Individual income tax: credit; child tax credit; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 275.

2025-2026 Regular Session Introduced by Brian BeGole and 19 co-sponsors

Michigan would create a refundable state child tax credit equal to 50% of the federal credit, starting 2025 and tied to federal rules, reducing state revenue and boosting refunds.

bill electronically reproduced 02/04/2025

#individualincometax:credit

Purpose

HB 4055 would create a Michigan state child tax credit by adding section 206.275 to the Income Tax Act. The intent is to provide Michigan taxpayers a credit equal to half of the federal child tax credit they claim on their Michigan individual income tax return, beginning with tax years that start on or after January 1, 2025.

Key provisions

Creates a non‑codified state credit (proposed MCL 206.275): taxpayers may claim a credit equal to 50% of the credit the taxpayer is allowed under section 24 of the Internal Revenue Code for the same tax year.

Refundable: if the state credit exceeds a taxpayer’s Michigan tax liability for the year, the excess must be refunded to the taxpayer.

Effective date: for tax years beginning on or after January 1, 2025.

Tied to federal law: the state credit amount automatically moves with the federal child tax credit calculation (i.e., changes in federal law or phaseouts affect the state credit).

Practical dollar examples:
- For 2025 (while the 2017 TCJA is in effect): federal credit commonly $2,000 per qualifying child under 17 and $500 per other dependent → state credit would be $1,000 per qualifying child and $250 per other dependent.
- If federal rules revert in 2026 (e.g., federal credit becomes $1,000 per child), the state credit would be $500 per child.

Who is affected

Individual Michigan taxpayers who claim the federal child tax credit (families with qualifying children and dependents).

State finances: reductions in individual income tax receipts and increased refund payments affect the General Fund and the School Aid Fund (the analysis estimates the School Aid Fund would absorb roughly 25% of the cost, with the remainder from the General Fund).

Fiscal impact

Estimated revenue loss: approximately $1.4 to $1.6 billion annually under federal rules in effect through 2025.

If the federal TCJA provisions expire (reducing the federal credit), the state revenue loss is projected to fall by roughly 50%–60% beginning in FY 2026–27.

If the credit produces larger refundable amounts, the General Fund would bear the full cost of increased refunds.

Legislative status & timeline (selected)

Electronically reproduced: 02/04/2025; introduced by Rep. Bill G. Schuette (filed 03/07/2025).

Referred to Committee on Economic Competitiveness; public/subcommittee hearing held 04/16/2025 and left pending in subcommittee.

Subsequent committee actions show the measure was indefinitely postponed/withdrawn and listed as dying in an intergovernmental affairs subcommittee in mid‑2025.

Companion bill: SB 1121.

Background/notes

The proposal restores a child‑related tax benefit at the state level; Michigan previously allowed child/dependent deductions until those were eliminated in 2011.

Because the credit is defined as 50% of the federal credit allowed under IRC §24, state liability and program cost track federal legislative changes.

Bill