High-Tech MEGA Tax Credit

Objective
To promote the development of high-tech businesses in both traditional and emerging industries in Michigan by providing a tax credit against the Single Business Tax (SBT).

Who Can Apply
Businesses that are primarily engaged in a "high-technology activity" or that use at least 25% of total operating expenses for research and development may qualify for the credit.

Eligible activities include advanced computing, biotechnology, electronic device technology, engineering and laboratory testing related to product development, medical device technology, product research and development, advanced vehicle technology, or technology that assists in the assessment or prevention of threats or damage to human health or the environment, and tool and die manufacturing.

To qualify on the basis of R&D expenses, the business must use at least 25% of total operating expenses for research-related activity in the year it applies to MEGA for the credit. The minimum 25% research and development expense ratio must also be maintained for the first three years of the credit. R&D expense is determined using generally accepted accounting practices (GAAP).

Benefit
A business may receive an SBT credit for the incremental SBT liability attributable to its expansion or location in Michigan, and a refundable credit equal to the personal income tax attributable to new jobs being created at the site of the expansion or new location. Each credit may be awarded for up to 20 years and for up to 100% of the tax related to the project.

Eligibility Criteria
At least five (5) new jobs must be created at the business within one year of beginning operations at the project facility, and 25 new jobs must be created within five years. Once created, the minimum number of new jobs must be maintained for the life of the credit. In addition, the business must maintain the number of jobs it had in Michigan prior to the expansion in order to remain eligible for the credits.

The average wage paid for the new jobs created must be at least 400% of the federal minimum wage.

The local government or a local economic development organization where the project is located must provide economic assistance to support the proposed expansion or location.

Credits will be awarded ONLY to businesses that are financially sound with economically sound project plans. Construction of the project facility may not have begun at the time the credit is awarded.

The tax credits must be an incentive to expand or locate in Michigan and must address the competitive advantages offered by sites outside the state. The project must increase employment opportunities and strengthen the economy of Michigan. A cost/benefit analysis of the project must show that authorizing the tax credits will result in an overall positive fiscal impact to the state.

If feasible in locating the project, the business should reuse or redevelop property previously used for commercial or industrial purposes.

Factors affecting the amount and duration of credit awards:

• The number and average wage level of the new jobs created
• The total capital investment in the project
• The cost differential between expanding or locating in Michigan versus another state
• The potential economic impact of the expansion or location, the cost of the credits, and the value of other state and local assistance provided to the project

Award Process
Project applications are evaluated by an eight-member public board comprised of the CEO of the Michigan Economic Development Corporation (MEDC), the State Treasurer and the directors of the State Departments of Transportation, and Labor and Economic Growth, and four private sector appointees of the Governor.