Summary — HB 4185 (Michigan) — Sales Tax: Distribution; Modify (Substitute H‑2, as passed House)
Status and context
- Introduced March 6, 2025 (Rep. Rylee Linting); substitute (H‑2) adopted and the bill passed the Michigan House on March 19, 2025 (immediate effect). Referred to Senate Appropriations.
- Part of a multi‑bill "road funding package" (tie‑barred with HBs 4180–4187 and 4230). Related measures in the package change motor fuel taxes, exemptions, and other tax distributions.
Main purpose
- Amend section 25 of the General Sales Tax Act (MCL 205.75) to (1) change how certain sales tax revenue is distributed among the State School Aid Fund (SAF), local revenue sharing, and other funds, and (2) temporarily modify/terminate prior special distributions tied to aviation fuel sales.
Key provisions
- New SAF earmark: For the fiscal year ending September 30, 2026 and each fiscal year thereafter, $755,000,000 of revenue collected under the 4% state sales tax must be deposited into the State School Aid Fund (in addition to other SAF deposits).
- Local revenue sharing earmark: For the fiscal year ending September 30, 2026 and each fiscal year thereafter, $95,000,000 per year of 4% sales tax revenue must be distributed to cities, villages, and townships under the Glenn Steil State Revenue Sharing Act — distributed on a per‑capita basis.
- Aviation fuel distributions sunsetting / reconciliation authority:
- Existing statutory provisions requiring the Department of Treasury to distribute the 2% sales/use tax on aviation fuel (35% to State Aeronautics Fund; 65% to Qualified Airport Fund) are limited to the current schedule (through Sept. 30, 2025) and the department is authorized to reconcile prior distributions for the fiscal year ending Sept. 30, 2025.
- Treasury is explicitly allowed to transfer money between funds, delay or adjust distributions, or take other actions needed to reconcile 2024–25 distributions; confidentiality/reporting requirements for reconciliation reports are retained for qualified airports.
- Retains existing general distribution framework (e.g., 15% of 4% collections to cities/villages/townships under revenue sharing; 60% of 4% to SAF) but layers the new earmarks above those allocations.
- Definitions and cross‑references (e.g., “aviation fuel,” Qualified Airport Fund) are included or clarified.
Who is affected
- Public schools / students: SAF receives $755M annually (from FY ending 9/30/2026 onward).
- Local units (cities/villages/townships): receive an additional $95M annually distributed per capita (subject to appropriation mechanics).
- Aeronautics/airport programs: the statutory routine distribution of the 2% aviation fuel levy is limited/subject to reconciliation and adjustments for FY 2024–25 and sunsets in its current form after 9/30/2025 as described.
- State General Fund: will be materially affected because the bill redirects GF/GP sales tax revenue into SAF and local revenue sharing; net fiscal effects depend on companion bills in the package.
- Department of Treasury: given authority to reconcile and adjust aviation fuel‑related distributions for FY 2024–25.
Fiscal and procedural notes
- HFA analysis of the overall package (Hbs 4180–4187 & 4230) estimated net state revenue changes of roughly +$269.1M (FY2025‑26), +$541.9M (FY2026‑27), and about +$300M per year thereafter; because HB 4185 changes distributions, its principal effect is shifting GF/GP sales tax receipts into SAF and local revenue sharing while altering flows to aviation funds. Exact fund‑level impacts depend on enactment of the full tied package and appropriation actions.
- Constitutional context: Article IX, sec. 8 authorizes a base 4% sales/use tax and an additional voter‑approved 2% dedicated to the State School Aid Fund (Proposal A, 1994). HB 4185 adds a statutory $755M SAF earmark drawn from the 4% layer.
Effective timing
- Reconciliation authority covers FY ending Sept. 30, 2025; the new SAF and local revenue sharing earmarks begin for the fiscal year ending Sept. 30, 2026 and continue annually thereafter.
