MI STRATEGIC TAX CAPTURE PROGRAM S.B. 579 (S-5), 580 (S-2), & 581 (S-2):
ANALYSIS AS PASSED BY THE SENATE
Senate Bill 579 (Substitute S-5 as passed by the Senate)
Senate Bills 580 and 581 (Substitute S-2 as passed by the Senate)
Sponsor: Senator Sam Singh (S.B. 579 & 581)
Senator Mary Cavanagh (S.B. 580)
Committee: Economic and Community Development
Date Completed: 4-2-24
RATIONALE
The Good Jobs for Michigan Program was an economic development tool that sought to create
new jobs in the State. It was created in 2017 and sunset in 2019. Some individuals believe
that the Program was ultimately successful. According to the Michigan Economic Development
Corporation (MEDC), it resulted in six projects, altogether projected to create more than
11,300 jobs with an average hourly wage of $31.51; however, most of these projects involved
large companies, such as Ford Motor Company (3,000 jobs), Stellantis (4,950 jobs), and
Pfizer, Inc. (354 jobs). Accordingly, it has been suggested that the Program be reinstated and
modified to provide funding to large and small businesses.
CONTENT
Senate Bill 579 (S-5) would add Chapter 8F to the Michigan Strategic Fund Act to do
the following:
-- Require the Michigan Strategic Fund (MSF) to create the High-Wage Incentive
for Regional Employment (HIRE) in Michigan Program.
-- Allow an eligible business to apply to the MSF to enter into a written agreement
that authorized the payment of withholding tax capture revenues in exchange
for the creation of certified new jobs.
-- Require each applicant to submit with the application a certified schedule listing
all violations of applicable environmental and occupational safety regulations
within the three-year period preceding the date of application.
-- Prescribe the conditions the MSF would have to consider when determining
whether to approve an application.
-- Upon approval of an application, require the MSF to determine the amount and
duration of the withholding tax capture revenues, which could not exceed ten
years from the date the authorized business created the certified new jobs.
-- Prescribe requirements of a written agreement.
-- Prohibit the MSF from committing an annual amount of total withholding tax
captures revenues that exceeded $125.0 million; however, if the amount
committed in a calendar year were less, the difference could be committed in
subsequent calendar years.
-- Prescribe timelines that authorized businesses would have to meet for a written
agreement to be binding.
-- Prohibit the MSF from designating an authorized business or entering into a new
written agreement eight years after the bill's effective date.
-- Require the MSF to submit, in its annual report to the Legislature, relevant
information related to all written agreements executed under the HIRE in
Michigan Program.
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Senate Bill 580 (S-2) would amend the Michigan Strategic Fund Act to do the
following:
-- Require the MSF to issue a withholdings certificate each calendar year to an
authorized business and provide the Department of Treasury with a copy of each
certificate issued.
-- Prescribe the requirements for this certificate.
-- Create the HIRE Michigan Fund within the State Treasury.
-- On receipt of a withholdings certificate, allow an authorized business to request
a withholding tax capture revenue payment from the Fund by filing a copy of the
certificate with the MSF.
-- Require the MSF to issue a payment from the Fund within 90 days after receipt
of a request for payment.
-- Provide that, if an authorized business failed to satisfy the provisions in a written
agreement, that business would forfeit its withholding tax capture revenue
payment for that calendar year; however, the authorized business could receive
payment for subsequent calendar years if it fulfilled those requirements.
Senate Bill 581 (S-2) would amend the Income Tax Act to require an amount equal
to the portion of the withholding tax capture revenues attributable to certified new
jobs and due to be paid to an authorized business as described in a written
agreement to be deposited each State fiscal year into the HIRE Michigan Fund.
Senate Bill 579 and Senate Bill 580 are tie-barred. Senate Bill 581 is tie-barred to Senate Bill
579 and Senate Bill 580.
Senate Bill 579 (S-5)
HIRE Program
The bill would require the MSF to create the HIRE in Michigan Program. Generally, the MSF
could use the Program to authorize the transfer of a dedicated portion of withholding tax
capture revenues to authorized businesses that provided certified new jobs in the State.
"Certified new job" would mean a permanent, full-time job created by an authorized business
at a facility in the State that is in excess of the number of permanent, full-time jobs that
authorized business maintained in the State before the expansion or location and the number
of permanent, full-time jobs that the authorized business acquired through a merger or
acquisition that were located in the State before the expansion or location, as determined by
the MSF.
"Withholding tax capture revenues" would mean the amount of income tax withheld each
calendar year that is attributable to individuals employed within certified new jobs. The State
Treasurer would have to develop methods and processes that were necessary for each
authorized business to report the amount of withholding from individuals employed within
certified new jobs.
The Program would have to be operated and administered by the authorized employees,
officers, and agents of the MSF, which could include employees of the MEDC. The MSF or its
designees would have to develop Program guidelines and use a detailed application, approval,
and compliance process that was published and available on the MSF's website.
Under the bill, an eligible business could apply to the MSF to enter into a written agreement
that authorized the payment of withholding tax capture revenues. "Eligible business" would
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mean a business other than a retail establishment, professional sports stadium, casino, or
that portion of an eligible business used exclusively for retail sales that proposes to create
one or more of the following as determined by the MSF:
-- A minimum of 250 certified new jobs in the State with an annual wage that is equal to
150% or more of the prosperity region median wage.
-- A minimum of 25 certified new jobs in the State with an annual wage that is equal to
175% or more of the prosperity region median wage.
-- A minimum of 25 certified new jobs in the State with an annual wage that is equal to
135% or more of the prosperity region median wage and located in a county with a
population of 50,000 or less according to the most recent Federal decennial census.
"Prosperity region" would mean each of the 10 prosperity regions identified by the Department
of Technology, Management, and Budget on August 25, 2017. "Prosperity region median
wage" would mean the median annual wage for the prosperity region where the facility is
located based on the most recent data made available by the Michigan Bureau of Labor Market
Information and Strategic Initiatives.1
Program Requirements
After receiving an application, the MSF could enter a written agreement with an eligible
business for withholding tax capture revenues if it determined all the following conditions
were met:
-- The eligible business proposed to create and maintain the minimum number of certified
jobs at a facility in the State and to pay an annual wage as described above.
-- In addition to the certified jobs, the eligible business agreed to maintain the number of
full-time jobs it maintained in the State before the expansion as determined by the MSF.
-- The plans for the expansion or location were economically sound.
-- The expansion or location of the eligible businesses would benefit the people of the State
by increasing opportunities for employment and by strengthening the State's economy.
-- The withholding tax capture revenues offered under and paid from the HIRE Fund would
be an incentive to expand or locate the eligible businesses in the State and address the
need for additional assistance for deal closing and second stage company gap financing.
-- An industry-recognized regional economic model cost-benefit analysis revealed that the
payment of withholding tax capture revenue to an eligible business would result in an
overall positive fiscal impact to the State.
-- The eligible business would create the required number of certified new jobs within at
least five years after entering a written agreement as determined by the MSF.
-- The eligible business would maintain the number of certified new jobs throughout the
duration of the period that the authorized business received withholding tax capture
revenues paid from the HIRE Fund; however, if the authorized business failed to maintain
the required number of certified new jobs as provided in the written agreement, the
business would forfeit the withholding tax capture revenue for that calendar year.
-- The local governing body of the municipality in which the facility was located approved
the expansion or new location by resolution.
-- The eligible business provided detailed hiring and training plans, including any registered
apprenticeships or certifications provided, and agreed to coordinate with local workforce
development agencies, including local Michigan Works! agencies, to attract and train, if
needed, a qualified workforce.
1
For more information on prosperity regions, see https://milmi.org/DataSearch/OEWS-Prosperity.
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Each applicant would have to submit with the application a certified schedule listing certain
violations within the three-year period immediately preceding the date of application. The
MSF could not enter into a written agreement with the applicant if the schedule described
below or other information available to the MSF indicated that either of the following applied:
-- In the three-year period immediately preceding the date of application, the applicant had
been issued five or more notices of violation of environmental regulations, or had an
administrative consent order or a consent judgment involving environmental regulations
that included stipulated penalties, unless the Department of Environment, Great Lakes,
and Energy found the applicant had made improvements in operations to come into
compliance with the State's environmental regulations, or other demonstrated ability to
comply with the State's environmental regulations.
-- In the three-year period immediately preceding the date of application, the applicant was
subject to a criminal penalty, conviction, or willful or repeated violation under the Michigan
Occupational Safety and Health Act, an order issued under that Act, or a rule or standard
promulgated under that Act, or was included in the Michigan Occupational Safety and
Health Administration's Severe Violator Enforcement Program.
The schedule would have to include any information required by the MSF to comply. For any
violation that was not a resolved violation, the schedule would have to include an action plan
on resolving the violation. If the schedule or other information available to the MSF indicated
that an applicant had an unresolved violation, the MSF could not enter into a written
agreement with the applicant unless the applicant submitted evidence, to the satisfaction of
the MSF, that there was a sufficient action plan to resolve the violation, or the violation was
in the process of being resolved.
HIRE Written Agreement
If the MSF determined that an eligible business satisfied all the HIRE in Michigan Program
requirements, the MSF would have to determine the amount and duration of the withholding
tax capture revenues to be authorized and enter into a written agreement. In determining
the maximum amount and duration of the withholding tax capture revenues authorized, the
MSF would have to consider the following factors, if applicable:
-- The number of certified new jobs to be created.
-- The degree to which the median annual wage of the certified new jobs exceeded the
prosperity region median wage.
-- Whether there was a disadvantage to the eligible business if it were to expand or locate
in the State versus a site outside the State.
-- The potential impact of the expansion or location on the economy of the State.
-- The estimated cost of the reimbursement of withholding tax capture revenues; the staff,
financial, or economic assistance provided by the municipality, or local economic
development corporation or similar entity; and the value of assistance otherwise provided
by the State.
-- Whether the expansion or location would occur in the State without the payment of
withholding tax capture revenues.
-- Whether the eligible business had made a written commitment to fund some portion of
costs for applicable training of the individuals who would perform the full-time jobs that
led to a professional or technical certification for these individuals.
Additionally, the MSF would have to consider whether the expansion or location of the eligible
business would support or enable progress toward the following goals:
-- Community enhancement or engagement opportunities.
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-- Investing in the State's labor and workforce.
-- Enacting a workforce plan that included recruitment, hiring, training strategies, and
advancement strategies for employees.
In determining the duration of the withholding tax capture revenues, the MSF would have to
provide a duration of up to 10 years. The duration of the withholding tax capture revenues
could not exceed 10 years, as determined by the MSF, from the date the authorized business
created the certified new jobs as provided in the written agreement. In determining the
amount of the withholding tax capture revenue payments, the MSF could approve a payment
of up to 100% of the withholding tax capture revenues.
A written agreement between an eligible business and the MSF could include all the following:
-- A description of the business expansion or location that was the subject of the written
agreement.
-- Conditions on which the authorized business designation was made.
-- A statement from the eligible business that the eligible business would not have added
certified new jobs without the withholding tax capture revenue payments authorized.
-- An estimate of the amount of withholding tax capture revenues expected to be generated
for each calendar year of the duration of the written agreement.
-- A statement by the eligible business that a violation of the written agreement could result
in the revocation of the designation as an authorized business, the loss or reduction of
future withholding tax capture revenue payments, or a repayment of withholding tax
capture revenues received.
-- A statement by the eligible business that a misrepresentation in the application could
result in the revocation of the designation as an authorized business and the repayment
of withholding tax capture revenues received plus a penalty equal to 10% of the
withholding tax capture revenue payments received.
-- A method for measuring and verifying permanent, full-time jobs before and after an
expansion or location of an authorized business in the State.
-- A provision that the authorized business, for a payment from the HIRE Michigan Fund,
would have to file the required returns and reports required by the Act and the Income
Tax Act with the Department of Treasury, and would have to provide any other
information reasonably requested by the MSF or the Department.
-- A maximum amount of withholding tax capture revenues that the authorized business
could claim.
-- A statement from the eligible business that it would not be in material violation of any
laws, ordinances, regulations, rules, orders, judgments, decrees, or other requirements
imposed by any governmental authority to which it was subject.
-- A provision that to maintain its designation as an eligible business and its eligibility to
receive withholding tax capture revenue payments, the eligible business could not commit
a violation described above and would have to annually certify to the MSF in the form and
manner prescribed by the MSF that the eligible business had complied with this
requirement.
On execution of a written agreement, an eligible business would be considered an authorized
business. The MSF would have to provide a copy of each written agreement to the Department
of Treasury. On execution of the written agreement, the transfer and payment of withholding
tax capture revenues would be binding on the State. The State Treasurer would have to
calculate, based on the written agreements, the amount of withholding tax capture revenues
collected because of the certified new jobs created for each calendar year and the percentage
of that amount that would need to be transferred from the General Fund (GF) and deposited
into the HIRE Michigan Fund, from which the MSF would have to issue payments to the
authorized business.
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The MSF could not commit an annual amount of total withholding tax capture revenues that
exceeded $125.0 million.2 If the amount committed in a calendar year were less than $125.0
million, the difference would be available to be committed in subsequent calendar years, in
addition to the annual limit otherwise applicable. The MSF would have to allocate the annual
amount committed among multiple eligible businesses and could not commit the entire
amount to a single eligible business.
Program Timelines
An authorized business whose location or expansion in the State required construction would
have to meet the following timeline:
-- The authorized business would have to begin construct