Incentives and Tax Rates

Print Friendly and PDF

Incentives and Tax Rates

A Top 15 State To Do Business

Michigan replaced the Michigan Business Tax, effective January 1, 2012, with a new, simpler and more competitive corporate income tax. This change reduces business taxes by an estimated 86%. All industries are in line for significant tax cuts, thus reducing operational costs and encouraging new investment in Michigan.

Corporate Income Tax -The new structure taxes C-Corporations at 6% on federal taxable income apportioned to Michigan

Personal Property Tax – will phase out for most businesses beginning in 2014.

Personal Income Tax – The personal income tax rate is 4.25%, among the lowest in the nation.

Michigan’s overall business tax climate ranks among the top 15 states in the U.S., according to the Tax Foundation. In isolating the corporate tax rankings, the Foundation’s Michigan ranking jumps to 7th from the previous level of 49th.

In addition to a top 10 corporate tax environment, a variety of grants, loans and other economic assistance are available to businesses for projects that create jobs and/or provide investment in the State of Michigan.

The most commonly awarded incentives are:

Michigan Business Development Program
The Michigan Business Development Program is a new incentive program available from the Michigan Strategic Fund (MSF), in cooperation with the Michigan Economic Development Corporation (MEDC). The program is designed to provide grants, loans or other economic assistance to businesses for highly competitive projects in Michigan that create jobs and/or provide investment.

Industrial Property Tax Abatement (P.A. 198)
Industrial property tax abatements provide incentives for eligible businesses to make new investment in Michigan. These abatements encourage Michigan manufacturers to build new plants, expand existing plants, renovate ageing plants, or add new machinery and equipment. High-technology operations are also eligible for the abatement.

Community Ventures Program

Community Ventures is an effort led by the MEDC to help structurally unemployed individuals pursue career opportunities at Michigan companies. Support and resources will be provided to ensure both employers and talent are well matched.

A complete list of incentives and financial assistance available in the State of Michigan can be found here.

Michigan and United States Tax Summary

MichiganUnited States
Business TaxBusiness Tax
Michigan levies a flat 6% corporate income tax on firms structured as C corporations. Income for other business entities flows through to the owners' personal income taxes and is taxed at the personal income tax rate of 4.25%.The U.S. Federal tax rate is 15% on the first $50,000 of taxable income; 25% on the next $25,000; 34% on the next $25,000; There is an additional 5% tax on taxable income over $100,000 up to a maximum additional tax of $11,750.
Michigan's corporate tax ranking is now 7th according to the Tax Foundation. Michigan's overall business tax climate is ranked 12th.
Property Tax
Both real and personal property are subject to taxation. Property is assessed at 50% of current market value. The millage rate will vary within each county and will depend on the exact business site location and taxing jurisdiction. Michigan's average non-homestead property tax rate was 49.54 mills, per $1,000 of assessed property. Under the recently reformed property tax system, industrial personal property is exempt from the 24 mills for schools and commercial personal property is exempt from 12 mills. (A mill equals $1 per $1,000 of assessed property.)
Inventory, special tooling, and pollution control equipment are exempt from property taxes.
Available property tax abatements are negotiated at the local level.
•Including 100% new personal property exemption available in specified communities.
•50% abatements for up to 12 years for real and personal property are available to industrial processors and high tech companies.
•Rehabilitation projects can be abated 100%
•Michigan also has more than 100 sites with tax-free Renaissance Zones, as well as the ability to designate Renewable Energy Renaissance Zones, effectively eliminating general property taxes.
Workers' Compensation Insurance
Michigan allows open competition among insurance carriers in setting rates. Thus, Michigan companies can shop for the best prices from among more than 250 insurance carriers. Actual costs will be determined by a combination of factors including the selected insurance carrier, occupation code, payroll, and others.
Personal Income Tax
Michigan levies a flat 4.25% personal income tax rate, among the lowest in the nation.
Sales Tax
The state sales tax is 6% on sales of tangible goods.
•No local sales taxes are allowed.
Exempt are:
•manufacturing machinery and equipment,
•electricity and natural gas used in production,
•pollution control equipment,
Unemployment Insurance
Tax Base: $9,500
New Employer Rate: 2.7%
Cost per Employee for New Employer: $257
Minimum Rate: 0.06%
Maximum Rate: 10.3%
Note: MI employers also pay an annual $42 per employee UI fee.

Source: State of Michigan.

Michigan Business Incentives Overview

ProgramBenefitEligibility (not comprehensive) 
Business DevelopmentMichigan has reinvented the incentive process. Instead of offering tax credits that may provide future savings based on jobs and investment targets, MEDC has programs that provide immediate benefit. Couple these innovative programs with a low 6% Corporate Income Tax and the elimination of the Personal Property Tax, Michigan offers one of the best pro-business environments in the country.
Border County ProgramEligible businesses may apply for tax incentives under P.A. 198 (ndustrial Property Tax Abatement or P.A. 328 Personal Property Tax Relief in Distressed Communities.Locate a warehouse, distribution or logistics facility in a county that borders another state or Canada.
Commercial Rehabilitation Act P.A. 210Encourages the rehabilitation of commercial properties that are at minimum 15 years old by providing tax abatements for up to 10 years.Eligibility gained via resolution by the local municipality.
Commercial Redevelopment Abatement P.A. 255Encourages the replacement, restoration or new construction of commercial propertiesEligibility gained via resolution by the local municipality.
New Facility Property Tax Abatement P.A. 198Tax abatement of about 50% of property taxes from value of new improvements and personal property, land not included of up to 12 years. Manufacturing and technology company focus.
Renaissance ZonesRenaissance Zones are virtually tax free geographical areas for any business or resident presently in, or moving into, the zone.Must physically be located in one of the Renaissance zones:
Agriculture Food Processing Renaissance Zone: Food processing is one of Detroit's reinvigorated industries.

Tool & Dye Renaissance Zone: The Detroit region is home to several Tool & Dye Renaissance Zones.
Genessee (7), Macomb (49), Livingston (1), Monroe (2), Oakland (19), Wayne (9)
Industrial Property Tax Abatement (P.A. 198)Industrial property tax abatements provide incentives for Michigan manufacturers to build new plants, expand existing plants, renovate aging plants or add new machinery and equipment. Also eligible for the abatement are high-technology operations defined as advanced computing, advanced materials, biotechnology, electronic device technology, engineering or laboratory testing, medical device technology, product research and development and advanced vehicles technology.Each municipality may have their own policy and terms for the length of the abatement. Not available to Retail Operations.
Personal Property Tax Relief in Distressed Communities (P.A. 328)This abatement allows distressed communities, county seats and certain border county communities to abate personal property taxes by the full millage rate on new investments made by eligible businesses.Cities, villages and townships that contain distressed areas (as defined under the Michigan State Housing Development Authority Act), and all county seats (as defined under the Neighborhood Enterprise Zone Act) are eligible to participate. Not available to Retail Operations.
Obsolete Property Tax Act (OPRA)Property tax exemption for value of improvements made to obsolete commerical real property for up to 12 years. Excludes land and personal property.Core communities only.
SmartZonesSmartZones provide distinct geographical locations where technology-based firms, entrepreneurs and researchers locate in close proximity top all of the community assets that assist in their endeavors. Companies located in the SmartZones benefit from resource collaborations, Small Business Innovation Research assistance, Small Business Technology Transfer assistance and venture capital preparation and introductions.Regional SmartZone locations are: Ann Arbor SPARK, Pinnacle Park DTW,TechTown, OU INCubator, Macomb INCubator, Automation Alley
Michigan Emerging TechnologiesDesigned to assist Michigan technology based companies with funding needs who are engaged in federal innovation research and development.
Michigan Works!To retain the current workforce, the Michigan Works! program offers several workforce assistance programs, including Employee Enhancement Training, through the Incumbent Worker Program. This program allows companies to spend up to $3,500 to train each employee, depending on the training program.Services include screening and hiring services, on-the-job training funds, Worker Opportunity Tax Credits and ongoing training strategies. Past training programs have included computer skills, LEAN manufacturing, ISO and trade apprenticeships.
Procurement Technical Assistance CentersProcurement Technical Assistance Centers (PTACs) of Michigan are your first step in getting government contracts and can assist your company throughout the entire process from start to finish: registering to become a government contract, identifying bid opportunities, walking you through and simplifying the bidding process, helping you to expedite payments through electronic invoicing and even helping you post award with the evaluation of contract awards.

Contact
    • Justin
    • Robinson
    • Vice President, Business Attraction
    • jrobinson@detroitchamber.com
    • 313.580.5230
How Can We Help?
Your Name (required)

Your Email (required)

Subject

Your Message

Input the Letters
captcha

Contact
    • Justin
    • Robinson
    • Vice President, Business Attraction
    • jrobinson@detroitchamber.com
    • 313.580.5230
How Can We Help?
Your Name (required)

Your Email (required)

Subject

Your Message

Input the Letters
captcha