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The Michigan Research and Development Tax Credit, enacted under Public Acts 186 and 187 of 2024 and effective for tax years beginning on or after January 1, 2025, rewards businesses for increasing qualified research expenses conducted within the state. Administered by the Michigan Department of Treasury, this refundable credit uses the IRC section 41(b) definition of qualified research expenses but applies its own Michigan specific base and rate rules and only counts research conducted in Michigan.
Credits are available to businesses conducting qualified research in Michigan, aligned with federal standards under IRC §41(b). Eligibility focuses on the nature of activities and in-state expenses, with Michigan QREs exceeding the base amount.
Michigan uses a single incremental method based on calendar-year state-sourced data, requiring calculation of a base amount as the average of prior QREs. Only Michigan QREs qualify, regardless of tax year.
Michigan's program emphasizes immediate liquidity through refunds and incentives for small businesses and university partnerships, with a focus on high-tech sectors like automotive and semiconductors.
A Michigan-based semiconductor startup unlocked significant savings through targeted R&D claims.
The Michigan Research and Development Tax Credit provides tiered rates (3% base + 10-15% excess) on qualified research expenses exceeding the state base amount, with a $100M annual cap and full refundability after nonrefundable credits.
Activities must meet federal IRC §41(b) criteria—technological uncertainty, experimentation, and improvement in products/processes—conducted in Michigan. Examples include prototyping new automotive components or refining semiconductor designs. Strike Tax verifies eligibility.
Savings depend on QREs and size: For example, a small business (<250 employees) with $1M of QREs above its base amount could get 15% of that excess ($150K), plus 3% on the QREs up to the base, subject to the $250K per taxpayer cap—fully refundable. Use Strike Tax’s R&D Credit Calculator for personalized estimates.
Yes, credits are fully refundable for all eligible businesses, including small ones (<250 employees), providing cash even with zero tax liability after other credits. No carryforward; subject to proration. Strike Tax maximizes cash flow.
Submit a tentative claim to the Michigan Department of Treasury by April 1, 2026, for 2025 expenses, using actual data. Then claim on CIT or withholding return. Strike Tax handles documentation.
Yes, stack state and federal for the same in-state QREs to amplify savings. Michigan uses IRC §41(b) for QREs, so documentation aligns. Strike Tax optimizes dual claims.
Base = average Michigan QREs from the prior three calendar years (zero if none). Calendar-year basis; fiscal filers may convert pre-2025 data. Strike Tax computes accurately.
Prorated if total tentative claims exceed cap ($25M small biz reserve); max $250K/$2M per firm. Timely filing essential; Strike Tax advises strategy.
Project descriptions, employee time logs, expense invoices, and collaboration agreements. Retain 4 years for audits. Strike Tax ensures IRC §41(b) compliance.
Tiered rates and refunds suit high-QRE sectors like semiconductors, with university bonus for collaborations. $100M cap fully utilized annually. Strike Tax tailors for MI innovators.
Use our calculator to estimate your potential federal and state benefits.
Schedule a consultation to structure your R&D activities for maximum credits.