Bill
HB 5101
The bill creates a Michigan withheld tax credit to spur in-state R&D by eligible employers, with tiered rates, caps, university collaboration bonuses, and a $100M annual cap.
Status and effective date
- Enacted as Public Act 187 of 2024; approved by the Governor January 13, 2025; filed January 14, 2025.
- Effective April 2, 2025.
- Applies to tax years beginning on and after January 1, 2025 (with special filing deadlines for the 2025 calendar year).
Purpose and intent
- Establishes a new state income tax credit against taxes required to be withheld and remitted to Michigan (a withholding tax credit) to incentivize increased in‑state research and development (R&D) spending by eligible employers (authorized businesses).
Key definitions (cross‑referenced)
- “Authorized business,” “base amount,” “qualifying research and development expenses,” and “research university” are defined in section 716 (as added in companion legislation). Generally:
- Qualifying R&D expenses = federal IRC §41‑style qualified research expenses (QREs) that are incurred for research conducted in Michigan.
- Base amount = average annual qualifying R&D expenses over the three calendar years immediately preceding the year for which credit is claimed (zero if none).
Credit structure (per employer per tax year)
- Base portion (all eligible employers): 3% of qualifying R&D expenses up to the base amount.
- Incremental portion (expenses above base amount):
- Employers with ≥250 employees: 10% of expenses above base, capped at $2,000,000 total credit per employer per year.
- Employers with <250 employees: 15% of expenses above base, capped at $250,000 total credit per employer per year.
- Additional university collaboration bonus: up to 5% extra on applicable R&D expenses incurred in collaboration with a Michigan research university, capped at $200,000 per employer per year (requires written agreement; documentation may be requested).
Program caps, proration, and administration
- Aggregate annual cap: $100,000,000 for credits claimed under this section (section 717) plus the companion corporate credit (section 677).
- Reserve: At least $25,000,000 of the annual cap is earmarked for businesses with <250 employees (subject to proration rules). If claims exceed $100M, the Department of Treasury prorates awards according to statutory procedures; Treasury must publish a notice if proration is necessary.
- Claims procedure:
- Tentative claims must be submitted to the Department of Treasury (deadline for 2025 calendar year: April 1, 2026; for later years: March 15 following the calendar year in which expenses were incurred).
- A final claim for the credit is filed with the employer’s annual return as prescribed by Treasury.
- Credits are claimed after the employer’s nonrefundable credits. If the allowed credit exceeds tax liability, the excess is refunded.
- Transferability: Credits are nontransferable and nonassignable. Members of flow‑through entities that claim the credit may not separately claim any portion.
Who is affected
- Primary beneficiaries: flow‑through employers (authorized businesses under section 716) that increase Michigan‑based qualifying R&D spending — with separate caps favoring small employers (<250 employees).
- State agencies: Department of Treasury (administers claims and proration), Michigan Strategic Fund (definitions and related program pieces in companion bills), and reporting/oversight entities per companion legislation.
- Fiscal impact: estimated potential reduction in state revenue up to about $100 million annually (aggregate cap); the distribution between the General Fund and the School Aid Fund depends on how withholding credits are applied and is uncertain. Administrative costs to Treasury and MSF anticipated; program allows administrative fees in companion MSF provisions.
Related measures and context
- HB 5101 is one of a package of bills creating an R&D tax credit program (HBs 4368, 5099, 5100, 5102). Companion provisions define terms, authorize MSF agreements, and create a corporate income tax credit counterpart (section 677). The base calculation, eligibility, and MSF application/agreement processes are set out in those companion bills/sections.
Compiled from official sources — confirm details with the bill’s official record.
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