Michigan Adopts New Incentive Tool for Economic Development

17 July 2017 Manufacturing Industry Advisor Blog
Authors: Steven H. Hilfinger

A new tax incentive program targeting large job providers passed the Michigan legislature last week with bi-partisan support, and is expected to be signed soon by Governor Rick Snyder, who strongly supported the legislation. The “Good Jobs for Michigan” program will bolster Michigan’s economic development toolkit, allowing it to better compete with other states for major business relocation and expansion projects.  Several business groups including Business Leaders for Michigan pushed the measure, which combined with Michigan’s prior tax reforms, adoption of Right to Work legislation and regulatory reinvention, will elevate the State in the eyes of site selectors and companies considering new facilities or expansions.

 The Good Jobs for Michigan package (Senate Bills 242-244) provides that companies that create hundreds of high-paying jobs, whether through expansion or opening of new facilities, can retain up to 100 percent of the withholding taxes payable with respect to the new employees, for up to 10 years.  Specifically:

  • An employer that creates at least 250 jobs that pay at least 125 percent of the average wage for the applicable region in Michigan is eligible to receive up to 100% of withholding taxes attributable to those employees, for up to 10 years.
  • An employer that creates at least 500 jobs paying at least the average wage for that region is eligible to receive up to 50% of the withholding taxes attributable to those employees, for up to five years.
  • An employer that creates at least 3,000 jobs would be eligible to receive 100% of the withholding taxes attributable to those employees for up to 10 years.
  • The state can approve up to 15 projects per year (any “unused projects” carry over to the next year), but cannot commit more than $200 million in withholding tax capture revenues at any one time.

The Good Jobs for Michigan legislation was spurred by a sense among many in the Michigan business community and state government that Michigan was lagging behind other states in terms of incentives that could be used to attract and retain businesses.   Principally Southern and Southeastern states, such as Georgia, South Carolina, Tennessee and Texas, have been providing richer incentives to companies who were seeking to relocate or build new facilities.  Michigan’s cash incentive program has been effective but is limited to a $10 million per project, and has been focused on small and medium-sized projects.

In addition to the parameters set forth above, one of the keys to getting the program passed through the legislature was including a December 31, 2019 sunset for the program.  This provision and the overall program cap provide fiscal discipline for the program, and was included in part to address concerns over large and variable liabilities incurred from previous tax credit programs such as the MEGA program.  In addition, disbursements of captured withholding taxes will only be made in years where the state has verified that the eligible company has achieved the relevant job targets.

If you have questions about your company’s eligibility for this program, or if you would like to learn more about economic development incentives offered by the State of Michigan, please reach out to Foley partner Steve Hilfinger (shilfinger@foley.com), who previously served as Chief Operating Officer of the Michigan Economic Development Corporation, or Rob Nederhood (rnederhood@foley.com), who ran the Office of Regulatory Reinvention for the State of Michigan.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services