Posted by Jeffrey Feingold on 07.25.19
On June 13, 2019, Michigan State Senator Ken Horn introduced Senate Bill 378 that would create a refundable research tax credit (RTC) for specific automotive industry taxpayers for tax years beginning after December 31, 2019. All we have to do is look at our vehicles, safety technology, the development of autonomous vehicles and even instrumentation to be able to see that R&D is a way of staying relevant and staying on the cutting edge of the industry. Michigan is the heart of the United States automotive industry. If the consistency of R&D intensity throughout the past several years is any indicator of innovation, Michigan companies will be leading the pack.
Companies and facilities along with Qualified Research Expenses are treated differently depending on geographical location in Qualified Opportunity Zones (OZ). The base period is defined as the three prior taxable years. Bill 378 would allow a credit for a percentage of the difference between the taxpayer’s R&D expenses in an opportunity zone and expenses in an opportunity zone during the three-year base period, with a formula to determine the credit if the taxpayer didn’t incur qualified R&D expenses in the base period. The current research tax credit equals 1.9% of Qualified Research Expenses (QREs).
Michigan Senate Bill 378 would reinstate the R&D tax credit. This would be a 5% to 12% credit and apply to the 2020 tax year. This bill is in the Senate up for vote and is expected to pass.