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 . Summary of credits:

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

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