Short answer. Michigan's new credit, first available for 2025 expenses, is 3 percent of research spending up to a base, then 15 percent above the base for employers under 250 employees (capped at $250,000; 10 percent and capped at $2 million for larger ones), plus 5 percent for research done with a Michigan university. It is refundable, but a $100 million statewide cap prorates claims when the pool is oversubscribed.
Key facts
| Rate (up to base) | 3% of Michigan QRE |
|---|---|
| Rate (above base) | 15% (under 250 employees, capped $250,000) or 10% (250+, capped $2M) |
| University collaboration | +5% (capped $200,000) |
| Refundable | Yes |
| Statewide cap | $100M, prorated (2025: 50.96% large, 59.88% small) |
| Tentative claim | Due March 15, 2027 for 2026 expenses |
A size-tiered rate, refundable
Every employer earns 3 percent to the base; the rate above the base depends on headcount.
The base is your average annual Michigan qualifying research expenses for the three calendar years before the credit year. Up to that base, the rate is 3 percent. Above the base, a small employer (under 250 employees) earns 15 percent, capped at $250,000 per year, and a large employer (250 or more) earns 10 percent, capped at $2 million per year. You must have expenses above your base to qualify.
The credit is refundable. It is claimed after your nonrefundable credits, and any amount beyond your tax is paid out. For a pre-profit software company with little Michigan tax, that is cash rather than a banked credit.
The university bonus
Research done with a Michigan university earns an extra slice.
Research performed with a Michigan research university under a written agreement earns an additional 5 percent, capped at $200,000 per taxpayer per year. It stacks on top of the size-tiered rate for the qualifying portion of the work.
The cap decides your real number
This is the rule that separates the formula from the payout.
Total credits are limited to $100 million statewide each year. The cap splits $75 million for large employers and $25 million for small only when small-business claims exceed $25 million but stay at or below 25 percent of all claims. When claims exceed the cap, the Department of Treasury prorates, so the certified amount can be less than the formula produces. For 2025 expenses, Treasury set proration at 50.96 percent for large claimants and 59.88 percent for small claimants.
For 2026 expenses, the tentative claim is due to Treasury by March 15, 2027 (the 2025 claim was due April 1, 2026). C corporations claim the credit against the corporate income tax under MCL 206.677; pass-through entities claim it against Michigan payroll withholding tax under MCL 206.717. The credit was created by Public Acts 186 and 187 of 2024.
More on Michigan's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- Michigan Compiled Laws 206.677 (research and development credit) - Michigan Legislature
- Michigan Compiled Laws 206.717 (research and development credit, withholding tax) - Michigan Legislature
- Michigan Department of Treasury, Research and Development Tax Credit - Michigan Department of Treasury
- Michigan Department of Treasury, Research and Development Credit Proration Notice for credits based on 2025 expenses (April 24, 2026) - Michigan Department of Treasury
- BDO, Michigan issues detailed guidance on claiming refundable R&D credit (April 2, 2026) - BDO USA
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Michigan state workpaper from one engagement, both built to survive an exam.