Michigan brought back its R&D credit - refundable, but capped.

Rate	3% to base, then 10% or 15% above, plus 5% university
Refundable	Yes
Note	$100M statewide cap; reinstated TY2025; contact-only

Michigan went years with no state R&D credit after the 2011 business-tax overhaul removed it. Public Acts 186 and 187 of 2024 brought one back, adding sections 677 and 717 to the Income Tax Act (MCL 206.677 and 206.717). It applies to qualifying research expenses incurred in calendar year 2025 and after.

The shape of the new credit:

• It is refundable. A credit larger than your tax is paid out, not just carried forward. For a pre-profit software company with little Michigan tax, that is cash rather than a credit you bank for later.
• It is tiered by employer size. Large employers (250 or more employees) and small employers (under 250) earn different rates above the base amount.
• It is capped and prorated. Total credits are limited to $100 million statewide each year, split $75 million for large employers and $25 million for small. If tentative claims exceed a pool, Treasury scales every credit in that pool down. For 2025, claims exceeded the cap, so credits are being prorated.
• You file a tentative claim. You submit a tentative claim to Treasury by April 1 (April 1, 2026 for 2025 expenses; March 15 of the following year after that). The tentative claim, then the proration, then your return determine the final credit.

The credit rests on the federal definition of research, narrowed to Michigan, then routed through a tentative claim. The mechanics:

• Rate, large employers (250+ employees). 3 percent of Michigan qualifying research expenses up to the base amount, plus 10 percent of expenses above the base. The credit is capped at $2 million per taxpayer per year.
• Rate, small employers (under 250 employees). 3 percent up to the base amount, plus 15 percent of expenses above the base.
• University collaboration adds 5 percent. Research done with a Michigan research university under a written agreement earns an extra 5 percent, capped at $200,000 per taxpayer per year.
• Base amount. The average annual qualifying research expenses for the 3 calendar years before the credit year, computed on a calendar-year basis.
• Refundable. The credit is claimed after your nonrefundable credits; any amount left over that exceeds your tax is refunded.
• The cap and proration. $100 million statewide, $75 million for large employers and $25 million for small. When a pool is oversubscribed, Treasury prorates, so the certified credit can be less than the formula amount.
• Same expense definition as federal. Michigan qualifying research expenses follow IRC Section 41: wages for qualified services, supplies, and contract research, limited to research performed in Michigan.

The credit is claimed against the corporate income tax under MCL 206.677, or as a withholding-based credit under MCL 206.717 for flow-through entities, after a tentative claim is filed with Treasury.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder is what supports your federal Form 6765 and, starting tax year 2026, the mandatory Form 6765 Section G appendix. Because Michigan uses the same Section 41 expense definition, that same evidence supports the Michigan-attributable expenses behind your tentative claim.

For a Michigan claimant, R&D Binder produces a Michigan-attributable research expense workpaper:

• Michigan qualifying research expenses broken out by wages, supplies, and contract research tied to research performed in Michigan, with the large-or-small-employer rate structure applied.
• The same business-component partition as the federal binder, so each dollar maps to a specific project and the four-part-test rationale behind it.
• The base amount computed from your 3 prior calendar years of Michigan research expenses, plus the university-collaboration portion broken out separately if you have a qualifying written agreement.
• A trail from each figure back to the underlying commit history and payroll, which is the contemporaneous support behind the numbers on the claim.

What R&D Binder does not do for Michigan: we do not file the tentative claim, we do not set your credit amount, which Treasury fixes through the cap and proration, and we do not represent you before the Department. Our scope is the documentation, the same as on the federal side.

Because the credit is capped, prorated, and runs through a tentative claim with a hard April 1 deadline, we scope Michigan documentation per engagement rather than offering it as a flat checkout add-on. Tell us your situation and we will scope it against your filing timeline.

A worked example. An Ann Arbor SaaS company with 12 engineers and $2.4M in qualifying wages, most of that research performed in Michigan. With well under 250 employees, it is a small employer.

• Federal Section 41 credit. Computed on the full federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, the QRE workpaper, and the Form 6765 Section G appendix.
• Michigan expenses. Say $1.8M of the QREs are tied to research performed in Michigan, and the base amount (the 3-year average) is $1.2M. The small-employer formula is 3 percent of the $1.2M up to the base ($36,000) plus 15 percent of the $600,000 above the base ($90,000), for a formula credit of $126,000.
• Refundable, then prorated. If the company is pre-profit with little Michigan tax, the credit is refundable rather than stranded. But the $126,000 is the formula figure before proration. Because the 2025 small-employer pool was oversubscribed, Treasury scales the credit down to its pro-rata share, so the certified amount is lower and is not known until Treasury runs the proration.
• Where the documentation sits. The Michigan-attributable workpaper supports the tentative claim. R&D Binder produces it; you or your CPA file the claim and the return.

The expense allocation, the base amount, and the proration are specific to each year and company; the figures above are illustrative. The CPA files; R&D Binder never appears on the federal return or the Michigan claim.

Michigan's credit has a step most state credits do not: the tentative claim. You report your Michigan research expenses to Treasury by April 1, Treasury totals every claim against the $100 million cap, and if a pool is oversubscribed it prorates. The substantiation behind the claim is the same kind the IRS expects under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, and expenses allocated by employee, contractor, and supplies, plus support that the research was performed in Michigan. The binder R&D Binder produces is built to that standard on the federal side, and the Michigan workpaper inherits the same business-component structure and adds the in-state allocation.

Our standard scope ends at delivering the binder and the Michigan workpaper. Engagement support for a Treasury review or examination is a separate scope at $250 per hour, scoped per incident. We do not represent you before the Department; that remains your CPA's or your tax controversy attorney's role.

• Michigan Compiled Laws section 206.677 (the corporate income tax research credit) and section 206.717 (the withholding-based credit for flow-through entities), added by Public Acts 186 and 187 of 2024, with the 3 percent base-tier rate, the 10 and 15 percent above-base rates, the $2 million large-employer cap, the 5 percent university-collaboration credit, the 3-year-average base amount, the $100 million statewide cap and its $75 million / $25 million split, and the refundable treatment. Michigan Legislature, MCL 206.677 and MCL 206.717.
• Michigan Department of Treasury, Research and Development (R&D) Tax Credit, and the tentative claim submission guidance, for the April 1 deadline and the claim process.
• Michigan Department of Treasury, Research and Development Credit Proration Notice for credits based on 2025 expenses, confirming that 2025 tentative claims exceeded the $100 million cap and are being prorated. Michigan Treasury taxpayer notice.
• IRS Form 6765 (federal Credit for Increasing Research Activities) and Internal Revenue Code Section 41, the federal definition of qualified research expenses that Michigan incorporates.

This page is general informational content, not tax advice for any specific taxpayer. The Michigan R&D credit is administered by the Michigan Department of Treasury. Rates, the $100 million cap, the proration, and the April 1 tentative-claim deadline reflect Public Acts 186 and 187 of 2024 (MCL 206.677 and 206.717) and Treasury guidance as of June 2026. The credit is new and prorated; confirm current figures, the cap status, and deadlines with your CPA or Treasury before claiming.

• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• Connecticut R&D credit
• Delaware R&D credit
• Iowa R&D credit