Bill
SB 118
Implements a refundable Michigan tax credit for taxpayers with eligible dependents not in public school, equal to the annual target foundation allowance per qualifying child.
Status and basic purpose
- Introduced: Jan 23, 2025.
- Current status: Referred to the Senate Committee on Finance, Insurance, and Consumer Protection.
- Purpose: Create a new, refundable state individual income tax credit for taxpayers with eligible dependents who are not enrolled in a Michigan public school and who meet certain age and proficiency requirements. The credit amount equals the State’s annual "target foundation allowance" (the per‑pupil amount referenced in the State School Aid Act) for the school year that ends during the taxpayer’s tax year.
Key provisions
- New statute: Adds Section 281 to the Michigan Income Tax Act (1967 PA 281, MCL 206.1–206.847).
- Credit amount: For each qualified dependent, a taxpayer may claim a credit equal to the target foundation allowance as specified in section 20(1) of the State School Aid Act (MCL 388.1620) for the relevant school year. (The target foundation allowance is set annually under the State School Aid Act and therefore will vary by year.)
- Refundability: If the credit exceeds the taxpayer’s Michigan income tax liability for the year, the excess is refundable.
- Eligibility — “qualified dependent”: all of the following must be true for the dependent for the tax year:
- Age: at least 5 years old and younger than 19 on the last day of the tax year;
- School enrollment: not enrolled in a public school for the school year that ends during the tax year; and
- Academic proficiency: has demonstrated proficiency in reading and math at the appropriate grade level (measured by state or private assessments, exams, or other testing mechanisms).
- Claim requirement: The taxpayer must claim the dependent exemption under the referenced personal‑exemption provision (section 30(2)(b) of the Income Tax Act). The Department of Treasury may require reasonable proof that the dependent meets the qualifying conditions.
Who would be affected
- Primary beneficiaries: Michigan taxpayers who claim qualifying dependents (e.g., parents/guardians of private‑school or properly assessed homeschooled children meeting the age and proficiency tests).
- Fiscal stakeholders: State General Fund revenues (income tax receipts) and, indirectly, the broader state budget and K–12 funding context because the credit amount is tied to the per‑pupil target foundation allowance.
Procedural/timing notes
- The credit amount used for a tax year is the target foundation allowance for the school year that ends during that tax year (i.e., links the tax year to the corresponding school year’s allowance).
- The bill is at committee referral; any fiscal estimates, amendments, or enactment timing would be determined as the bill progresses. The legislation does not itself set a fixed dollar amount because it ties the credit to the annually established target foundation allowance.
Potential impacts (overview)
- Taxpayers with eligible dependents would receive a substantial, refundable tax benefit sized to the State’s per‑pupil target foundation allowance.
- State income tax revenues would be reduced to the extent credits are claimed (net fiscal impact depends on number of claimants and the annual allowance).
- The policy creates an explicit subsidy tied to non‑public schooling status and assessed proficiency; broader effects on public school enrollment, education funding debates, and administrative verification requirements may follow if the credit is enacted.
Compiled from official sources — confirm details with the bill’s official record.
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