Michigan Research and Development Tax Credit Summary

Michigan offers a research and development tax credit for qualified research conducted in the state of Michigan.  The Michigan R&D credit leverages off of the federal Section 41 rules surrounding credits for increasing research activities.

  • Governed by Section 208.1405 of Michigan Compiled Law.
  • Credit amount is equal to 1.9% of a taxpayer's research and development expenditures within the state of Michigan beginning for tax years 2009 and thereafter.
  • Credit amount is 1.52% for the 2008 tax year.
  • R&D expenditures are defined by IRC section 41(b) of the federal code.
  • The R&D credit combined with other Section 403 credits cannot exceed 65% of a taxpayer's liability.
  • Unused credits are extinguished and cannot be carried forward.

Michigan R&D Tax Credit Case Study

A car parts manufacturer has been claiming the R&D credit for years.  The company claims R&D credits each year for the development activities of its engineers.  This project involved a multi-year study covering the tax years 2011 - 2014. The Company qualified for the federal R&D Tax Credit of $243,367 and an additional $55,670 of state R&D Tax Credit in Michigan .

  
FEDERAL
 
MICHIGAN
Year
Total QREs
Credit
Total QREs
Credit
2014
$880,000
$75,367
$880,000
$16,750
2013
775,000
64,750
775,000
14,725
2012
650,000
50,750
650,000
12,350
2011
625,000
52,500
625,000
11,875
     
Total $2,930,000$243,367 $2,930,000$55,670