Posted by Robert Bryant, Esq., CPA on 01.31.25
On Monday, January 13, 2025, Michigan Governor Gretchen Whitmer signed House Bills 5100 and 5101 into law, establishing a research and development (R&D) tax credit and creating an innovation fund. These initiatives are crucial for enhancing the state's economic development, and goes into effect for tax years beginning on or after January 1, 2025.
R&D Tax Credits
The new Michigan tax credit introduces a state-level incentive similar to the R&D tax credits available at the federal level. Michigan employers with more than 250 employees who incur qualifying research and development expenses can claim up to $2 million per year. Smaller employers are eligible for credits of up to $250,000 annually. In addition, companies could qualify for an extra credit of up to $200,000 if they partner with Michigan universities on their research projects. University of Michigan President Santa Ono praised these efforts, describing the creation of the new credits and the innovation fund as a “game- changing moment” that could help the state retain graduates from its top research institutions. The aggregate Michigan credits will be capped at $100 million per year, with at least $25 million earmarked to benefit smaller operations.
Innovation Fund
Separate legislation establishes an innovation fund aimed at investing in Michigan-based startups. Supporters say this measure will help cultivate homegrown ideas into fully operational businesses. The innovation fund will utilize $60 million that lawmakers previously set aside in the state budget for grants to venture capital funds, evergreen funds, and startup support services. This initiative is designed to assist early-stage businesses at a time when they need help the most. These measures will leverage the resources of universities, turning Michigan into a hub for innovation and providing a significant boost to local economies across the state. This change will align Michigan with various other states that already offer an R&D tax credit, positioning Michigan as a leader in innovation by encouraging more companies to invest there and attracting employees seeking high-paying jobs in these industries. Find Out if Your Activities Qualify The R&D tax credit can be a lucrative incentive for innovative businesses in Michigan. Given the new permanent nature of the federal tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving state tax credit opportunities. Request a free assessment to determine qualifying R&D tax credit eligibility. Tax Point Advisors, a firm with expertise in working with small and midsize companies, works with businesses that may qualify for R&D tax benefits. For more information, call us at 800-260-4138 or please leave us a message below.