SB 301

Act No. 39
Public Acts of 2026
Approved by the Governor
July 21, 2026
Filed with the Secretary of State
July 22, 2026
EFFECTIVE
DATE: July 22, 2026
state of michigan
103rd Legislature
Regular session of 2026
Introduced by Senators Bellino, Hertel, Webber and
Cherry
ENROLLED SENATE BILL No. 301
AN ACT to amend 1967 PA 281,
entitled �An act to meet deficiencies in state funds by providing for the
imposition, levy, computation, collection, assessment, reporting, payment, and
enforcement by lien and otherwise of taxes on or measured by net income and on
certain commercial, business, and financial activities; to prescribe the manner
and time of making reports and paying the taxes, and the functions of public
officers and others as to the taxes; to permit the inspection of the records of
taxpayers; to provide for interest and penalties on unpaid taxes; to provide
exemptions, credits, rebates, and refunds of the taxes; to create certain
funds; to provide for the expenditure of certain funds; to impose certain
duties and requirements on certain officials, departments, and authorities of
this state; to prescribe penalties for the violation of this act; to provide an
appropriation; and to repeal acts and parts of acts,� by amending sections 30
and 623 (MCL 206.30 and 206.623), section 30 as amended by 2025 PA 24 and
section 623 as amended by 2021 PA 135, and by adding sections 279 and 679.
The People of the State of
Michigan enact:
Sec.
30. (1) �Taxable income� means, for a person other than a corporation, estate,
or trust, adjusted gross income as defined in the internal revenue code subject
to the following adjustments under this section:
(a) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, in the same amount
that has been excluded from adjusted gross income less related expenses not
deducted in computing adjusted gross income because of section 265(a)(1) of the
internal revenue code.
(b) Add taxes on or measured by income to the extent the
taxes have been deducted in arriving at adjusted gross income including any
direct or indirect allocated share of taxes paid by a flow-through entity under
part 4.
(c) Add losses on the sale or exchange of obligations of the
United States government, the income of which this state is prohibited from
subjecting to a net income tax, to the extent that the loss has been deducted
in arriving at adjusted gross income.
(d) Deduct, to the extent included in adjusted gross income,
income derived from obligations, or the sale or exchange of obligations, of the
United States government that this state is prohibited by law from subjecting
to a net income tax, reduced by any interest on indebtedness incurred in
carrying the obligations and by any expenses incurred in the production of that
income to the extent that the expenses, including amortizable bond premiums,
were deducted in arriving at adjusted gross income.
(e) Deduct, to the extent included in adjusted gross income,
the following:
(i) Compensation, including retirement or
pension benefits, received for services in the Armed Forces of the United
States.
(ii) Retirement or pension benefits under the
railroad retirement act of 1974, 45 USC 231 to 231v.
(iii) Retirement or pension benefits received
for services in the Michigan National Guard.
(f) Deduct the following to the extent included in adjusted
gross income subject to the limitations and restrictions set forth in
subsection (9), (10), or (11), as applicable:
(i) Retirement or pension benefits received
from a federal public retirement system or from a public retirement system of
or created by this state or a political subdivision of this state.
(ii) Retirement or pension benefits received
from a public retirement system of or created by another state or any of its
political subdivisions if the income tax laws of the other state permit a
similar deduction or exemption or a reciprocal deduction or exemption of a
retirement or pension benefit received from a public retirement system of or
created by this state or any of the political subdivisions of this state.
(iii) Social Security benefits as defined in
section 86 of the internal revenue code.
(iv) Beginning on and after January 1, 2007,
retirement or pension benefits not deductible under subparagraph (i) or subdivision (e) from any other retirement or pension
system or benefits from a retirement annuity policy in which payments are made
for life to a senior citizen, to a maximum of $42,240.00 for a single return
and $84,480.00 for a joint return. The maximum amounts allowed under this
subparagraph shall be reduced by the amount of the deduction for retirement or
pension benefits claimed under subparagraph (i) or
subdivision (e) and by the amount of a deduction claimed under subdivision (p).
For the 2008 tax year and each tax year after 2008, the maximum amounts allowed
under this subparagraph shall be adjusted by the percentage increase in the
United States Consumer Price Index for the immediately preceding calendar year.
The department shall annualize the amounts provided in this subparagraph as
necessary.
(v) The amount determined to be the section
22 amount eligible for the elderly and the permanently and totally disabled
credit provided in section 22 of the internal revenue code.
(g) Adjustments resulting from the application of section
271.
(h) Adjustments with respect to estate and trust income as
provided in section 36.
(i) Adjustments resulting from the allocation and
apportionment provisions of chapter 3.
(j) Deduct the following payments made by the taxpayer in the
tax year:
(i) The amount of a charitable contribution
made to the advance tuition payment fund created under section 9 of the
Michigan education trust act, 1986 PA 316, MCL 390.1429.
(ii) The amount of payment made under an
advance tuition payment contract as provided in the Michigan education trust
act, 1986 PA 316, MCL 390.1421 to 390.1442.
(iii) The amount of payment made under a
contract with a private sector investment manager that meets all of the
following criteria:
(A) The contract is certified and approved by the board of
directors of the Michigan education trust to provide equivalent benefits and
rights to purchasers and beneficiaries as an advance tuition payment contract
as described in subparagraph (ii).
(B) The contract applies only for a state institution of
higher education as defined in the Michigan education trust act, 1986 PA 316,
MCL 390.1421 to 390.1442, or a community or junior college in Michigan.
(C) The contract provides for enrollment by the contract�s
qualified beneficiary in not less than 4 years after the date on which the
contract is entered into.
(D) The contract is entered into after either of the
following:
(I) The purchaser has had the purchaser�s offer to enter into
an advance tuition payment contract rejected by the board of directors of the
Michigan education trust, if the board determines that the trust cannot accept
an unlimited number of enrollees upon an actuarially sound basis.
(II) The board of directors of the Michigan education trust
determines that the trust can accept an unlimited number of enrollees upon an
actuarially sound basis.
(k) If an advance tuition payment contract under the Michigan
education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, or another
contract for which the payment was deductible under subdivision (j) is
terminated and the qualified beneficiary under that contract does not attend a
university, college, junior or community college, or other institution of
higher education, add the amount of a refund received by the taxpayer as a
result of that termination or the amount of the deduction taken under
subdivision (j) for payment made under that contract, whichever is less.
(l) Deduct from the taxable income of a
purchaser the amount included as income to the purchaser under the internal
revenue code after the advance tuition payment contract entered into under the
Michigan education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, is
terminated because the qualified beneficiary attends an institution of
postsecondary education other than either a state institution of higher
education or an institution of postsecondary education located outside this
state with which a state institution of higher education has reciprocity.
(m) Add, to the extent deducted in determining adjusted gross
income, the net operating loss deduction under section 172 of the internal
revenue code.
(n) Deduct a net operating loss deduction for the taxable
year as determined under section 172 of the internal revenue code subject to
the modifications under section 172(b)(2) of the internal revenue code and
subject to the allocation and apportionment provisions of chapter 3 for the
taxable year in which the loss was incurred.
(o) Deduct, to the extent included in adjusted gross income,
benefits from a discriminatory self-insurance medical expense reimbursement
plan.
(p) Beginning on and after January 1, 2007, subject to any
limitation provided in this subdivision, a taxpayer who is a senior citizen may
deduct to the extent included in adjusted gross income, interest, dividends,
and capital gains received in the tax year not to exceed $9,420.00 for a single
return and $18,840.00 for a joint return. The maximum amounts allowed under
this subdivision shall be reduced by the amount of a deduction claimed for
retirement or pension benefits under subdivision (e) or a deduction claimed
under subdivision (f)(i), (ii), (iv), or (v). For the 2008 tax year and each tax year
after 2008, the maximum amounts allowed under this subdivision shall be
adjusted by the percentage increase in the United States Consumer Price Index
for the immediately preceding calendar year. The department shall annualize the
amounts provided in this subdivision as necessary. The deduction under this
subdivision is not available to a senior citizen born after 1945.
(q) Deduct, to the extent included in adjusted gross income,
all of the following:
(i) The amount of a refund received in the
tax year based on taxes paid under this part and any direct or indirect
allocated share of a refund received by a flow-through entity under part 4.
(ii) The amount of a refund received in the
tax year based on taxes paid under the city income tax act, 1964 PA 284,
MCL 141.501 to 141.787.
(iii) The amount of a credit received in the
tax year based on a claim filed under sections 520 and 522 to the extent that
the taxes used to calculate the credit were not used to reduce adjusted gross
income for a prior year.
(r) Add the amount paid by the state on behalf of the
taxpayer in the tax year to repay the outstanding principal on a loan taken on
which the taxpayer defaulted that was to fund an advance tuition payment
contract entered into under the Michigan education trust act, 1986 PA 316, MCL
390.1421 to 390.1442, if the cost of the advance tuition payment contract was
deducted under subdivision (j) and was financed with a Michigan education trust
secured loan.
(s) Deduct, to the extent included in adjusted gross income,
any amount, and any interest earned on that amount, received in the tax year by
a taxpayer who is a Holocaust victim as a result of a settlement of claims
against any entity or individual for any recovered asset pursuant to the German
act regulating unresolved property claims, also known as Gesetz zur Regelung
offener Vermogensfragen, as a result of the settlement of the action entitled In
re: Holocaust victim assets litigation, CV-96-4849, CV-96-5161, and
CV-97-0461 (E.D. NY), or as a result of any similar action if the income and
interest are not commingled in any way with and are kept separate from all
other funds and assets of the taxpayer. As used in this subdivision:
(i) �Holocaust victim� means a person, or
the heir or beneficiary of that person, who was persecuted by Nazi Germany or
any Axis regime during any period from 1933 to 1945.
(ii) �Recovered asset� means any asset of any
type and any interest earned on that asset, including, but not limited to, bank
deposits, insurance proceeds, or artwork owned by a Holocaust victim during the
period from 1920 to 1945, withheld from that Holocaust victim from and after
1945, and not recovered, returned, or otherwise compensated to the Holocaust
victim until after 1993.
(t) Deduct all of the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from education savings
accounts, calculated on a per education savings account basis, pursuant to the
Michigan education savings program act, 2000 PA 161, MCL 390.1471 to
390.1486, not to exceed a total deduction of $5,000.00 for a single return or
$10,000.00 for a joint return per tax year. The amount calculated under this
subparagraph for each education savings account shall not be less than zero.
(ii) To the extent included in adjusted gross
income, interest earned in the tax year on the contributions to the taxpayer�s
education savings accounts if the contributions were deductible under
subparagraph (i).
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from an education savings
account to the designated beneficiary of that education savings account.
(u) Add, to the extent not included in adjusted gross income,
the amount of money withdrawn by the taxpayer in the tax year from education
savings accounts, not to exceed the total amount deducted under subdivision (t)
in the tax year and all previous tax years, if the withdrawal was not a
qualified withdrawal as provided in the Michigan education savings program act,
2000 PA 161, MCL 390.1471 to 390.1486. This subdivision does not apply to
withdrawals that are less than the sum of all contributions made to an
education savings account in all previous tax years for which no deduction was
claimed under subdivision (t), less any contributions for which no deduction
was claimed under subdivision (t) that were withdrawn in all previous tax
years.
(v) A taxpayer who is a resident tribal member may deduct, to
the extent included in adjusted gross income, all nonbusiness income earned or
received in the tax year and during the period in which an agreement entered
into between the taxpayer�s tribe and this state pursuant to section 30c of
1941 PA 122, MCL 205.30c, is in full force and effect. As used in this
subdivision:
(i) �Business income� means business income
as defined in section 4 and apportioned under chapter 3.
(ii) �Nonbusiness income� means nonbusiness
income as defined in section 14 and, to the extent not included in business
income, all of the following:
(A) All income derived from wages whether the wages are
earned within the agreement area or outside of the agreement area.
(B) All interest and passive dividends.
(C) All rents and royalties derived from real property
located within the agreement area.
(D) All rents and royalties derived from tangible personal
property, to the extent the personal property is utilized within the agreement
area.
(E) Capital gains from the sale or exchange of real property
located within the agreement area.
(F) Capital gains from the sale or exchange of tangible
personal property located within the agreement area at the time of sale.
(G) Capital gains from the sale or exchange of intangible
personal property.
(H) All pension income and benefits, including, but not
limited to, distributions from a 401(k) plan, individual retirement accounts
under section 408 of the internal revenue code, or a defined contribution plan,
or payments from a defined benefit plan.
(I) All per capita payments by the tribe to resident tribal
members, without regard to the source of payment.
(J) All gaming winnings.
(iii) �Resident tribal member� means an
individual who meets all of the following criteria:
(A) Is an enrolled member of a federally recognized tribe.
(B) The individual�s tribe has an agreement with this state
pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in full force
and effect.
(C) The individual�s principal place of residence is located
within the agreement area as designated in the agreement under sub-subparagraph
(B).
(w) Eliminate all of the following:
(i) Income from producing oil and gas to the
extent included in adjusted gross income.
(ii) Expenses of producing oil and gas to the
extent deducted in arriving at adjusted gross income.
(x) Deduct all of the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from an ABLE savings
account, pursuant to the Michigan achieving a better life experience (ABLE)
program act, 2015 PA 160, MCL 206.981 to 206.997, not to exceed a total
deduction of $5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for an ABLE savings
account shall not be less than zero.
(ii) To the extent included in adjusted gross
income, interest earned in the tax year on the contributions to the taxpayer�s
ABLE savings account if the contributions were deductible under subparagraph (i).
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from an ABLE savings
account to the designated beneficiary of that ABLE savings account.
(y) Add, to the extent not included in adjusted gross income,
the amount of money withdrawn by the taxpayer in the tax year from an ABLE
savings account, not to exceed the total amount deducted under subdivision (x)
in the tax year and all previous tax years, if the withdrawal was not a
qualified withdrawal as provided in the Michigan achieving a better life
experience (ABLE) program act, 2015 PA 160, MCL 206.981 to 206.997. This
subdivision does not apply to withdrawals that are less than the sum of all contributions
made to an ABLE savings account in all previous tax years for which no
deduction was claimed under subdivision (x), less any contributions for which
no deduction was claimed under subdivision (x) that were withdrawn in all
previous tax years.
(z) Deduct, to the extent included in adjusted gross income,
compensation received in the tax year pursuant to the wrongful imprisonment
compensation act, 2016 PA 343, MCL 691.1751 to 691.1757.
(aa) For tax years that begin on and after January 1, 2025, a
taxpayer who is a disabled veteran may deduct, to the extent included in
adjusted gross income, income reported on a federal income tax form 1099-C that
is attributable to the cancellation or discharge of a student loan by the
United States Department of Education pursuant to the total and permanent
disability discharge program, 34 CFR 685.213. As used in this subdivision, �disabled
veteran� means an individual who meets either of the following criteria:
(i) Has been determined by the United States
Department of Veterans Affairs to be permanently and totally disabled as a
result of military service and entitled to veterans� benefits at the 100% rate.
(ii) Has been rated by the United States
Department of Veterans Affairs as individually unemployable.
(bb) For tax years that begin on and after January 1, 2021,
and subject to the limitation under this subdivision, deduct, to the extent not
deducted in determining adjusted gross income, wagering losses deducted under
section 165(d) of the internal revenue code on the taxpayer�s federal income
tax return for the same tax year. For a nonresident, only wagering losses that
are attributable to wagering transactions placed at or through a casino or
licensed race meeting located in this state may be deducted and must not exceed
the gains on wagering transactions allocated to this state under section
110(2)(d). As used in this subdivision, �casino� and �licensed race meeting�
mean those terms as defined in section 110.
(cc) Except as otherwise provided under subparagraph (i), for tax years that begin on and after January 1, 2022,
deduct all of the following:
(i) To the extent not deducted in
determining adjusted gross income, contributions made by the taxpayer in the
tax year less qualified withdrawals made in the tax year from a first-time home
buyer savings account, pursuant to the Michigan first-time home buyer savings
program act, 2022 PA 6, MCL 565.1001 to 565.1013, not to exceed a total
deduction of $5,000.00 for a single return or $10,000.00 for a joint return per
tax year. The amount calculated under this subparagraph for a first-time home
buyer savings account shall not be less than zero. The deduction under this
subparagraph does not apply for tax years that begin after December 31, 2026.
(ii) To the extent not deducted in
determining adjusted gross income, interest earned in the tax year on the
contributions to the taxpayer�s first-time home buyer savings account.
(iii) To the extent included in adjusted gross
income, distributions that are qualified withdrawals from a first-time home
buyer savings account to the qualified beneficiary of that savings account.
(dd) For tax years that begin on and after January 1, 2022,
add, to the extent not included in adjusted gross income, the amount of money
withdrawn by the taxpayer in the tax year from a first-time home buyer savings
account, not to exceed the total amount deducted under subdivision (cc) in the
tax year and all previous tax years, if the withdrawal was not a qualified
withdrawal as provided in the Michigan first-time home buyer savings program
act, 2022 PA 6, MCL 565.1001 to 565.1013. This subdivision does not apply to
withdrawals that are less than the sum of all contributions made to a
first-time home buyer savings account in all previous tax years for which no
deduction was claimed under subdivision (cc), less any contributions for which
no deduction was claimed under subdivision (cc) that were withdrawn in all
previous tax years.
(ee) Subject to the limitations under this subdivision, for
tax years beginning after December 31, 2025 and before January 1, 2029, deduct,
to the extent not deducted in determining adjusted gross income, an amount
equal to the sum of the following deductions allowed to be claimed on the
taxpayer�s federal income tax return for the same tax year:
(i) Qualified tips under section 224 of the
internal revenue code. For a nonresident, only qualified tips that are
attributable to services performed in this state may be deducted.
(ii) Qualified overtime compensation under
section 225 of the internal revenue code. For a nonresident, only qualified
overtime compensation that is attributable to services performed in this state
may be deducted.
(ff) For tax years beginning after December 31, 2024,
adjusted gross income must be calculated as if both of the following conditions
applied, subject to any necessary adjustments under subparagraph (iii):
(i) Sections 168(n) and 174A of the internal
revenue code were not in effect.
(ii) Sections 163(j), 168(k), 174, and 179 of
the internal revenue code applied as those provisions were in effect on
December 31, 2024.
(iii) The state treasurer shall, if necessary,
modify the application of any references in the internal revenue code to the
sections identified in subparagraphs (i) and
(ii) in a reasonable manner to carry out the
purpose of this subdivision, including, but not limited to, modifying the
application of section references that were amended under Public Law 119-21.
(gg) For tax years beginning after December 31, 2021,
adjusted gross income must be calculated as if the transition rules under
section 70302 of Public Law 119-21, including, but not limited to, any
provisions related to the application of section 174A of the internal revenue
code, do not apply.
(hh) Add, to the extent deducted in determining adjusted
gross income, wages paid for organ donation leave for which a credit under
section 279 or 679 is claimed.
(2) Except as otherwise provided in subsection (7), and
section 30a, a personal exemption of $3,700.00 multiplied by the number of
personal and dependency exemptions shall be subtracted in the calculation that
determines taxable income. The number of personal and dependency exemptions
allowed shall be determined as follows:
(a) Each taxpayer may claim 1 personal exemption. However, if
a joint return is not made by the taxpayer and the taxpayer�s spouse, the
taxpayer may claim a personal exemption for the spouse if the spouse, for the
calendar year in which the taxable year of the taxpayer begins, does not have
any gross income and is not the dependent of another taxpayer.
(b) A taxpayer may claim a dependency exemption for each
individual who is a dependent of the taxpayer for the tax year.
(c) A taxpayer may claim an additional exemption under this
subsection in the tax year for which the taxpayer has a certificate of
stillbirth from the department of health and human services as provided under
section 2834 of the public health code, 1978 PA 368, MCL 333.2834.
(3) Except as otherwise provided in subsection (7), a single
additional exemption determined as follows shall be subtracted in the
calculation that determines taxable income in each of the following
circumstances:
(a) $1,800.00 for each taxpayer and every dependent of the
taxpayer who is a deaf person as defined in section 2 of the deaf persons�
interpreters act, 1982 PA 204, MCL 393.502; a paraplegic, a quadriplegic, or a
hemiplegic; a person who is blind as defined in section 504; or a person who is
totally and permanently disabled as defined in section 522. When a dependent of
a taxpayer files an annual return under this part, the taxpayer or dependent of
the taxpayer, but not both, may claim the additional exemption allowed under
this subdivision.
(b) For tax years beginning after 2007, $250.00 for each
taxpayer and every dependent of the taxpayer who is a qualified disabled
veteran. When a dependent of a taxpayer files an annual return under this part,
the taxpayer or dependent of the taxpayer, but not both, may claim the
additional exemption allowed under this subdivision. As used in this
subdivision:
(i) �Qualified disabled veteran� means a
veteran with a service-connected disability.
(ii) �Service-connected disability� means a
disability incurred or aggravated in the line of duty in the active military,
naval, or air service as described in 38 USC 101(16).
(iii) �Veteran� means an individual who served
in the active military, naval, marine, coast guard, or air service and who was
discharged or released from the individual�s service with an honorable or
general discharge.
(4) An individual with respect to whom a deduction under
subsection (2) is allowable to another taxpayer during the tax year is not
entitled to an exemption for purposes of subsection (2), but may subtract
$1,500.00 in the calculation that determines taxable income for a tax year.
(5) A nonresident or a part-year resident is allowed that
proportion of an exemption or deduction allowed under subsection (2), (3), or
(4) that the taxpayer�s portion of adjusted gross income from Michigan sources
bears to the taxpayer�s total adjusted gross income.
(6) In calculating taxable income, a taxpayer shall not
subtract from adjusted gross income the amount of prizes won by the taxpayer
under the McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972 PA 239, MCL 432.1
to 432.47.
(7) For each tax year beginning on and after January 1, 2013,
the personal exemption allowed under subsection (2) shall be adjusted by
multiplying the exemption for the tax year beginning in 2012 by a fraction, the
numerator of which is the United States Consumer Price Index for the state
fiscal year ending in the tax year prior to the tax year for which the adjustment
is being made and the denominator of which is the United States Consumer Price
Index for the 2010-2011 state fiscal year. For the 2022 tax year and each tax
year after 2022, the adjusted amount determined under this subsection shall be
increased by an additional $600.00. The resultant product shall be rounded to
the nearest $100.00 increment. For each tax year, the exemptions allowed under
subsection (3) shall be adjusted by multiplying the exemption amount under
subsection (3) for the tax year by a fraction, the numerator of which is the
United States Consumer Price Index for the state fiscal year ending the tax
year prior to the tax year for which the adjustment is being made and the
denominator of which is the United States Consumer Price Index for the
1998-1999 state fiscal year. The resultant product shall be rounded to the
nearest $100.00 increment.
(8) As used in this section, �retirement or pension benefits�
means distributions from all of the following:
(a) Except as provided in subdivision (d), qualified pension
trusts and annuity plans that qualify under section 401(a) of the internal
revenue code, including all of the following:
(i) Plans for self-employed persons,
commonly known as Keogh or HR10 plans.
(ii) Individual retirement accounts that
qualify under section 408 of the internal revenue code if the distributions are
not made until the participant has reached 59-1/2 years of age, except in the
case of death, disability, or distributions described by section 72(t)(2)(A)(iv) of the internal revenue code.
(iii) Employee annuities or tax-sheltered
annuities purchased under section 403(b) of the internal revenue code by
organizations exempt under section 501(c)(3) of the internal revenue code, or
by public school systems.
(iv) Distributions from a 401(k) plan
attributable to employee contributions mandated by the plan or attributable to
employer contributions.
(b) The following retirement and pension plans not qualified
under the internal revenue code:
(i) Plans of the United States, state
governments other than this state, and political subdivisions, agencies, or
instrumentalities of this state.
(ii) Plans maintained by a church or a
convention or association of churches.
(iii) All other unqualified pension plans that
prescribe eligibility for retirement and predetermine contributions and
benefits if the distributions are made from a pension trust.
(c) Retirement or pension benefits received by a surviving
spouse if those benefits qualified for a deduction prior to the decedent�s
death. Benefits received by a surviving child are not deductible.
(d) Retirement and pension benefits do not include:
(i) Amounts received from a plan that allows
the employee to set the amount of compensation to be deferred and does not
prescribe retirement age or years of service. These plans include, but are not
limited to, all of the following:
(A) Deferred compensation plans under section 457 of the
internal revenue code.
(B) Distributions from plans under section 401(k) of the
internal revenue code other than plans described in subdivision (a)(iv).
(C) Distributions from plans under section 403(b) of the
internal revenue code other than plans described in subdivision (a)(iii).
(ii) Premature distributions paid on
separation, withdrawal, or discontinuance of a plan prior to the earliest date
the recipient could have retired under the provisions of the plan.
(iii) Payments received as an incentive to
retire early unless the distributions are from a pension trust.
(9) Except as otherwise provided in subsection (10) or (11),
in determining taxable income under this section, the following limitations and
restrictions apply:
(a) For a person born before 1946, this subsection provides
no additional restrictions or limitations under subsection (1)(f).
(b) Except as otherwise provided in subdivision (c), for a
person born in 1946 through 1952, the sum of the deductions under subsection
(1)(f)(i), (ii),
and (iv) is limited to $20,000.00 for a single
return and $40,000.00 for a joint return. After that person reaches the age of
67, the deductions under subsection (1)(f)(i), (ii), and (iv) do not apply and that person is eligible
for a deduction of $20,000.00 for a single return and $40,000.00 for a joint
return, which deduction is available against all types of income and is not
restricted to income from retirement or pension benefits. A person who takes
the deduction under subsection (1)(e) is not eligible for the unrestricted
deduction of $20,000.00 for a single return and $40,000.00 for a joint return
under this subdivision.
(c) Beginning January 1, 2013 for a person born in 1946
through 1952 and beginning January 1, 2018 for a person born after 1945 who has
retired as of January 1, 2013, if that person receives retirement or pension
benefits from employment with a governmental agency that was not covered by the
federal social security act, 42 USC 301 to 1397mm, the sum of the deductions
under subsection (1)(f)(i), (ii),
and (iv) is limited to $35,000.00 for a single
return and, except as otherwise provided under this subdivision, $55,000.00 for
a joint return. If both spouses filing a joint return receive retirement or
pension benefits from employment with a governmental agency that was not
covered by the federal social security act, 42 USC 301 to 1397mm, the sum of
the deductions under subsection (1)(f)(i), (ii), and (iv) is limited to $70,000.00 for a joint
return. After that person reaches the age of 67, the deductions under
subsection (1)(f)(i), (ii),
and (iv) do not apply and that person is eligible
for a deduction of $35,000.00 for a single return and $55,000.00 for a joint
return, or $70,000.00 for a joint return if applicable, which deduction is
available against all types of income and is not restricted to income from
retirement or pension benefits. A person who takes the deduction under
subsection (1)(e) is not eligible for the unrestricted deduction of $35,000.00
for a single return and $55,000.00 for a joint return, or $70,000.00 for a
joint return if applicable, under this subdivision.
(d) Except as otherwise provided under subdivision (c) for a
person who was retired as of January 1, 2013, for a person born after 1952 who
has reached the age of 62 through 66 years of age and who receives retirement
or pension benefits from employment with a governmental agency that was not
covered by the federal social security act, 42 USC 301 to 1397mm, the sum of
the deductions under subsection (1)(f)(i), (ii), and (iv) is limited to $15,000.00 for a single
return and, except as otherwise provided under this subdivision, $15,000.00 for
a joint return. If both spouses filing a joint return receive retirement or
pension benefits from employment with a governmental agency that was not
covered by the federal social security act, 42 USC 301 to 1397mm, the sum of
the deductions under subsection (1)(f)(i), (ii), and (iv) is limited to $30,000.00 for a joint
return.
(e) Except as otherwise provided under subdivision (c) or
(d), for a person born after 1952, the deduction under subsection (1)(f)(i), (ii), or (iv)
does not apply. When that person reaches the age of 67, that person is eligible
for a deduction of $20,000.00 for a single return and $40,000.00 for a joint
return, which deduction is available against all types of income and is not
restricted to income from retirement or pension benefits. For tax years that
begin before January 1, 2026 and after December 31, 2028, if a person takes the
deduction of $20,000.00 for a single return and $40,000.00 for a joint return,
that person shall not take the deduction under subsection (1)(f)(iii) and shall not take the personal exemption under subsection
(2). For tax years that begin before January 1, 2026 and after December 31,
2028, that person may elect not to take the deduction of $20,000.00 for a
single return and $40,000.00 for a joint return and elect to take the deduction
under subsection (1)(f)(iii) and the personal exemption under
subsection (2) if that election would reduce that person�s tax liability. For
tax years that begin on and after January 1, 2026 and before January 1, 2029,
if a person takes the deduction of $20,000.00 for a single return or $40,000.00
for a joint return, that person shall not take the personal exemption under
subsection (2). A person who takes the deduction under subsection (1)(e) is not
eligible for the unrestricted deduction of $20,000.00 for a single return and
$40,000.00 for a joint return under this subdivision.
(f) For a joint return, the limitations and restrictions in
this subsection shall be applied based on the date of birth of the older spouse
filing the joint return. If a deduction under subsection (1)(f) was claimed on
a joint return for a tax year in which a spouse died and the surviving spouse
has not remarried since the death of that spouse, the surviving spouse is
entitled to claim the deduction under subsection (1)(f) in subsequent tax years
subject to the same restrictions and limitations, for a single return, that
would have applied based on the date of birth of the older of the 2 spouses.
For tax years beginning after December 31, 2019, a surviving spouse born after
1945 who has reached the age of 67 and has not remarried since the death of
that spouse may elect to take the deduction that is available against all types
of income subject to the same limitations and restrictions as provided under
this subsection based on the surviving spouse�s date of birth instead of taking
the deduction allowed under subsection (1)(f), for a single return, based on
the date of birth of the older spouse.
(10) In determining taxable income under this section, a
taxpayer may elect to deduct retirement or pension benefits as provided under
subsection (1)(f) with the following limitations and restrictions or elect to
apply the limitations and restrictions in subsection (9), or subsection (11) if
applicable:
(a) For the 2023 tax year, a taxpayer who was born after 1945
and before 1959 may deduct an amount of retirement or pension benefits not to
exceed 25% of the maximum amount of retirement or pension benefits that the
taxpayer would be allowed to deduct for the tax year under subsection (1)(f)(iv) if the taxpayer�s retirement or pension benefits were
subject to the limitations of that subsection only.
(b) For the 2024 tax year, a taxpayer who was born after 1945
and before 1963 may deduct an amount of retirement or pension benefits not to
exceed 50% of the maximum amount of retirement or pension benefits that the
taxpayer would be allowed to deduct for the tax year under subsection (1)(f)(iv) if the taxpayer�s retirement or pension benefits were
subject to the limitations of that subsection only.
(c) For the 2025 tax year, a taxpayer who was born after 1945
and before 1967 may deduct an amount of retirement or pension benefits not to
exceed 75% of the maximum amount of retirement or pension benefits that the
taxpayer would be allowed to deduct for the tax year under subsection (1)(f)(iv) if the taxpayer�s retirement or pension benefits were
subject to the limitations of that subsection only.
(d) For the 2026 tax year and each tax year after 2026, a
taxpayer may deduct retirement or pension benefits as provided under subsection
(1)(f), except that the amounts deductible under subsection (1)(f)(i) and (ii) combined are subject to the same maximum
amounts allowed under subsection (1)(f)(iv) for
a single return and a joint return for that same tax year.
(e) For a joint return, the limitations and restrictions in
this subsection shall be applied based on the date of birth of the older spouse
filing the joint return. If a deduction under subsection (1)(f) was claimed on
a joint return for a tax year in which a spouse died and the surviving spouse
has not remarried since the death of that spouse, the surviving spouse is
entitled to claim the deduction under subsection (1)(f) in subsequent tax years
subject to the same restrictions and limitations under this subsection, for a
single return, that would have applied based on the date of birth of the older
of the 2 spouses.
(11) For tax years beginning on and after January 1, 2023, in
determining taxable income under this section, a taxpayer with retirement or
pension benefits received for services as a public police or fire department
employee subject to 1969 PA 312, MCL 423.231 to 423.247, a state police trooper
or state police sergeant subject to 1980 PA 17, MCL 423.271 to
423.287, or a corrections officer employed by a county sheriff in a county
jail, work camp, or other facility maintained by a county that houses adult
prisoners may elect to deduct retirement or pension benefits as provided under
subsection (1)(f) without any additional limitations or restrictions or elect
to apply the limitations and restrictions in subsection (9) or (10).
(12) As used in this section:
(a) �Oil and gas� means oil and gas subject to severance tax
under 1929 PA 48, MCL 205.301 to 205.317.
(b) �Senior citizen� means that term as defined in section
514.
(c) �United States Consumer Price Index� means the United
States Consumer Price Index for all urban consumers as defined and reported by
the United States Department of Labor, Bureau of Labor Statistics.
Sec. 279. (1) Subject to the limitations under this section,
for tax years beginning on and after January 1, 2026, a qualified taxpayer that
provides paid organ donation leave to an eligible employee may claim a credit
against the tax imposed under this part in an amount equal to 100% of the wages
paid to an eligible employee during any period during which the eligible
employee is on organ donation leave. The maximum amount of organ donation leave
with respect to any eligible employee for which a credit may be claimed under
this section must not exceed 12 weeks. The credit
allowed under this section must be claimed for the tax year in which the
eligible employee completed use of the paid organ donation leave, and for
purposes of calculating the amount of the credit, the qualified taxpayer may
include wages paid during the immediately preceding tax year.
(2) For a taxpayer who is a member of a flow-through entity
that is a qualified taxpayer that qualifies for the credit under this section,
that taxpayer may claim a proportionate share of the credit against the member�s
tax liability under this part based on the member�s distributive share of
business income reported from that flow-through entity or an alternative method
approved by the department.
(3) If the credit allowed under this section for the tax year
and any unused carryforward of the credit allowed by this section exceed the
qualified taxpayer�s tax liability for the tax year, that portion that exceeds
the tax liability for the tax year must not be refunded but may be carried
forward to offset tax liability in subsequent tax years for 3 years or until
used up, whichever occurs first.
(4) As used in this section:
(a) �Eligible employee� means an employee who has provided
the employer with written physician verification that the employee is an organ
donor.
(b) �Organ donation leave� means that period of absence from
employment received by an eligible employee related to the organ donation after
all other leave benefits provided to that employee have been exhausted. Organ
donation leave may be used by an eligible employee before, during, and after
the organ donation.
(c) �Organ donor� means an individual who donates, in whole
or part, 1 or more of the individual�s human organs to another individual to be
transplanted using a medical procedure to the body of the other individual.
Organ donor includes an individual who donates bone marrow using the peripheral
blood stem cell apheresis method.
(d) �Qualified taxpayer� means a taxpayer that is an employer
that has a written policy offering eligible employees paid organ donation leave
that is in addition to any other paid leave benefits policy provided to
employees and the rate of payment under that policy for paid organ donation
leave is not less than 100% of the wages normally paid to that same employee
for services performed for the employer.
(e) �Wages� means that term as defined in section 3306(b) of
the internal revenue code.
Sec.
623. (1) Except as otherwise provided in this part, there is levied and imposed
a corporate income tax on every taxpayer with business activity within this
state or ownership interest or beneficial interest in a flow-through entity
that has business activity in this state unless prohibited by 15 USC 381 to
384. The corporate income tax is imposed on the corporate income tax base,
after allocation or apportionment to this state, at the rate of 6.0%.
(2) The corporate income tax base means a taxpayer�s business
income subject to the following adjustments, before allocation or
apportionment, and the adjustment in subsection (4) after allocation or
apportionment:
(a) Add interest income and dividends derived from
obligations or securities of states other than this state, in the same amount
that was excluded from federal taxable income, less the related portion of
expenses not deducted in computing federal taxable income because of sections
265 and 291 of the internal revenue code.
(b) Add all taxes on or measured by net income including the
tax imposed under this part to the extent that the taxes were deducted in
arriving at federal taxable income including any direct or indirect allocated
share of taxes paid by a flow-through entity under part 4.
(c) Add any carryback or carryover of a net operating loss to
the extent deducted in arriving at federal taxable income.
(d) To the extent included in federal taxable income, deduct
dividends and royalties received from persons other than United States persons
and foreign operating entities, including, but not limited to, amounts
determined under section 78 of the internal revenue code or sections 951 to 965
of the internal revenue code.
(e) Except as otherwise provided under this subdivision, to
the extent deducted in arriving at federal taxable income, add any royalty,
interest, or other expense paid to a person related to the taxpayer by
ownership or control for the use of an intangible asset if the person is not
included in the taxpayer�s unitary business group. The addition of any royalty,
interest, or other expense described under this subdivision is not required to
be added if the taxpayer can demonstrate that the transaction has a nontax
business purpose, is conducted with arm�s-length pricing and rates and terms as
applied in accordance with sections 482 and 1274(d) of the internal revenue
code, and 1 of the following is true:
(i) The transaction is a pass through of
another transaction between a third party and the related person with
comparable rates and terms.
(ii) An addition would result in double
taxation. For purposes of this subparagraph, double taxation exists if the
transaction is subject to tax in another jurisdiction.
(iii) An addition would be unreasonable as
determined by the state treasurer.
(iv) The related person recipient of the
transaction is organized under the laws of a foreign nation which has in force
a comprehensive income tax treaty with the United States.
(f) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(g) Eliminate all of the following:
(i) Income from producing oil and gas to the
extent included in federal taxable income.
(ii) Expenses of producing oil and gas to the
extent deducted in arriving at federal taxable income.
(h) For a qualified taxpayer, eliminate all of the following:
(i) Income derived from a mineral to the
extent included in federal taxable income.
(ii) Expenses related to the income
deductible under subparagraph (i) to the extent
deducted in arriving at federal taxable income.
(i) Add, to the extent deducted in determining federal
taxable income, wages paid for organ donation leave for which a credit under
section 279 or 679 is claimed.
(3) For purposes of subsection (2), the business income of a
unitary business group is the sum of the business income of each person
included in the unitary business group less any items of income and related
deductions arising from transactions including dividends between persons
included in the unitary business group.
(4) Deduct any available business loss incurred after
December 31, 2011. As used in this subsection, �business loss� means a negative
business income taxable amount after allocation or apportionment. For purposes
of this subsection, a taxpayer that acquires the assets of another corporation
in a transaction described under section 381(a)(1) or (2) of the internal
revenue code may deduct any business loss attributable to that distributor or
transferor corporation. The business loss must be carried forward to the year
immediately succeeding the loss year as an offset to the allocated or
apportioned corporate income tax base, then successively to the next 9 taxable
years following the loss year or until the loss is used up, whichever occurs
first.
(5) As used in this section, �oil and gas� means oil and gas
that is subject to severance tax under 1929 PA 48, MCL 205.301 to 205.317.
Sec.
679. (1) Subject to the limitations under this section, for tax years beginning
on and after January 1, 2026, a qualified taxpayer that provides paid organ
donation leave to an eligible employee may claim a credit against the tax
imposed under this part in an amount equal to 100% of the wages paid to an
eligible employee during any period during which the eligible employee is on
organ donation leave. The maximum amount of organ donation leave with respect
to any eligible employee for which a credit may be claimed under this section
must not exceed 12 weeks. The credit allowed under this section must be claimed
for the tax year in which the eligible employee completed use of the paid organ
donation leave, and for purposes of calculating the amount of the credit, the
qualified taxpayer may include wages paid during the immediately preceding tax
year.
(2) If the credit allowed under this section for the tax year
and any unused carryforward of the credit allowed by this section exceed the
qualified taxpayer�s tax liability for the tax year, that portion that exceeds
the tax liability for the tax year must not be refunded but may be carried
forward to offset tax liability in subsequent tax years for 3 years or until
used up, whichever occurs first.
(3) As used in this section:
(a) �Eligible employee� means an employee who has provided
the employer with written physician verification that the employee is an organ
donor.
(b) �Organ donation leave� means that period of absence from
employment received by an eligible employee related to the organ donation after
all other leave benefits provided to that employee have been exhausted. Organ
donation leave may be used by an eligible employee before, during, and after
the organ donation.
(c)
�Organ donor� means an individual who donates, in whole or part, 1 or more of
the individual�s human organs to another individual to be transplanted using a
medical procedure to the body of the other individual. Organ donor includes an
individual who donates bone marrow using the peripheral blood stem cell
apheresis method.
(d)
�Qualified taxpayer� means a taxpayer that is an employer that has a written
policy offering eligible employees paid organ donation leave that is in
addition to any other paid leave benefits policy provided to employees and the
rate of payment under that policy for paid organ donation leave is not less
than 100% of the wages normally paid to that same employee for services
performed for the employer.
(e)
�Wages� means that term as defined in section 3306(b) of the internal revenue
code.
This act is ordered to take
immediate effect.
Secretary of the Senate
Clerk of the House of
Representatives
Approved___________________________________________
____________________________________________________
Governor