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HB 5682

Individual income tax: exemptions; broadband expansion grants; exempt from taxable income. Amends secs. 30, 623 & 815 of 1967 PA 281 (MCL 206.30 et seq.).

2023-2024 Regular Session Introduced by Joey Andrews and 15 co-sponsors

HB 5682 exempts eligible broadband grant proceeds from Michigan income tax for tax years 2023+ but requires add-backs for expenses tied to those grants to prevent double benefits.

REFERRED TO COMMITTEE ON FINANCE, INSURANCE, AND CONSUMER PROTECTION
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Bill Summary · HB 5682

Summary — HB 5682 (Individual income tax: broadband expansion grants exempt from taxable income)

Status: Enacted (filed without Governor’s signature on June 20, 2025)
Statutes amended: MCL 206.30, 206.623, 206.815 (Income Tax Act of 1967)
Sponsor: Rep. Jenn Hill

Purpose

To exempt certain government broadband expansion grant proceeds from taxable income for taxpayers subject to Michigan’s Income Tax Act, while preventing a double tax benefit by requiring add‑backs of expenses attributable to those grants.

Key provisions

  • For tax years beginning on or after January 1, 2023, a taxpayer subject to the Income Tax Act (individuals and corporations) may deduct, to the extent included in adjusted gross income or federal taxable income, grant funds received for the purpose of providing, improving, or expanding broadband in Michigan.
  • Eligible grants include awards made under a specified list of state and federal broadband programs, including:
    • Michigan Broadband Expansion Act and Connecting Michigan Communities program
    • Federal BEAD (Broadband Equity, Access, and Deployment) program
    • Federal Middle Mile grants
    • FCC Connect America Fund (including Alternative/CACM/EACM) and Rural Digital Opportunity Fund (RDOF)
    • USDA ReConnect (Rural eConnectivity) and Rural Broadband Access Loan & Loan Guarantee programs
    • NTIA Tribal Broadband Connectivity and Broadband Infrastructure programs
    • Federal Coronavirus Capital Projects Fund
    • Federal State Digital Equity Capacity and Digital Equity competitive grants
  • Under the committee‑reported substitute (H‑1), taxpayers must add back, to the extent previously deducted in computing adjusted gross income or federal taxable income, expenses (including depreciation) attributable to an eligible grant for the same tax years. In short: grant receipts are deductible/exempt, but related expenses cannot generate additional deductions against Michigan taxable income.

Who is affected

  • Individuals and corporate taxpayers that received eligible broadband grant awards and included them in Michigan taxable income.
  • Grant recipients that are not taxable entities (e.g., certain nonprofits) will not generate state revenue impacts.
  • State general fund revenues are affected (see fiscal impact).

Fiscal impact and implementation notes

  • Department of Treasury estimates a general fund revenue reduction of roughly $1.3 million (FY 2024) to $5.4 million (FY 2027) under an interpretation that the exemption applies only to net income related to grants.
  • If the exemption is interpreted as a full exclusion of awards, annual revenue loss could be substantially larger (estimated $15–$20 million annually), depending on award timing and recipients; over $2.3 billion in eligible grants had been awarded at the time of analysis.
  • The bill addresses timing/recapture concerns by requiring add‑backs of expenses for the same tax years, reducing the risk of a duplicative tax benefit, but some timing reconciliation issues remain for multi‑year projects.

Procedural/timeline highlights

  • Introduced April 25, 2024; substitute (H‑1) adopted by House (Sept. 25, 2024); passed both chambers with amendments and enrolled.
  • Sent to Governor June 2, 2025; filed without Governor’s signature June 20, 2025 (became law).
  • Retroactive tax application expressly provided for tax years beginning on/after January 1, 2023.
  • Refer to the enacted bill text and Department of Treasury guidance for filing instructions, effective date details in bill remarks, and administrative implementation.

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

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