Advocacy News – Oct. 9, 2025
What’s new: As part of the final budget negotiations, state lawmakers voted to “decouple” from numerous federal tax reforms in the One Big Beautiful Bill Act (OBBBA). This decision significantly increases Michigan businesses’ state tax bills and adds new administrative headaches for job providers.
Why it matters: Recent reforms under the OBBBA were designed to strengthen U.S. competitiveness – helping companies expand, reshore operations and invest in workers. Michigan policymakers, however, chose to go their own way by passing HB 4961, separating from those same pro-growth provisions.
- For decades, Michigan has aligned its tax code with the federal government to simplify compliance and encourage investment. But, by breaking that link, lawmakers have effectively imposed a $2 billion tax hike over the next five years and created a far more complex, confusing and less competitive tax environment for Michigan employers.
The bottom line: Michigan businesses will no longer be able to use these provisions in Michigan tax code to calculate their taxable income and liability:
- 168n – 100% depreciation for qualified production property (QPP) to spur capital investments through new or expanded construction.
- 174/174a – Restores immediate or 2-year 100% deduction for domestic research and development, and allows for small- and mid-size businesses to retroactively utilize the provision for research and development deductions starting in 2022 by filing amended returns.
- 163j – Interest deductions restored to the pre-EDIBTA calculation (30% limit).
- 168k – Bonus depreciation, allowing full deduction of qualifying assets in the year they were placed in service.
- 179 – Immediate deduction up to $2.5 million of small and mid-size business purchases – double the old limit.
Some argue this is only a temporary timing difference – but that’s simply not true. Unless Michigan law is changed, this decoupling is permanent, leaving Michigan companies paying higher state taxes while competitors in neighboring states continue to benefit from these reforms.
What we’re doing: The Michigan Chamber is exploring whether lawmakers are open to restoring alignment with these federal tax reforms so Michigan employers can benefit too. We’re also making clear to policymakers that this move represents a permanent tax increase on businesses in our state and a step backward for Michigan’s economy and prosperity.
For questions or more information, contact Randy Gross.