R&D TAX CREDIT: MICHIGAN
Michigan revised the R&D tax credit effective for tax years beginning on or after January 1, 2025. This initiative aims to foster economic growth and attract high-tech industries to the state.
Eligibility and Calculation
Effective for tax years beginning on or after January 1, 2025, the R&D tax credit is available to businesses conducting qualified research activities in Michigan.
- Qualified Research Expenses (QREs): Eligible expenses include wages, supplies, and contract research costs related to qualifying R&D activities as defined by federal tax regulations.
- Base Amount: The credit is calculated based on the average annual QREs for the three preceding tax years. For businesses with fewer than three years of QREs, an alternative calculation applies.
Credit Percentage:
- Businesses with fewer than 250 employees can claim 3% of QREs up to the base amount and 15% on QREs exceeding the base amount, with a maximum credit of $250,000 per year.
- Businesses with 250 or more employees can claim 3% on QREs up to the base amount and 10% on QREs exceeding the base amount, with a maximum credit of $2 million per year.
Additional Incentives
An extra 5% credit is available for R&D expenditures made in partnership with Michigan-based research universities. This bonus credit is capped at $200,000 annually.
How to Claim the Credit
Businesses must submit a tentative claim to the Michigan Department of Treasury within the following deadlines:
- For 2025 expenses: April 1, 2026
- For subsequent years: March 15 of the following year
Michigan has set an annual cap of $100 million for R&D tax credits. If claims exceed this limit, credits will be distributed proportionally among eligible applicants.
Key Considerations
- Refundable Credit: If the credit exceeds a business’s tax liability, the excess amount is refundable.
- Non-Transferable: The credit cannot be transferred or assigned to another entity.