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R&D Tax Credit Introduced, Moves Out of Committee Within a Couple Hours

October 31, 2023

A research and development (R&D) tax credit program was voted out of a House committee Tuesday, a package that included a bill that was introduced, referred to committee and reported out of committee within a couple hours.

Following a Tuesday morning hearing with testimony and voting on several bill packages reinventing the Strategic Outreach and Economic Development (SOAR) fund, along with expanding Michigan Strategic Fund (MSF) authority over designating renaissance zones, the committee went at ease until after session.

During that time, Rep. Rachel Hood (D-Grand Rapids)’s HB 5187 was introduced. Rep. Jason Hoskins (D-Southfield), chair of the House Economic Development and Small Business Committee, said their committee went at ease for most of the day until the bill could be introduced and referred.

After session, members returned to vote out a package of bills establishing a research and development tax credit program, including Hood’s HB 5099, which authorizes the Michigan Strategic Fund to create and operate a research and development tax credit for eligible businesses with a project proposal that would increase R&D spending; Rep. Jasper R. Martus (D-Flushing)’ HB 5100, which establishes a credit for businesses over 250 employees for 10% of their R&D expenses; Rep. Julie Rogers (D-Kalamazoo)’ HB 5101, which provides a similar 15% credit for businesses under 250 employees and Rep. Ranjeev Puri (D-Canton)’s HB 5102, which provides an additional credit for projects in collaboration with Michigan’s research universities.

During a first hearing last week, Hoskins said technical changes requested by the business community would be implemented. Tuesday, all of the bills were moved out including HB 5187, which was birthed only moments prior.

Rep. Mark Tisdel (R-Rochester Hills) criticized the decision to move swiftly with the bill, adding that it’s difficult to vote on a bill that hasn’t yet been seen.

But Hoskins said the bill was intended to be a vessel for changes that the business community wanted addressed, and the package as a whole will be amended on the floor.

He said there were concerns that amending the existing legislation in committee would take too long, and waiting for another hearing next week wouldn’t leave enough time for the bills to get to the Senate.

All five bills in the package were voted out, 8-5.

GM Opposes ‘Make It In Michigan’ SOAR Alternative

During the Tuesday morning House Economic Development and Small Business Committee hearing, General Motors (GM) expressed concern about a proposed move away from the Strategic Outreach and Attraction Reserve Fund and towards a new “Make it in Michigan Fund.”

While GM didn’t directly oppose the bill, Brian O’Connell, GM’s regional director of state government relations said he believes the bill as written would jeopardize GM’s eligibility for economic incentives.

The five-bill package includes Rep. Jason Hoskins (D-Southfield)’ HB 5104, HB 5105 and HB 5106, along with Rep. Joey Andrews (D-St. Joseph)’ HB 5107 and HB 5095, which together amend the Michigan Strategic Fund (MSF) Act to replace the SOAR fund with the “Make it in Michigan Fund.”

Under Hoskins’ HB 5104, the Make it in Michigan fund would be made up of three programs: the Critical Industry Program, Michigan Strategic Site Readiness program and a newly created Michigan 360 program.

Similar legislation was introduced in the Senate in the form of SB 559, SB 560, SB 561, SB 562 and SB 569, which heard testimony on Oct. 12.

Tuesday, Hoskins and Sen. Mallory McMorrow (D-Royal Oak) testified in support of the legislation.

Under the bill package, the updated goal of the MSF would be to determine how economic incentives could be combined into a singular offer package under all three “Make it in Michigan” programs.

But economic incentives couldn’t be provided unless the proposed project also enabled progress towards the state’s economic justice and climate goals.

The bill would also limit incentives if an applicant had not fully repaid all clawbacks, was in default on a grant, loan or other economic assistance through the MSF or Michigan Economic Development Corporation (MEDC), had an unpaid fee for pollution or environmental contamination on a project in any state or was currently in bad standing with the state.

O’Connell said through his job, which is to travel the country and assess economic incentives for GM, he’s seen Michigan become one of the country’s economic development leaders through the creation of the SOAR program.

But that could change if the bill remains as written, as he said the legislation will render GM ineligible for any incentives, which could jeopardize future investments in Michigan communities with existing GM facilities.

O’Connell referenced the prohibition on receiving incentives if a company has a pollution or environmental contamination investigation open in Michigan or any other state.

He said if, for example, a GM plant in Kansas had a gas tank spill, it would result in an immediate investigation and GM would become ineligible in Michigan.

“As we sit right now, we would not be in good standing with the state of Michigan,” he said.

For companies that are in good standing with the state, the Michigan 360 program would require up to 20% of the total economic assistance provided under the combined “Make it in Michigan” fund programs to be allocated to municipalities, universities or other nonprofits.

The funding would be used for improving walkable communities, supporting small businesses in the area, expanding community services, infrastructure improvements, addressing a lack of housing or expanding broadband access, among others.

Mike Johnston, vice president of government affairs with the Michigan Manufacturers Association, said economic incentives aren’t enough when there’s not a good business climate, and taking away a portion of incentives to put towards childcare, training and housing is “by definition, 20% less than what other states are offering.”

That includes other states that also subsidize childcare and workforce training, he said, and to take from one and give to another puts Michigan at a disadvantage.

Johnston added that he believes the package has become too bloated with the additional considerations for businesses, which he said would now number over 60.

Other states don’t have that heavy load of considerations and complexity, he said.

The amended MSF application process would require companies applying for economic incentives to address the potential impact of the project on a local community, the investments made in additional economic growth and workforce training, the support for local housing and childcare needs in the area, if the project will reuse vacant or historic buildings or redevelop blighted property, if the company will commit to not interfering in unionization efforts, if the business has partnered with foreign entities that could harm Michigan as a whole and if the company has laid off employees in the last two years.

It would eliminate the consideration of private investment into the project, including the businesses’ own investments, and the appropriation of public funding.

It would add a provision that any money clawed back from SOAR be deposited into the General Fund, similar to legislation introduced by Rep. Ann Bollin (R-Brighton) last week.

O’Connell said the provision regarding layoffs would also make GM ineligible, because they have to lay off workers while investing and rebuilding new facilities.

The bill would also expand the MSF board of directors to include four legislative non-voting members, including the majority and minority vice chair of a House and Senate committee selected by the House speaker and Senate majority leader, which O’Connell said could result in a lack of confidentiality due to current language not providing for nondisclosure requirements.

“If there are leaks in the process, it jeopardizes the project, and we will simply walk away,” he said.

Hoskins said the committee is happy to work with stakeholders on addressing their concerns.

Other bills in the package update references to the SOAR fund in other areas.

The package was supported by the Michigan League for Public Policy, Michigan Townships Association, Southeast Michigan Council on Governments and Quentin Messer with the MEDC, who said it underscores the importance of investing in three elements: people, place and project.

“When we do that, not only will we grow in prosperity for all Michiganders, but we’ll also accelerate our population growth,” he said.

In other news, the committee voted out Rep. Kristian C. Grant (D-Grand Rapids)’s HB 5096, which allows the Michigan Strategic Fund board to handle the designation of additional renaissance zones.

The bill was amended to grant a request from the Attorney General to clarify that the MSF board can delegate tasks to the Michigan Economic Development Corporation, as well as a change requested by Treasury to update language codifying the administrative process used to calculate and reimburse school revenue losses in renaissance zones.

The bill was then voted out, 8-0, with five Republicans passing on the vote.

Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter


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