Tax Incentives

Tax Incentives

Tax Abatements

Michigan communities can abate up to 50% of local property taxes for up to 12 years for industrial development projects - including construction or rehabilitation projects, and the purchase of new machinery/equipment. The state can provide up to a 6 mill reduction in property taxes for up to 12 years depending on the impact on local tax base and job creation. State law also exempts inventory, pollution control equipment and certain tools, dies, jigs and fixtures from local property taxes. The state sales tax is exempted from the purchase of machinery used in manufacturing and energy used in manufacturing.

The Single Business Tax (SBT) provides a capital acquisition deduction for real and personal property used in the production process which may be carried forward for up to ten years. For capital intensive and high tech companies, this can mean that the company could have no SBT liability for the first years of operation. Recent changes in the law have also decreased the SBT rate and expected legislation will reduce the base on which this value added tax is calculated by exempting some employee costs.

MEGA

MEGA (Michigan Economic Growth Alliance) was proposed as a means of encouraging the creation of net new job growth in Michigan that otherwise would not have occurred without the incentives offered. The program provides the ability to award a Single Business Tax (SBT) credit to eligible companies for up to 20 years for up to 100% of the personal income tax withholding for the net new jobs being created and the incremental SBT liability attributable to an expansion/new location project. Minimum eligibility criteria includes:

An in-state business that is expanding must create at least 75 new jobs on a company payroll; an out-of-state business locating in Michigan must create at least 150 new jobs on the company payroll. Contract employees do not count towards new employee requirements.
The new jobs must exceed that maintained by the company during the year preceding the opening of the facility.
The business must certify that the expansion/location would not have occurred without the incentives.
A local organization must make a financial or economic commitment to the project.
The business has not begun construction or announced the location for the facility.
The average wage of the new jobs must equal or exceed 150% of the federal minimum wage.
The project is fiscally beneficial to the state.
The project will increase employment opportunities for citizens of the state.

MEGA Credits

Historically, the Michigan Economic Growth Alliance (MEGA Program) has been reserved for companies that create 150 new jobs, or for existing companies, which create 75 new jobs. MEGA is a cutting edge program, which gives powerful incentives, including an abatement of the Michigan Single Business Tax (SBT) and credits for job creation for up to 20 years. Companies which now spend at least 25% of their operation budget on research and development, create five jobs initially, and 25 jobs over the next five years, or, are currently paying an average of 400% of the minimum wage now meet the criteria necessary to receive the MEGA benefit. Job retention numbers can be used in special cases in which it is proven the incentives will help a company focus on new technologies and/or adoption of technologies even in basic fields.

50% Property Tax Abatements

Historically, office based companies which focus on technology were not eligible for a 50% property tax abatement to expand or build new facilities. Under new law, non-manufacturing enterprises are now eligible for up to 12 years of abatements on real and personal property.

Federal Incentives

The Federal Work Opportunity Tax Credit program provides a per worker tax credit of $2,100 to employers who hire employees from one of seven targeted groups, including:

Aid to Families with Dependent Children recipients.
Verterans who are members of AFDC or food stamp families.
Low income ex-offenders hired less than a year after serving time for a felony.
Youths age 18 to 24 who live in an empowerment zone of the community.
Summer employees (age 16 or 17) who live in a zone.
Handicapped persons.
Youths age 18 to 24 on aid.

This assistance is available to help offset the cost of additional training which might be necessary for eligible employees.