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MIRS Weekly Report

Michigan News And Capitol Report, Week Ending Friday, March 22nd, 2024

 

Senate OKs R&D Tax Credit Bills

The Senate approved legislation Tuesday setting up a research and development (R&D) tax credit system in Michigan, allowing employers with at least 250 workers to claim up to $2 million as a tax credit for their in-state research costs. 

Establishing an R&D tax credit was a proposal touted in the Governor's State of the State address in January, and was a noted priority of Senate Minority Leader Aric Nesbitt (R-Lawton) and House Republican Leader Matt Hall (R-Kalamazoo) since early 2023.

But when Republicans were discussing an R&D tax credit last year, some of them were looking at a $500 million program offering credits valued at 15 percent of R&D spending, unlike the package approved Tuesday. Because the bills approved will limit the credit program at $100 million annually, some critics might raise concerns the benefits will be absorbed quickly by larger-sized businesses with substantial labor forces, while small businesses are left behind and are awarded incentives in a more constrained manner. 

Currently, Michigan is in the minority of states without its own R&D tax credit program, as 38 states including Wisconsin, Ohio, North Dakota, Virginia and Kansas are recognized as offering R&D tax credit benefits. 

The bills approved Tuesday consist of HB 5099, HB 5100, HB 5101, HB 5102 and HB 5368. 

HB 4368 and HB 5099 passed 23-12 with Sens. Thomas Albert (R-Lowell), Joseph Bellino Jr. (R-Monroe), Jon Bumstead (R-North Muskegon), Roger Hauck (R-Union Twp.), Michele Hoitenga (R-Manton), Ruth Johnson (R-Holly), Dan Lauwers (R-Brockway), Aric Nesbitt (R-Lawton) and Lana Theis (R-Brighton) voting against the legislation, along with Democratic Sens. Sarah Anthony (D-Lansing) and Mary Cavanagh (D-Redford Twp.). 

Sen. Sylvia Santana (D-Detroit) joined the aforementioned no-voters to oppose HB 5100, HB 5101 and HB 5102, which passed 22-13. 

Ultimately, through the legislation, all companies will receive a tax credit worth 3 percent of existing R&D spending based on their average annual spending in the last three years. 

For taxpayers with more than 250 employees, new R&D spending will be incentivized by allowing an add-on to their credit worth 10 percent of increased spending. The overall tax credit for the aforementioned businesses cannot exceed $2 million in a tax year. 

Meanwhile, taxpayers with fewer than 250 employees could extend their credit by 15 percent of increased R&D spending for the year, and they could not access an overall credit exceeding $250,000 in the tax credit. 

Additionally, through the bills, an extra credit that can be worth up to $200,000 per taxpayer year could be claimed by employers conducting R&D with one of Michigan's research universities. In order to access the added credit, the business would need to provide the state's Department of Treasury with a copy of its written agreement with the university. 

In a single calendar year, the total amount of tax credits being claimed by employers and taxpayers for permitted R&D expenses could not go over $100 million. 

The Treasury would be responsible for reviewing tentative tax credit claims, which must be submitted to the department on or before March 15. Furthermore, the Treasury would need to collaborate with the Michigan Strategic Fund board to prepare a report on the credit program's operations and effectiveness that must be submitted to the Governor, the Legislature and the House and Senate fiscal agencies by July 1 of each year. 

The Senate Fiscal Agency projects the legislation to result in approximately $100 million in General Fund and School Aid Fund reductions. Because HB 5101 deals specifically with authorized businesses – while HB 5100 involves "taxpayers" with employees – the bill could involve subtractions from the School Aid Fund as it permits credits against income tax withholding on workers' paychecks. 

 

Trump Endorsement Takes Rogers From 27 to 67 Percent

If you ever questioned the value of President Donald Trump’s endorsement in a Republican primary, question no more. 

Republican U.S. Senate frontrunner Mike Rogers went from a field-leading 27% support among GOP primary voters to 67% after respondents were told the former president is backing Rogers, a former member of Congress from Livingston County. 

“It’s unbelievable,” said Steve Mitchell of Mitchell Research & Communications. “A 40-percentage point bounce? It shows you how strong it is. I’m surprised it’s that much, but if you look at whom the endorsement is coming from, maybe I shouldn’t be. 

“He absolutely has the strongest hold of the party that I’ve ever seen, and that includes Ronald Reagan. And I worked for Reagan in ‘84.” 

Mitchell Communications’ March 15-16 survey for MIRS found that on the cold question regarding the Republican U.S. Senate primary, a 57% majority are undecided. Rogers is at 27%, former U.S. Rep. Peter Meijer is at 7%, former U.S. Rep. Justin Amash is at 6%, Southeast Michigan business executive Sandy Pensler is at 1% and “other" is at 2%. 

When voters are told that Trump has “strongly endorsed” Rogers, he shoots up 40 points to 67 percent, while Meijer goes to 5 percent, Amash moves to 5% and Pensler remains at 1%. Undecided drops to 20%. 

On the Democratic side, former U.S. Rep. Elissa Slotkin continues to have a huge lead over actor Hill Harper, 57 to 11 percent, while business executive Nassar Beydoun is at 3 percent. 

In a head-to-head, Slotkin and Rogers are tied at 37 percent. Once the bios below were read, Slotkin was up 41 to 39 percent. 

The bios were as follows: 

Elissa Slotkin is a United States Congresswoman who has represented both mid-Michigan and Oakland County in Congress. Prior to serving in Congress, she served as a CIA analyst and as a Department of Defense official. Slotkin is described as a moderate but has voted in line with President Biden 100% of the time.  

Mike Rogers is a former law enforcement officer, State Legislator, and United States Congressman. He served in Congress from 2001-2015 and was chair of the House Intelligence Committee. He has written several books on terrorist activities and is currently a talk radio host. He says he will support President Trump. 

Slotkin is leading among independents in this poll 42 to 33 percent. She’s doing well with women, younger voters and older voters, while Rogers is doing better with men and people between 45 and 64 years of age. 

She’s leading in Oakland County, the I-75 Corridor and Mid-Michigan/Washtenaw/Monroe and Livingston. 

It’s basically tied in West Michigan. Rogers is up in Macomb, Northern Michigan and the Upper Peninsula. 

The poll was conducted entirely by text messaging voters’ cell phones and sending them to a SurveyMonkey link. The sample was determined by a selection of the projected demographic turnout of the 2024 election. 

 

Payroll Tax Capture Incentives Pass Senate By Party-Line Vote

The Senate approved legislation Tuesday by a party-line vote that resurrects and rebrands the Snyder-era “Good Jobs for Michigan” program, which incentivized certain businesses by allowing them to keep the income taxes on their new employees' wages. 

Now called the High-wage Incentive for Regional Employment (HIRE) in Michigan program, SB 579, SB 580 and SB 581 was touted by Gov. Gretchen Whitmer in her January State of the State remarks.

The maximum incentive that could be offered through the HIRE in Michigan program would be 10 years of withholding up to 100 percent tax capture revenues. 

"I think this is very different from what we saw during the Snyder years . . . It has a lot of Democratic priorities when it comes to (how) any new job that comes to Michigan is going to raise you out of poverty," said Sen. Mary Cavanagh (D-Redford Twp.) on the legislation she spearheaded along with Senate Majority Floor Leader Sam Singh (D-East Lansing). 

All bills passed 20-15. Sens. Kevin Daley (R-Lum), Rick Outman (R-Six Lakes) and Jim Runestad (R-White Lake) were absent. 

Each bill was updated with its own floor substitute. Some of the changes include that the state could allow up to $125 million in tax capture to be withheld annually (it was originally a $100 million yearly cap), with the legislation permitting money to roll over into the next year if the entire $125 million dedicated to the program is not used. 

Also, multiple eligible businesses must be awarded the incentive. The entire amount of money couldn't be committed to a single business. 

While speaking to the media around 9:20 p.m., when the session ended Tuesday, Cavanagh highlighted that an environmental component was added to the legislation, rejecting applicant companies if they were issued five or more notices of violating environmental regulations in the last three years. The state's Department of Environment, Great Lakes and Energy would have the option to vouch for the applicant if they find that the company has improved its operations to better comply with environmental mandates. 

Proponents of the bills argue that the HIRE in Michigan program will be unlike the Snyder-era incentives as they are more aimed at smaller-sized businesses as opposed to corporate juggernauts like Ford Motor Co. and Pfizer which benefited from it previously. 

Meanwhile, opponents include the Mackinac Center for Public Policy, the free market think-tank that has labeled the 2018-2019 incentives as ineffective, expensive and unfair

"Once again, the Democratic majority is putting big corporations over struggling families – picking winners and losers by handing over millions of Michigan tax dollars to global corporations in secret back-room crony business deals," said Senate Minority Leader Aric Nesbitt (R-Lawton) in a press release. "These tax dollars should be going back into the pockets of the hardworking Michigan taxpayers who actually need economic relief." 

Essentially, Nesbitt described the HIRE in Michigan program bills as "even more special tax carve-outs for large corporations right on the heels of raising taxes on small businesses last year." He said Democrats were playing "a name change game of three-card monte" after they approved policies the business community opposed in 2023, like approving their 100 percent "clean energy" by 2040 mandates and repealing Right to Work, requiring union dues to be paid in the private sector in exchange for accessing the outcomes of a bargaining agreement.   

The legislation provides that in order to participate in the HIRE in Michigan program, an eligible business could not be a retail establishment, a professional sports stadium or a casino. They must offer at least 250 new jobs in Michigan with a median annual wage worth 150 percent or more of the median wage in the prosperity region. 

They could also participate if they deliver at least 25 certified new jobs with a median annual wage equal to 175 percent or more of the prosperity region median wage. 

If a project is located in a county with 50,000 residents or fewer, according to the latest federal decennial census, it can deliver 24 certified new jobs with annual wages equal to at least 135 percent of the prosperity region median wage. 

SB 579 details that an agreement for withholding tax capture revenues can take place if the eligible business demonstrates a need for extra help with "deal closing and second stage company gap financing." 

Additionally, they must present comprehensive hiring and training plans, which can include any registered apprenticeships or certifications they might provide, and an agreement to coordinate with local workforce development agencies like the nearby Michigan Works! Agencies. 

The Snyder-era "Good Jobs for Michigan" program distributed incentive packages in 2018 and 2019, and was restricted to a cap of $200 million being withheld in tax capture in total across participants. 

In its final year, the Stellantis automobile corporation in Detroit, the Acrisure LLC insurance broker in Grand Rapids and the Ford Motor Company in Dearborn were altogether awarded up to $131 million to be withheld. 

Meanwhile, the HIRE in Michigan would allow the Michigan Strategic Fund board  – the official body for awarding state-funded economic incentives and business grants – to enter program agreements until eight years after the legislation's effective date.

"There's a difference between a job and a good job, and really putting in language that centers around rewarding companies who are going to be good environmental stewards, who respect their employees . . . the tiered wages that will adapt over time," Senate Economic and Community Development Chair Mallory McMorrow (D-Royal Oak) told the media. "One of the criticisms of 'Good Jobs' previously is that it was just a flat floor salary, that didn't just base on where you live or on (wages changing over time) . . . that's been a lot of the conversation we've had within our caucus, is what is the difference between a job and a good job, and how can we bake that into a lot of the work we're putting forward." 

 

State Unemployment Rate Remains Stable In February

The unemployment rate in Michigan dropped from 4 percent to 3.9 percent in February, maintaining the stable rate seen for months, according to data released by the Michigan Center for Data and Analytics.

Employment went up by 2,000 people, while unemployment went down by 4,000 people. The statewide workforce went down by 1,000 people. The labor force participation rate slipped one-tenth a percent to 62.2.

“Michigan’s unemployment rate and labor force levels remained relatively stable in February,” said Wayne Rourke, Michigan Center for Data and Analytics labor market information director.

Michigan matched the national unemployment rate in February.

Rourke said the payroll jobs rose significantly for the month, with the total nonfarm payroll jobs rising by 15,000 jobs. The job total for February was 4,472,000.

 The education and health services sectors in the state went up by 9,000 jobs and the government went up by 4,000.

The two sectors have been the driving force of employment in Michigan, with government increasing employment by 21,000 and education and health services increasing by 20,000 over the year.

“With a low unemployment rate and strong labor force growth over the past year, Michigan has the momentum. More people are working, businesses are expanding, and commercial districts and restaurants are buzzing as we start spring and get ready for warmer weather just around the corner,” said Gov. Gretchen Whitmer.

Whitmer said she and the Legislature were working on the economic issues through economic development missions, housing and higher education focus.

“Michiganders are working hard as our economy continues to grow,” Whitmer said.