As part of five bipartisan bills recently signed by Governor Whitmer, Michigan has introduced a new Research & Development (R&D) Credit. Michigan joins 36 other states with the implementation of this R&D tax credit. It will be available to businesses with the amount claimed varying depending on its number of employees. It is effective for tax years beginning on or after January 1, 2025.
Businesses with less than 250 employees are eligible to claim an amount equal to 3 percent of its Qualified Research & Development expenses (QRE) up to its “base amount” and 15 percent of its QRE above and beyond its “base amount,” up to $250,000 per taxpayer per year. Businesses with 250 or more employees are eligible to claim 3 percent of its QRE up to its “base amount” and 10 percent of its QRE above and beyond its “base amount,” up to $2 million per taxpayer per year. Employers will be able to claim an additional credit equal to 5 percent of their QRE for engaging in collaboration with a research university, not to exceed $200,000 per taxpayer per year. The “base amount” for a business’ R&D expenses is determined by calculating the average annual QRE for the three calendar years preceding the year for which the credit is taken.
What qualifies as a Qualified Research & Development expense? It must be wages paid to an employee performing research activities conducted at a Michigan facility, wages paid to any employee who is directly supervising or supporting the employee performing research activities conducted at a Michigan facility, supplies that were used while performing those research activities in Michigan, or third-party research but only the portion that was conducted within Michigan.
Taxpayers must file a tentative credit claim by using the form specified by the Department of Treasury. For the 2025 calendar year the deadline is April 1, 2026. For the 2026 calendar year and later, the deadline will become March 15 following the year for which the credit is being requested. The total credit amount that Michigan will pay out each calendar year is capped at $100 million, with $25 million reserved for small businesses. Proration of the amount of credit allowed for each claimant will occur if the total submissions exceed the cap during any year.
Please reach out to your AHP representative if there are any questions or concerns we can assist with.
