Michigan R&D Tax Credits

Michigan’s research and development (R&D) tax credit historically has closely followed the federal R&D tax credit. If a company qualified for the federal credit, then it 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.

Lawmakers continue to introduce legislation that would reinstate the Michigan R&D Tax Credit. Currently under bipartisan consideration at the capitol building (January 2022), H.B. 5601 would permit innovating companies to claim a 15% credit on the state’s corporate income tax. Specifically directed at the advanced automotive, semiconductor, and life sciences industries, H.B. 5601 would place Michigan innovators who are involved in improving products and processes ahead of the competition.

State lawmakers acknowledge that the proposed bill may have unintended consequences on Michigan’s state budget. Additional proposals include capping the amount of R&D Tax Credits for the state on an annual basis. Lawmakers are also concerned about equitable R&D access for small and startup life science companies. Stay tuned to see if Michigan lawmakers pass a final, updated version of an R&D bill.

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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 state 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.