Bill Text: MI SB1017 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: Corporate income tax: credits; aerospace and defense technology related research and development credit; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding secs. 277 & 677. TIE BAR WITH: SB 1018'24
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced) 2024-09-26 - Referred To Committee On Finance, Insurance, And Consumer Protection [SB1017 Detail]
Download: Michigan-2023-SB1017-Introduced.html
SENATE BILL NO. 1017
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
(MCL 206.1 to 206.847) by adding sections 277 and 677.
the people of the state of michigan enact:
Sec. 277. (1) Subject to the limitations under this subsection, for tax years beginning on and after January 1, 2025 through December 31, 2028, a qualified taxpayer may claim a credit against the tax imposed under this part equal to 20% of the qualified taxpayer's research and development expenses incurred in this state during the tax year that are in excess of the base amount as certified by the Michigan strategic fund. The Michigan strategic fund shall not approve and certify more than $100,000,000.00 in total tax credits under this subsection and section 677(1) for a single calendar year. The maximum amount of the credit allowed under this subsection must not exceed $5,000,000.00 per tax year per qualified taxpayer.
(2) Subject to the limitations under this subsection, for tax years beginning on and after January 1, 2025 through December 31, 2028, a qualified taxpayer may claim a credit against the tax imposed under this part equal to 20% of the qualified taxpayer's expenses incurred during the tax year that are attributable to the storage and maintenance of the qualified taxpayer's finished goods inventory. The Michigan strategic fund shall not approve and certify more than $25,000,000.00 in total tax credits under this subsection and section 677(2) for a single calendar year. The maximum amount of the credit allowed under this subsection must not exceed $1,000,000.00 per tax year per qualified taxpayer. For purposes of this subsection only, qualified taxpayer does not include a taxpayer designated under subsection (6)(c)(ii) and includes only a taxpayer designated under subsection (6)(c)(i) that has less than $5,000,000.00 in annual gross revenue.
(3) For a qualified taxpayer who is a member of a flow-through entity that qualifies for the credit under this section, that taxpayer may claim a credit against the member's tax liability under this part based on the member's distributive share of business income reported from that flow-through entity or an alternative method approved by the department.
(4) A qualified taxpayer shall not claim a credit under this section unless the Michigan strategic fund has issued a certificate to the qualified taxpayer. The qualified taxpayer shall attach the certificate to the annual return filed under this part on which a credit under this section is claimed. The certificate required by this subsection must state all of the following:
(a) The taxpayer is a qualified taxpayer and the date on which the taxpayer was designated as a qualified taxpayer.
(b) The amount of the credit under subsection (1) or (2), or both, if applicable, for the qualified taxpayer for the designated tax year.
(c) The qualified taxpayer's federal employer identification number or the Michigan department of treasury number assigned to the taxpayer.
(5) The credit allowed under this section must be claimed after all other allowable nonrefundable credits under this part. If the amount of the credit allowed under this section exceeds the tax liability of the qualified taxpayer for the tax year, that portion of the credit that exceeds the tax liability of the qualified taxpayer for the tax year may be refunded or carried forward to offset tax liability in subsequent tax years or until used up, whichever occurs first. Amounts carried forward do not affect the maximum amount of credits that may be claimed in subsequent tax years.
(6) As used in this section:
(a) "Base amount" means the average amount of research and development expenses incurred in this state for the 3 tax years immediately preceding the tax year for which the credit is being claimed under this section.
(b) "Michigan strategic fund" means the Michigan strategic fund created under section 5 of the Michigan strategic fund act, 1984 PA 270, MCL 125.2005.
(c) "Qualified taxpayer" means a taxpayer that was designated by the Michigan strategic fund as either of the following:
(i) A business whose primary business activity is defense contracting, aerospace defense, aerospace equipment manufacturing, or other aerospace and defense technology activities.
(ii) A business that is a tier 1, tier 2, or tier 3 defense supplier, aerospace supplier, aerospace defense supplier, or aerospace defense contractor with less than $5,000,000.00 in annual gross revenue.
(d) "Research and development expenses" means qualified research expenses as that term is defined in section 41(b) of the internal revenue code for research conducted in this state.
Sec. 677. (1) Subject to the limitations under this subsection, for tax years beginning on and after January 1, 2025 through December 31, 2028, a qualified taxpayer may claim a credit against the tax imposed under this part equal to 20% of the qualified taxpayer's research and development expenses incurred in this state during the tax year that are in excess of the base amount as certified by the Michigan strategic fund. The Michigan strategic fund shall not approve and certify more than $100,000,000.00 in total tax credits under this subsection or section 277(1) for a single calendar year. The maximum amount of the credit allowed under this subsection must not exceed $5,000,000.00 per tax year per qualified taxpayer.
(2) Subject to the limitations under this subsection, for tax years beginning on and after January 1, 2025 through December 31, 2028, a qualified taxpayer may claim a credit against the tax imposed under this part equal to 20% of the qualified taxpayer's expenses incurred during the tax year that are attributable to the storage and maintenance of the qualified taxpayer's finished goods inventory. The Michigan strategic fund shall not approve and certify more than $25,000,000.00 in total tax credits under this subsection and section 277(2) for a single calendar year. The maximum amount of the credit allowed under this subsection must not exceed $1,000,000.00 per tax year per qualified taxpayer. For purposes of this subsection only, qualified taxpayer does not include a taxpayer designated under subsection (6)(c)(ii) and includes only a taxpayer designated under subsection (6)(c)(i) that has less than $5,000,000.00 in annual gross revenue.
(3) A qualified taxpayer shall not claim a credit under this section unless the Michigan strategic fund has issued a certificate to the qualified taxpayer. The qualified taxpayer shall attach the certificate to the annual return filed under this part on which a credit under this section is claimed. The certificate required by this subsection must state all of the following:
(a) The taxpayer is a qualified taxpayer and the date on which the taxpayer was designated as a qualified taxpayer.
(b) The amount of the credit under subsection (1) or (2), or both, if applicable, for the qualified taxpayer for the designated tax year.
(c) The qualified taxpayer's federal employer identification number or the Michigan department of treasury number assigned to the taxpayer.
(4) The credit allowed under this section must be claimed after all other allowable nonrefundable credits under this part. If the amount of the credit allowed under this section exceeds the tax liability of the qualified taxpayer for the tax year, that portion of the credit that exceeds the tax liability of the qualified taxpayer for the tax year may be refunded or carried forward to offset tax liability in subsequent tax years for 5 years or until used up, whichever occurs first. Amounts carried forward do not affect the maximum amount of credits that may be claimed in subsequent tax years.
(5) By July 1 of each year, the department, in cooperation with the Michigan strategic fund, shall submit to each member of the legislature, the governor, the clerk of the house of representatives, the secretary of the senate, and the senate and house fiscal agencies an annual report concerning the operation and effectiveness of the research and development tax credits created under sections 277 and 677. The report shall include all of the following:
(a) A brief assessment of the overall effectiveness of the research and development tax credits created under sections 277 and 677. The department may use the applicable provisions of the economic development incentive evaluation prepared under the economic development incentive evaluation act, 2018 PA 540, MCL 18.1751 to 18.1759, to satisfy this subdivision.
(b) The number of businesses applying and filing tentative claims for a research and development tax credit for the immediately preceding calendar year.
(c) The name of each qualified taxpayer submitting claims for a research and development credit with an annual return and the amount of the research and development tax credit allowed for the immediately preceding calendar year.
(6) As used in this section:
(a) "Base amount" means the average amount of research and development expenses incurred in this state for the 3 tax years immediately preceding the tax year for which the credit is being claimed under this section.
(b) "Michigan strategic fund" means the Michigan strategic fund created under section 5 of the Michigan strategic fund act, 1984 PA 270, MCL 125.2005.
(c) "Qualified taxpayer" means a taxpayer that was designated by the Michigan strategic fund as either of the following:
(i) A business whose primary business activity is defense contracting, aerospace defense, aerospace equipment manufacturing, or other aerospace and defense technology activities.
(ii) A business that is a tier 1, tier 2, or tier 3 defense supplier, aerospace supplier, aerospace defense supplier, or aerospace defense contractor with less than $5,000,000.00 in annual gross revenue.
(d) "Research and development expenses" means qualified research expenses as that term is defined in section 41(b) of the internal revenue code for research conducted in this state.
Enacting section 1. This amendatory act does not take effect unless Senate Bill No. 1018 of the 102nd Legislature is enacted into law.
