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.
The implementation of HB 5978 is expected to enhance Michigan's attractiveness for industries focused on aerospace and defense technology, encouraging investment in innovation and advanced manufacturing sectors. This supports the state's broader economic development goals and aims to foster local businesses by providing financial relief through tax credits. It also stipulates the involvement of the Michigan strategic fund in certifying and administering these credits, ensuring a regulated process is in place for oversight and effectiveness.
House Bill 5978 proposes amendments to the Income Tax Act of 1967 in Michigan, specifically adding sections 277 and 677. The bill introduces tax credits aimed at incentivizing research and development (R&D) activities within the state from January 1, 2025, to December 31, 2028. Under the provisions, qualified taxpayers can claim a tax credit of 20% for R&D expenses incurred, with a cap of $5 million per tax year per taxpayer. Additionally, it outlines provisions for a credit relating to expenses for the storage and maintenance of finished goods inventory, capped at $1 million annually for qualifying entities.
Although the bill focuses on stimulating economic growth through tax incentives, it may lead to contention regarding the allocation of limited tax credits, as the total credits are constrained to $100 million annually for R&D purposes. Critics may argue that such tax incentives could disproportionately benefit larger companies or specific sectors, particularly those involved in government contracts, potentially sidelining smaller businesses or other innovative sectors. This creates a discussion on the balance of economic support across diverse industries in Michigan.