250 or more employees can receive a credit of 3% on qualifying expenses up to a "base amount" (the average annual qualifying expenses from the prior three years, or zero if none were previously incurred) and 10% on expenses exceeding the base amount, with a maximum credit of $2,000,000 per year. Businesses with fewer than 250 employees receive 3% on expenses up to the base amount and 15% on expenses exceeding it, with a maximum of $250,000 per year. An additional credit of 5% (up to $200,000 annually) is available for expenses incurred in collaboration with a "research university" (a public university or independent nonprofit college in Michigan) under a written agreement. To claim the credit, employers must first submit a tentative claim by specific deadlines, and the total aggregate credits allowed across all employers and taxpayers under this section and section 677 are capped at $100,000,000 annually, with prorated adjustments if tentative claims exceed this limit. The credit is nonrefundable, meaning it can reduce tax liability to zero, and any excess is refunded, but it must be claimed after other nonrefundable credits and cannot be assigned or transferred.