Summary — HB 4186 (Michigan Business Tax amendments)
Status
- Introduced: March 6, 2025 (sponsor Rep. Steve Carra).
- Passed House (with Substitute H‑1): March 19, 2025 (immediate effect); referred to Senate Appropriations Committee.
- Amends: Michigan Business Tax Act (2007 PA 36), sections 201 & 500 (MCL 208.1201 & 208.1500).
- Tie‑bar: HB 4180–4187, HB 4230 (part of a multi‑bill “road funding” package).
Purpose / Intent
- To modify the Michigan Business Tax (MBT) rules that apply to the small group of taxpayers who continue to file under the repealed MBT (so‑called legacy MBT filers with certificated credits) by (1) sharply increasing the MBT business income tax rate, and (2) offering those taxpayers a one‑time election to switch to the Corporate Income Tax (CIT) regime instead.
Key provisions
- MBT income rate increase: raises the MBT business income tax rate from 4.95% to 30.0% for “all business activity occurring on and after January 1, 2025.” (The MBT historically had two parts: a business income tax and a 0.8% modified gross receipts tax; this bill increases the business income tax component.)
- One‑time election to switch to CIT: permits taxpayers who previously elected to continue filing under the MBT to elect, for any tax year beginning with the 2025 tax year, to file under the Income Tax Act and pay the Corporate Income Tax (CIT) instead. Any taxpayer making that election would forfeit the ability to claim remaining certificated (legacy) MBT credits.
- Retains existing MBT base definitions and adjustments in large part (many statutory technical adjustments and carryforward/loss provisions remain in the bill text).
Who is affected
- Primary: businesses that still file under the MBT — generally entities with outstanding certificated MBT credits issued before the 2011 MBT repeal.
- Secondary: state fiscal flows and other legislation in the tied package — HB 4187 and related bills reallocate CIT/MBT and other tax revenue to transportation funds, School Aid Fund, and local revenue sharing. (HB 4186 functions within that broader revenue/earmarking package.)
Timing and procedural notes
- Substantive tax change is effective for activity on/after January 1, 2025.
- The election to switch to the CIT may be made for tax years beginning in 2025.
- HB 4186 is tied to multiple bills in the road funding package; enactment and practical fiscal effects depend on the full package and subsequent appropriation language.
- Committee analyses note the package (collectively) shifts revenues among funds and estimates net State revenue changes (package totals reported by House Fiscal Agency: approx. +$269.1M in FY2025‑26, +$541.9M in FY2026‑27, and roughly +$300M/year thereafter), though the distributional impacts vary by fund.
Implications / likely effects
- For legacy MBT filers who remain under MBT, the statutory MBT rate increase would be a large nominal jump (4.95% → 30%), substantially increasing tax liability absent other offsets.
- The availability of a switch to the CIT at its 6% rate — in exchange for forfeiting legacy credits — creates a practical decision point: remain under a dramatically higher MBT rate while keeping credits, or switch to a lower CIT rate but give up credits.
- Administrative and compliance considerations will arise for affected taxpayers and the Department of Treasury (election mechanics, credit forfeiture documentation, and coordination with the broader fund reallocation in the tie‑barred package).
