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HB 4370

Individual income tax: credit; credit for sales and use tax paid for textbooks purchased by eligible students; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 281.

2025-2026 Regular Session Introduced by Joey Andrews and 21 co-sponsors

Michigan will provide a refundable income tax credit for the sales/use tax paid on textbooks for eligible Pell Grant students or their dependents, starting in 2026.

bill electronically reproduced 04/22/2025
#highereducation:students #individualincometax:credit
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Bill Summary · HB 4370

Summary — HB 4370 (added Sec. 281 to the Income Tax Act of 1967)

Purpose

HB 4370 creates a state individual income tax credit that reimburses eligible students (or taxpayers purchasing textbooks for eligible dependents) for the sales or use tax paid on required textbooks. The intent is to reduce out‑of‑pocket textbook costs for low‑income postsecondary students.

Key provisions

  • Adds section 281 to 1967 PA 281 (MCL 206.1–206.847).
  • For tax years beginning on or after January 1, 2026, a taxpayer may claim a credit equal to the amount of sales tax or use tax paid on textbooks purchased during the tax year if the purchaser is:
    • the taxpayer who is an eligible student, or
    • the taxpayer purchasing textbooks for a dependent who is an eligible student.
  • The credit is claimed in a form and manner prescribed by the Michigan Department of Treasury.
  • The Department may require receipts and other reasonable proof of textbook purchases and of the student’s eligibility.
  • The credit is refundable: any portion that exceeds the taxpayer’s income tax liability must be refunded.
  • Definitions provided:
    • "Eligible institution": a Michigan vocational school or institution of higher education eligible to participate in federal student aid programs.
    • "Eligible student": an individual awarded a federal Pell Grant (20 U.S.C. §1070a), enrolled and attending an eligible Michigan institution, and maintaining satisfactory academic progress; this definition also includes certain graduate/professional students who would have been Pell‑eligible as undergraduates based on financial need.
    • "Textbook": any book or other written material that an eligible institution requires for a course.
    • "Sales tax or use tax": taxes levied under the state General Sales Tax Act or Use Tax Act.

Who is affected

  • Primary beneficiaries: Michigan students awarded federal Pell Grants and their families who purchase required textbooks.
  • State agencies: Michigan Department of Treasury (administration, verification, processing refunds).
  • Fiscal impact: reduces net tax obligations for eligible taxpayers and may reduce state revenue to the extent of credits claimed (no fiscal estimate in the bill text).

Administration & compliance

  • Claiming requires a Department‑prescribed form and likely submission of receipts/proof.
  • Treasury will implement verification processes (e.g., reviewing Pell eligibility, receipts).

Legislative status and effective dates

  • Introduced March 11, 2025.
  • Passed both chambers May 2025; enrolled and sent to Governor.
  • Signed by the Governor: June 20, 2025.
  • Statutory effective date: September 1, 2025.
  • Credit applies to tax years beginning on or after January 1, 2026.

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

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