Michigan looks to future with R&D tax credits, startup ‘innovation fund’
- Gov. Gretchen Whitmer signs off on research and development tax credits for Michigan employers, state ‘innovation fund’ for startups
- Michigan joins majority of US states in offering tax credits for research and development
- Whitmer and other advocates say the new policies will help foster economic growth and retain Michigan talent
DETROIT — Michigan will be the latest state to offer businesses research and development credits and an “innovation fund” for entrepreneurs and startups under bills signed by Gov. Gretchen Whitmer Monday.
The new laws, which earned bipartisan support in the Legislature, are the state’s latest attempt to incentivize current and prospective employers to set up shop in Michigan or expand existing operations.
Speaking in Detroit’s Newlab at Michigan Central — which is home to more than 100 startups — Whitmer and other supporters said the new offerings would put Michigan in line with most other states and benefit businesses of all sizes.
“It's based on a simple idea: the more that you innovate here in Michigan, the more you should be able to save and make in Michigan,” said Whitmer, who pitched the proposals during her 2024 State of the State address.
“We're coming together to make Michigan a state where you can come and build something great.”
Whitmer had urged the Legislature to do more in the economic development space prior to the end of the year, most notably extending funding for a large-scale incentive program the state has used to subsidize several electric vehicles and battery projects.
The fate of that program is unclear, as Democrats failed to finalize legislation before losing the state House to Republicans, who recently regained the majority and will have a greater say in what gets to the governor’s desk.
R&D tax credits
The new tax credits law, made official with Whitmer’s signature on Monday, creates a state-level incentive similar to research and development tax credits available at the federal level.
Employers with more than 250 workers with qualifying research and development expenses could claim up to $2 million per year, with smaller employers eligible for up to $250,000 per year.
Companies could see an additional credit of up to $200,000 if they partner with Michigan universities on their research.
University of Michigan President Santa Ono praised the effort Monday, calling creation of the new credits and the innovation fund a “game-changing moment” that could help the state retain graduates from its top research institutions.
Total credits will be capped at $100 million per year, and at least $25 million would need to benefit smaller operations.
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A majority of states already offer similar credits, meaning the new policy will bring Michigan in line with best practice throughout the country, said Rep. Jasper Martus, a Flushing Democrat who sponsored the legislation.
Innovation fund
Separate legislation signed Wednesday creates an innovation fund for investing in Michigan-based startups, a measure supporters say will help cultivate homegrown ideas into full-fledged operations.
The program will draw from $60 million that lawmakers previously set aside in the state budget to fund grants for venture capital funds, evergreen funds and startup support services. The idea, supporters say, is to assist early-stage businesses when they need the help most.
“This is the first and the most significant…step that the state of Michigan has ever taken to truly enable and invest in people with ideas,” said Lt. Gov. Garlin Gilchrist, who described himself as a “two-time recovering entrepreneur.”
As the bills were moving through the Legislature, some Republicans cautioned that the state is taking on a lot of risk by supporting startups. Two Republicans supported the Democratic bills, however, sending them to Whitmer for her signature.
The legislation was supported by a broad coalition of economic development groups, including Business Leaders for Michigan, Ann Arbor SPARK and The Right Place in Grand Rapids.
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