SB 924 (2025-2026) – Michigan
Summary for the 2025-2026 legislative session
Overview
- Bill to amend the Income Tax Act of 1967 (1967 PA 281) by adding new sections 279 and 678.
- Purpose: Create a new (nonrefundable) community development tax credit program administered by the Michigan Strategic Fund (the Fund) to incentivize eligible redevelopment, preservation, and housing projects on eligible properties.
- Tie bar: Requires passage of SB 923 and SB 925 to take effect.
Main Purpose and Intent
- Establish two parallel but coordinated tax credit streams (sections 279 and 678) that provide refundable-like treatment through credits against Michigan individual and corporate income tax liabilities for eligible investments.
- Target projects that: rehabilitate historic resources, redevelop blighted/underutilized properties, create or retain housing, and invest in property located in walkable urban areas or LMI (low-to-moderate income) areas, with special emphasis on rural, housing, and economic revitalization outcomes.
Key Provisions
1) Section 279 – Community Development Credit for eligible projects
- Eligibility and Preapproval:
- Qualified taxpayers with a post-issuance preapproval letter and a certificate of completion may claim the credit.
- Applicants must apply for preapproval to the Fund; projects evaluated on a detailed set of criteria (local support, ability to complete, need for credit, location on eligible property).
- Projects on multiple eligible properties can be pursued in a tax year, but each project must be on one property.
- Credit Structure:
- Credit amount depends on project type:
- If the project includes rehabilitation of a historic resource, is rural, or is located in an LMI census tract: 25% to 50% of eligible investment, with a floor-to-ceiling framework:
- More than 25% but up to 50% of eligible investment may be credited.
- All other projects: 25% of eligible investment.
- Eligible Investments and Costs:
- Eligible investments include demolition, construction, rehabilitation, site improvements, machinery/equipment additions, and certain professional fees.
- Soft costs (e.g., developer fees, financing costs, marketing, etc.) are excluded.
- Eligible property must meet categories: facility, historic resource, blighted property, or functionally obsolete property.
- Application, Review, and Timing:
- Fund reviews completed within 91 days after administratively complete submission.
- Post-approval, a preapproval letter outlines project number, investment caps, and conditions.
- Financing must be secured within 1 year (18 months for some categories) of preapproval; project must generally complete within 3 years (with possible 1-year extension for large investments >$75M).
- Preapproval letters are non-transferable.
- Credit Caps and Allocation:
- Individual project credit caps: up to $10M, with up to $15M if meeting specific criteria (e.g., rehabilitation expenditures eligible for federal credit, LIHC allocations, or qualified community development equity investments).
- Aggregate annual cap: $200M for credits issued under Section 279 and Section 678, with minimum annual carve-outs:
- At least 20% for rural/small projects.
- At least 30% for housing creation/retention.
- Annual CPI adjustments begin Jan 1, 2028; unused credits may carry forward; the Fund can reallocate credits if needed.
- Completion and Certification:
- Upon project completion, the Fund verifies completion and issues a Certificate of Completion detailing total credits and project specifics (costs, credit amounts, project number, FEIN, etc.).
- Monetization and Assignment:
- Taxpayers may monetize (assign) all or part of their credits. Assignments are irrevocable and must be made in the tax year of the certificate of completion unless the lessee is unknown.
- Assignees must attach assignment certificates to their tax returns; subsequent reassignees may further transfer.
- Refunds and Carryforwards:
- If credits exceed tax liability, taxpayers may elect 90% refundable portion; remaining 10% is not refundable but can be carried forward up to 10 years or until used.
2) Section 678 – Alternative but parallel credit program
- Mirrors Section 279 in structure and requirements with the same preapproval, timing, and certification mechanics.
- Separate credit stream but part of the same annual aggregate cap of $200M for both sections combined.
- Uses identical definitions for terms (e.g., eligible investment, eligible property, blighted property, LMI census tract, etc.).
Common Definitions (selected)
- Eligible investment: costs directly attributable to eligible project components (demolition, construction, improvements, machinery, site work, professional fees), excluding certain soft costs.
- Eligible property: includes facilities, historic resources, blighted property, or functionally obsolete property.
- Rural project: located outside metropolitan statistical area counties.
- Small project: eligible investment of $10M or less.
- LMI census tract: 51%+ of households earn less than 80% of area median income.
Effective Date
- Enactment is contingent on the enactment of SB 923 and SB 925; once all three bills are enacted, the act takes effect.
Impact and Beneficiaries
- Eligible taxpayers (individuals, corporations, and nonprofits) undertaking redevelopment or housing projects on eligible properties.
- Local governments and communities seeking revitalization, blight reduction, and housing creation/retention in urban, rural, and LMI areas.
- Michigan Strategic Fund as the administering and decision-making body, with annual reporting to the legislature.
Procedural/Timeline Highlights
- Preapproval and completion timelines are tight but allow extensions for large investments.
- Annual cap and minimum set-asides guide prioritization toward rural/small projects and housing creation.
- Carryforward and carryover provisions allow unused credits to be used in future years, maintaining some flexibility in funding cycles.
Notes
- The bill includes extensive definitions and criteria to evaluate eligibility and project viability.
- The credit is nonrefundable generally, with a 90% refundable option for excess credits in some cases.
- Specific program details are subject to enactment of related bills (SB 923 and SB 925) and final legislative action.
