Legislative Analysis
RESEARCH AND DEVELOPMENT Phone: (517) 373-8080
http://www.house.mi.gov/hfa
TAX CREDIT DEFINITIONS ACT
Analysis available at
House Bill 5187 (H-1) as reported from committee http://www.legislature.mi.gov
Sponsor: Rep. Rachel Hood
Committee: Economic Development and Small Business
Complete to 10-31-23
SUMMARY:
House Bill 5187 would create the “Research and Development Tax Credit Definitions Act.”
The bill would define the following terms with respect to a research and development (R&D)
tax credit to be administered under the Income Tax Act:
Authorized business would mean a taxpayer subject to the corporate income tax or a flow-
through entity, as applicable, that has increased its qualifying R&D expenses.
Base amount would mean the average annual amount of qualifying R&D expenses during the
three calendar years immediately preceding the calendar year ending with or within the tax
year for which an R&D tax credit is claimed. An authorized business with no prior qualifying
R&D expenses would have a base amount of zero, and if qualifying R&D expenses were
incurred in only one or two of those three years, then the average annual amount would be
based on the number of calendar years in which qualifying R&D expenses were incurred.
Qualifying research and development expenses would mean qualified research expenses
(QREs), as that term is defined under federal law, for research conducted in Michigan. 1
Generally, it would mean spending for technological research, including employee wages,
contract expenses, and supply costs.
Research university would mean a public university in Michigan or an independent nonprofit
college or university in Michigan.
FISCAL IMPACT:
The bill would have no fiscal impact on the state or local units of government.
POSITIONS:
Economic Development Leaders for Michigan indicated support for the bill. (10-31-23)
Legislative Analyst: Holly Kuhn
Fiscal Analyst: Ben Gielczyk
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
1
For a full description of qualified research expenses, see: https://www.irs.gov/businesses/audit-techniques-guide-
credit-for-increasing-research-activities-ie-research-tax-credit-irc-ss-41-qualified-research-expenses.
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