Phone: (517) 373-8080
RESEARCH AND DEVELOPMENT TAX CREDIT http://www.house.mi.gov/hfa
House Bill 5601 as introduced Analysis available at
Sponsor: Rep. Matt Hall http://www.legislature.mi.gov
Committee: Tax Policy
Complete to 1-18-21
House Bill 5601 would amend Part 2 of the Income Tax Act, which addresses the corporate
income tax (CIT), to allow taxpayers to claim an income tax credit for qualified research
and development expenses. The credit would apply to research and development (R&D)
expenses incurred in Michigan during the given tax year and could be equal to 15% of the
taxpayer’s R&D expenses.
Qualified research and development expenses would mean research and development
expenses (as defined in the federal Internal Revenue Code) that are related to any of
• The design, development, or improvement of semiconductors, semiconductor
devices and equipment, and other related products and technology, such as
integrated circuits, and to the processes, techniques, formulas, software, or
inventions to sustain the ability of the semiconductor industry to continually
improve semiconductor performance and technology while decreasing costs
through technological innovation.
• The design, engineering, testing, or diagnostics of automated driving systems
for automated motor vehicles, related to advanced automotive technology.
• A design, development, or improvement related to life sciences technology.
If the amount of the credit allowed under this provision exceeded the tax liability of the
taxpayer for the tax year, that portion of the credit that exceeded the tax liability would not
be refunded but could be carried forward to offset tax liability under the Income Tax Act
for up to 15 years or until used up, whichever occurred first.
Proposed MCL 206.672
An R&D tax credit is available at the federal level, and over 30 states offer an R&D tax
credit to offset state tax liability. Section 41 of the Internal Revenue Code governs this
“Credit for Increasing Research Activities,” with the name describing the motivation for
House Fiscal Agency Page 1 of 2
As written, House Bill 5601 would reduce revenue received from the CIT by an unknown,
but potentially very large, amount.
Based on R&D spending data for Michigan in 2018 from the National Science Foundation,
roughly 45% of all R&D expenditures in the Transportation sector (NAICS 361) in the
United States were conducted in Michigan, totaling more than $16 billion. Even if only
20% of this amount meets the requirement for qualified R&D, CIT revenue could decline
by almost $500.0 million if no carryforwards were necessary. To the extent that the credit
exceeded a taxpayer's CIT liability, the overall impact would be lower, although the excess
would likely be claimed in a future tax year.
All CIT revenue accrues to the general fund.
Legislative Analyst: Jenny McInerney
Fiscal Analyst: Jim Stansell
■ 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.
House Fiscal Agency HB 5601 as introduced Page 2 of 2Statutes affected:
House Introduced Bill: 206.1, 206.713