Michigan R&D Tax Credits

Michigan’s R&D tax credit historically has closely followed the federal R&D tax credit. If a company qualified for the federal credit, then they would qualify for the Michigan credit. However, the R&D activities and expenditures must have occurred within the state of Michigan. The current credit equals 1.9% of Michigan QREs, is limited to 75% of a taxpayer's tax liability, and is claimed on Form 4570, Part 4.

As of June, 2021, Senate Bill 378 (2019) has been introduced in the state legislature which would reinstate the Michigan R&D Tax Credit.  Currently, companies and facilities (and QREs) are treated differently depending on the location of 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.

Michigan Senate Bill 378 would revamp the R&D tax credit. This would become a 5% to 12% credit and apply to the 2020 tax year. This bill is expected to voted on soon and is expected to pass. Stay tuned for further updates on the Michigan R&D Tax Credit.

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Learn more about Michigan's R&D Tax Credit law here. 

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Due with Michigan Tax Return

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Data Required to Compute Credit:

Claim Period Qualified R&D Expenses (QREs)

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Credit Carryforward:

None

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The R&D tax credit equals:

• 1.9% of the Michigan QREs during the tax year.
• Credits are limited to 75% of a taxpayer's tax liability, before credits.

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Specific Items to Note:

• The R&D credit, along with two other tax credits, cannot exceed 75% of the taxpayer's tax liability in a given year.