Summary — HB 4124 (Income Tax Act amendment)
Status and sponsors
- Introduced: Feb/Mar 2025 by Rep. Pauline Wendzel (primary) (filed March 7, 2025).
- Committee: Referred to Committee on Energy (public hearing held April 14, 2025; left pending). Later House actions show adoption of a substitute and passage by the House (Oct. 28, 2025); tie-bar requires companion bills (HB 4125–4129) to also be enacted.
- Companion/related: SB 2026 (companion).
Purpose
- Create state tax credits to encourage in‑state research and development (R&D) on advanced nuclear reactor technologies by reducing corporate income tax and employer withholding liabilities.
Key provisions
- Two credits added to the Income Tax Act (proposed MCL 206.677a and 206.717a):
- A credit against corporate income tax equal to 15% of a taxpayer’s qualified R&D expenses incurred in Michigan for advanced nuclear reactor technologies.
- A credit against employer withholding tax equal to 15% of an employer’s qualified R&D expenses incurred in Michigan.
- Eligible expenses: “Qualified research expenses” as defined in IRC §41(b), limited to research conducted in Michigan related to design, development, improvement or analytical techniques for advanced nuclear reactor technologies (and in some drafts including advanced fuel technologies and plant power‑uprates). Expenses outside Michigan are excluded.
- Definitions reference federal/state authority: “Advanced nuclear reactors” per 42 U.S.C. §16271 and related Michigan statutory definitions (MCL 460.10h).
- Claim rules:
- Claimants must file a tentative claim with the Michigan Department of Treasury by March 15 following the calendar year that includes the tax year in question; tentative claims must state the amount of qualified expenses.
- If total tentative claims for a calendar year exceed the annual cap, credits are prorated equally across claimants and Treasury must post notice of any proration.
- Limits and carryforward:
- Aggregate cap (introduced bill and House Fiscal Agency analysis): $2,500,000 total per calendar year for both credits combined. (If claims exceed the cap, prorate.)
- Credits are nonrefundable; unused credit amounts may be carried forward up to 15 tax years.
- Interaction with existing credits: A claimant may claim these credits and other existing credits (sections 677 or 717), but may not claim both credits based on the same qualified expenses.
Fiscal and administrative impact
- House Fiscal Agency estimate: ~ $2.5 million reduction in state general fund revenue annually for tax years beginning on or after January 1, 2026 (administrative timing could alter actual yearly impact).
- Additional administrative costs for the Department of Treasury are expected but not quantified.
Effective date / procedural notes
- Credits apply for tax years beginning on or after January 1, 2026 (text also includes Jan 1, 2025 in some substitute drafts; HFA analysis uses 2026).
- Enactment of this bill is tied to enactment of HB 4125–4129 (bill contains an enacting section requiring those bills also be enacted).
