Bill
HB 5775
Michigan HB 5775 expands exemptions/deductions, notably creating a post-graduation scholarship grant deduction and talent-attraction incentives for individuals relocating to Michig
HB 5775 (Michigan) 2025-2026 – Individual income tax: exemptions; exemption for post-graduation scholarship grants
Overview
- Purpose: Expand and modify Michigan’s individual income tax exemptions and deductions, with specific focus on post-graduation scholarship grants and related “talent attraction” incentives, while preserving a wide range of existing exemptions, deductions, and tax treatment rules.
- Jurisdiction: Michigan
- Status: Introduced and referred to the Committee on Economic Competitiveness (as of 2026-04-14).
Scope and main aims
- The bill amends Section 30 of the Income Tax Act of 1967 (MCL 206.30), including numerous subsections that define how taxable income is calculated, what deductions and exemptions apply, and how those amounts are adjusted over time.
- It introduces, expands, or clarifies several exemptions and deductions for individuals, with particular emphasis on:
- Post-graduation scholarship grants related to relocating for work in Michigan (see subsection (hh) and associated definitions in (hh)–(hh)(v)).
- Talent attraction incentives to entice skilled workers to relocate to Michigan for employment (which can include relocation payments, housing assistance, and post-graduation scholarship grants).
Key provisions and changes (highlights)
- Post-graduation scholarship grants and talent attraction incentives (new or clarified in subsection (hh) and related definitions):
- Beginning in tax years after 2027, a deduction is allowed for amounts received as talent attraction incentives when relocating to Michigan for employment.
- A “postgraduation scholarship grant” is defined as a grant program where:
- The grant is used to help repay an applicable education loan incurred by the individual.
- The recipient must relocate to Michigan, establish a primary residence, and work for a Michigan employer.
- The grant payments are made directly to the loan holder and not to the employee or related entities.
- The bill adds an accompanying deduction for interest paid as part of a postgraduation scholarship grant, deductible to the extent included in adjusted gross income (AGI), beginning in 2027.
- The grant definitions include specific terms for what constitutes an applicable loan, qualified education expenses, and a “qualified organization” (501(c)(3), etc.) that provides the postgraduation scholarship grant.
- The program references the broader framework of the Michigan Education Trust and related contracts, including treatment of refunds if the beneficiary does not attend a qualifying institution.
- Other substantial tax design features (preserved or adjusted):
- Personal exemptions and dependent exemptions are retained, with adjustments tied to inflation (CPI) and statutory update provisions.
- Various existing deductions and credits (e.g., for retirement, education savings accounts, ABLE accounts, Holocaust victim settlements, first-time homebuyer accounts, and other education-related benefits) remain, with explicit mechanisms for adjustment over time.
- Special rules for certain retirees (age-based deduction limits and phased-in adjustments) and for surviving spouses are included, with provisions for how those deductions interact with other exemptions.
- The bill continues to address nonresident and part-year resident apportionment, executive-specific retirement benefits, and oil-and-gas-related exclusions as applicable.
- Timing and fiscal notes:
- Several provisions explicitly reference tax years beginning after December 31, 2024, 2025, 2026, and 2027, indicating staged effective dates for the new talent attraction and postgraduation grant-related deductions.
Affected parties
- Michigan individual income taxpayers, particularly:
- Residents relocating to Michigan for employment and eligible for talent attraction incentives.
- Recipients of postgraduation scholarship grants that repay education loans.
- Seniors and retirees eligible for various deductions, exemptions, and phase-ins.
- Employers and organizations involved in educational grants and relocation incentives (to the extent cross-referenced by program definitions).
Timelines and operational notes
- Effective dates are staged, with major changes targeted for tax years beginning after 2024 and most notably after 2027 for the postgraduation scholarship grant-related provisions.
- The department would administer annualized adjustments to certain deduction amounts based on CPI, consistent with existing Michigan practice.
In sum
HB 5775 adds and refines exemptions and deductions related to post-graduation scholarship grants and talent attraction incentives, while preserving a broad structure of existing personal exemptions and other deductions. It establishes specific definitions and eligibility criteria for programs intended to recruit talent to Michigan, tying benefits to relocation and employment within the state.
Compiled from official sources — confirm details with the bill’s official record.
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