An Act amending the act of December 16, 1998 (P.L.980, No.129), known as the Police Officer, Firefighter, Correction Employee and National Guard Member Child Beneficiary Education Act, further providing for definitions and for Postsecondary Educational Gratuity Program; and repealing provisions relating to retroactivity.

2025-2026 Regular Session Introduced by Lynda Culver and 4 co-sponsors

SB 91 would exclude certain customer tips from Michigan taxable income, cutting state income tax for tipped workers and prompting payroll tweaks for employers.

Laid on the table (Pursuant to Senate Rule 9)

Main purpose / intent

SB 91 would amend Michigan’s income tax statute (MCL 206.30) to exclude certain gratuities received by tipped employees from Michigan “taxable income.” In plain terms, the bill seeks to reduce or eliminate state income tax liability on some types of tips/gratuities that employees in tipped occupations receive.

Key provisions (based on bill title and statutory target)

Amends section 30 of the Income Tax Act of 1967 (MCL 206.30), which defines “taxable income,” by adding an exclusion or deduction for specified gratuities received by tipped employees.

Establishes that certain customer gratuities paid to employees (commonly called “tips”) are not included in the state taxable income calculation to the extent described in the bill.

Likely will include definitions and scope (typical items to be defined in such a bill include: “tipped employee,” “gratuity,” “service charge,” and whether pooled tips or employer-distributed service charges qualify).

May set documentation or reporting requirements for employees and/or employers to claim the exclusion (the introduced summary does not include detailed bill text on reporting).

Note: The full statutory text (definitions, exclusions, limits, and any recordkeeping requirements) should be consulted once published; the legislative summary and title indicate the direction but not detailed mechanics.

Who would be affected

Primary beneficiaries: workers in tipped occupations (e.g., restaurant servers, bartenders, hairstylists, hotel staff) who receive customer gratuities.

Employers: payroll and withholding practices may need adjustment if tips are excluded from state taxable income; employers may need to change reporting or withholding calculations.

State finances: exclusion of gratuities could reduce individual income tax receipts to the extent tips are currently taxed under Michigan law.

Tax administrators: Michigan Department of Treasury would need to issue guidance about implementation, recordkeeping, and interaction with federal tax law (federal taxable treatment of tips would remain unchanged unless separately addressed by federal law).

Fiscal and administrative considerations

The bill’s title and introduction do not include a fiscal note in the materials provided here. Excluding gratuities from taxable income typically reduces revenue; the magnitude depends on the population of tipped workers and average reported tips.

Administrative impacts may include changes to withholding rules, taxpayer instructions, and audit/verification processes.

Legislative status and next steps

Introduced Jan. 22, 2025; referred to the Senate Committee on Finance, Insurance, and Consumer Protection.

Committee review may include hearings, fiscal analysis, and possible amendments.

If reported out of committee, the bill would proceed to the Senate floor for second and third reading votes, then to the House and, if passed, to the governor.

For precise language, definitions, and any limitations or recordkeeping requirements, consult the official bill text and any committee analyses or fiscal notes once they are posted.

Bill

SB 91 — Summary (Michigan)

Main purpose / intent

Key provisions (based on bill title and statutory target)

Who would be affected

Fiscal and administrative considerations

Legislative status and next steps

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