For more than a decade, Michigan was one of the few states — and the only one in the Midwest — without a research and development (R&D) incentive. That changed with Public Acts 186 and 187 of 2024, which created a refundable R&D credit for tax years beginning on or after January 1, 2025. For a state built on engineering, manufacturing and innovation, the new credit gives Michigan companies a long overdue reason to look closely at the research they already conduct in the state.
Now that the first filing cycle is complete, the lesson is clear: The credit is valuable, but it is competitive and unforgiving of errors. Below, we explain how the credit works, what the first year revealed, how Michigan rules differ from the federal credit, and what companies should do now to prepare for the March 15, 2027, deadline for the best chance of claiming the credit.
What Is the Michigan R&D Tax Credit, and Who Qualifies?
The credit is available to two groups of taxpayers:
- Corporate Income Tax (CIT) filers, and
- Flow-through entities — such as S Corporations, partnerships and LLCs — subject to Michigan withholding but not to the CIT or Michigan Business Tax.
That reach matters because many of Michigan’s most innovative companies are closely held flow-throughs that have never had a state-level research incentive.
How Is the Michigan R&D Tax Credit Calculated?
The calculation rewards both a company’s existing research and its growth:
- Small employers (fewer than 250 employees) can earn 3% of qualifying Michigan expenses up to the base amount and 15% of expenses above it, up to $250,000 a year.
- Large employers (250 or more employees) can earn the same 3% on base-level expenses and 10% above the base, up to $2 million a year.
- The university collaboration provision means companies of either size that work with a Michigan research university under a written agreement can earn an additional 5% on those collaborative expenses, up to $200,000.
One key difference from the federal credit: Michigan’s program has a fixed budget. Total credits for all claimants are capped at $100 million a year.
For more on calculating the credit, read “Michigan Offers New R&D Tax Credit, Opportunity for More Tax Savings”
What Did Michigan’s 2025 R&D Credit Proration Reveal?
The first filing cycle showed just how much demand there was for the credit. On April 24, 2026, Treasury announced total tentative claims for 2025 expenses exceeded the $100 million cap. Small employer claims were above $25 million but stayed under 25% of the total. As a result, both groups were prorated:
- Large employers will receive 50.96% of their tentative claims.
- Small employers will receive 59.88% of their tentative claims.
Why Is an Accurate Tentative Claim Critical Under Proration?
The proration rules contain an important detail:
- Understated claims cannot be increased. A company that later finds its tentative claim was too low cannot raise it, because the proration percentage still applies to the original amount.
- Overstated claims must be reduced. A company that finds its claim was too high must apply the percentage to the corrected, lower figure.
In other words, the rules penalize understatement and give no room to fix it. The lesson from Year 1 is that the credit is real and valuable, but competitive — and the accuracy of the tentative claim directly shapes what a company ultimately receives.
How Does the Michigan R&D Tax Credit Differ from the Federal R&D Credit?
The Michigan credit starts from the federal framework but adds its own rules. A strong federal credit study is a good foundation, but you can't simply carry it over to the state. Key differences include:
- Qualifying expenses. Qualifying expenses follow the definition of qualified research expenses in Section 41(b) and are limited to research performed in Michigan. Treasury has cautioned that other federal provisions and concepts should not be applied unless the Michigan Income Tax Act allows them.
- Base amount. The base amount is the average of a company’s Michigan qualified research expenses (MQREs) for the three calendar years before the credit year, with adjustments for companies with a shorter history.
- Calendar year reporting. All claimants must use calendar year figures, including companies that report on a fiscal year. For expense years 2025 through 2027, Treasury allows fiscal-year filers to convert prior-year expenses to a calendar-year basis.
- No statistical sampling. Michigan prohibits statistical sampling to calculate MQREs — a significant departure from common federal practice that places a premium on complete, well-organized data.
How Do Companies Claim the Michigan R&D Tax Credit?
Claiming the credit is a two-step process:
- File a tentative claim. The company files a tentative claim on Form 6133 through Michigan Treasury Online. There is no amendment process, so any correction requires submitting a new application.
- Claim the allowed credit. After Treasury publishes its proration notice, the company claims its allowed credit on the annual CIT return (Form 4891, 4905 or 4908) or, for withholding claimants, on the annual withholding return (Form 5081). Withholding claimants can also use the credit to offset periodic withholding payments.
Revenue Administrative Bulletin 2026-4 is Treasury’s main guidance on these mechanics and includes worked examples.
Why Start Planning Now for the 2027 Michigan R&D Credit Deadline?
The most pressing reason is the calendar, but it is not the only one. Michigan companies should keep the following in mind as they plan for the 2026 tax year:
- The deadline is firm. Tentative claims based on 2026 expenses are due March 15, 2027, and Treasury does not accept late submissions. That deadline usually comes well before companies prepare their tax returns, so those that normally file on extension cannot wait for their usual return cycle. The analysis must begin during the year.
- Proration raises the stakes. Because the program is capped and you can't increase an understated claim later, a hurried or incomplete tentative claim leaves money on the table for good. Getting the numbers right on the first filing is the only way to protect your company’s full share.
- Federal and Michigan treatment now differ. Michigan decoupled from the federal tax changes in the One Big Beautiful Bill Act (OBBBA), so Michigan’s treatment of R&D expenses differs from the federal treatment. Practitioners have noted the state credit can help offset that added cost.
- Documentation must be built during the year. Because Michigan requires calendar-year tracking, Michigan-only expenses and full data without sampling, companies that set up their documentation processes now will be in a far stronger position than those that try to rebuild the record after year-end.
How Can an R&D Tax Credit Study Help Maximize Your Michigan Credit?
An R&D tax credit study helps companies capture both federal and Michigan benefits accurately and defensibly. Working with outside specialists, a study helps you better understand where your research happens, who does it and how it ties to your Michigan operations. This helps identify every qualifying activity, including university collaborations that may qualify for the additional 5% credit. From there, calendar-year calculations, tentative claim filing, credit reporting, and documentation and support for any future examination will also be critical parts of the study. With the 2026 deadline only a few months away, now is the time to start building your team and your plan.
Contact David Swatosh or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.