Before leaving for its summer recess, the Michigan Legislature approved two landmark laws that expand the set of economic development incentives available in the state by allowing employers to keep income taxes paid by their employees. These new incentives represent a new source of support for developers and other businesses looking to invest in Michigan.
1. Transformational Brownfield Redevelopment Projects (Public Act 50 of 2017)
Effective Date: July 24, 2017, with sunset on new projects after December 31, 2022
Signed into law by Governor Snyder on June 8, 2017, Public Act 50 will offer investors the opportunity to receive subsidies for qualified “transformational brownfield projects” funded by the capture of income taxes paid by workers on the projects and income tax withheld from workers and residents located at the projects after they are built. Expenditures made in the course of developing and building these projects will also be exempt from sales and use taxes.
This new round of incentives, which for the first time includes the capture of income tax revenues, is designed to make feasible revitalization of previously-used and often polluted “brownfield” sites that have been difficult to develop because of their large up-front remediation costs. The law limits to five per year the number of projects that may be deemed eligible for the subsidies and requires approval by the local authorities, the Michigan Strategic Fund and the state treasurer.
2. “Good Jobs for Michigan” Program (Senate Bills 242-244)
Effective Date: August 25, 2017, with sunset on new agreements after December 31, 2019.
On July 26, 2017, Governor Snyder signed into law a package of bills designed to incentivize new hiring by allowing employers to retain the income taxes of new hires. Companies may qualify for the incentive under any of the following scenarios by creating at least:
- 250 jobs that pay at least 125% of the average regional wage (company would be eligible to receive 100% of employee withholding taxes for 10 years);
- 500 jobs paying at least average regional wage (company would be eligible to receive 50 percent of employee withholding taxes for 5 years); or
- 3,000 jobs (company would be eligible to receive 100 percent of employee withholding taxes for 10 years).
Up to 15 businesses per year will be eligible to enter withholding income tax capture agreements with the State of Michigan. The law caps the total amount of withholding tax capture to $200 million over the two-year life of the program.
Butzel Long’s team of real estate, tax, and business law attorneys have decades of experience helping clients discover and maximize the benefits of economic development incentives. Contact your Butzel attorney to learn if these incentives or other federal, state or local programs can help your business.