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HB 5119

AN ACT RELATING TO INSURANCE -- BENEFIT DETERMINATION AND UTILIZATION REVIEW ACT

2025 Regular Session Introduced by Jennifer Boylan and 9 co-sponsors

Creates a Michigan withholding tax credit for 501(c) organizations equal to 50% of their eligible Work Opportunity Tax Credit for qualified Michigan employees, nonrefundable.

04/01/2025 Committee recommended measure be held for further study
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Bill Summary · HB 5119

HB 5119 — Summary (House Bill)

Purpose / Intent

HB 5119 would create a Michigan state-level withholding tax credit that allows certain tax‑exempt employers to use a portion of the federal Work Opportunity Tax Credit (WOTC, IRC §51) benefit against their Michigan withholding tax liabilities. The goal is to extend an employment incentive to organizations exempt from federal taxation under IRC §501(c), encouraging hiring of workers in federally defined “targeted groups.”

Key provisions

  • Adds Section 714 to the Michigan Income Tax Act (1967 PA 281; MCL 206.1–206.847).
  • Effective for tax years beginning on or after January 1, 2026.
  • Eligible employers: organizations exempt from federal taxation under IRC §501(c).
  • Credit allowed: an employer may claim a credit against the taxes required to be withheld and remitted to Michigan equal to 50% of the WOTC amount the employer is (or would have been) allowed to claim under IRC §51 for the same tax year.
    • The state credit calculation excludes:
    • Any portion attributable to employees who are not “qualified employees.”
    • Any unused federal credit amounts carried back or forward under IRC §39.
  • Definitions:
    • “Qualified employee” — a Michigan resident certified by the Michigan Unemployment Insurance Agency as a member of a targeted group (per IRC §51(d)).
    • “Qualified wages” — as defined in IRC §51.
  • Claiming the credit: must be reported on the employer’s annual withholding return/report required under Michigan’s Section 711, using a department-prescribed form/content.
  • Nonrefundable: if the credit exceeds the employer’s withholding tax liability for the year, the excess is not refundable.

Who is affected

  • Primary: employers that are IRC §501(c) tax‑exempt organizations that hire Michigan resident employees certified as members of WOTC targeted groups.
  • Administrative: Michigan Department of Treasury (form and processing), Michigan Unemployment Insurance Agency (certification of targeted‑group status).
  • Secondary: targeted employees (may increase hiring incentives among nonprofit and other tax‑exempt employers).

Procedural / timeline aspects

  • Applies to tax years beginning on or after January 1, 2026.
  • Enactment is tied to another bill: this act “does not take effect unless House Bill No. 5118 of the 103rd Legislature is enacted into law” (tie‑bar).
  • Introduced to the House (filed March 13, 2025 / introduced October 23, 2025 per bill header). Referred to committees (Ways & Means; later Committee on Economic Competitiveness). Bill electronically reproduced October 23, 2025.

Legal placement

  • Amends the Income Tax Act of 1967 by adding Section 714 (MCL citation range 206.1–206.847).

This summary highlights statutory changes, eligibility, calculation rules, administrative steps, and the tie‑bar condition to HB 5118.

Compiled from official sources — confirm details with the bill’s official record.

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