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Making Michigan more competitive, exploring new economic development incentives

Advocacy News – Oct. 20, 2023

Incentives have become an even hotter topic across the nation as competition for major job-creating investments increasingly heats up. This is true for Michigan as the state has lost out on significant projects and continues to lose overall population.

Background:
Most recently, in 2021 the Michigan Legislature created the Strategic Outreach and Attraction Reserve (SOAR) Fund, designed to allow Michigan to offer significant economic incentives for businesses to expand or build large projects in the Great Lakes State. Two related programs were also crafted then for attraction and retention purposes: the Critical Industry Program (CIP), a program that allows Michigan to use its dollars efficiently to bring or expand businesses in our state, and the Strategic Site Readiness Program (SSRP) focused on creating investment-ready sites to attract businesses. The Michigan Chamber of Commerce supported these efforts in 2021.

What’s happening now:
SOAR
The Michigan Senate Committee on Economic and Community Development has begun hearing testimony on Senate Bills 559-562 and 569 — legislation that would expand change the name of the SOAR Fund to the “Make it in Michigan Fund” (MMF) and create an additional program titled the “Michigan 360 Program,” focused on local community economic development projects and placemaking efforts.

The Michigan Chamber shared the following feedback and concerns to ensure funding mechanisms that allow Michigan to be as competitive as possible on the national stage. The MI Chamber looks forward to working with legislators as the bill package progresses.

  • Avoid new and subjective criteria for businesses applying for incentives that fall within the MMF.
    • Rationale: The current legislation specifies applying businesses must “support or enable progress” towards the federal Justice40 program and document they will “honor a decision by its workers to form a union and will commit not to interfere in unionization efforts.” This language lacks clarity and definition and inappropriately seeks to make subjective value judgments about the types of businesses worthy of consideration, which could close the door to projects from the start.
  • Don’t deprioritize the Critical Industry Program (CIP) and the Strategic Site Readiness Program (SSPR).
    • Rationale: Expanding the MMF to include the “Michigan 360 Program,” a program focused on local community economic development projects and placemaking, would weaken the original intent of the SOAR Fund and ultimately hinder Michigan’s ability to compete with other states for new jobs and investments. CIP and SSRP projects should remain the highest priority to ensure Michigan can compete for transformational projects.
  • Don’t divert dollars from the outset, lessening Michigan’s ability to compete by requiring economic assistance of no less than 20% of the total project investment for CIP and SSRP projects allocated to the Michigan 360 program.
    • Rationale: While local investments are certainly important, we are concerned that diverting dollars to new programs will further dilute Michigan’s attraction efforts. The 20% threshold should be lowered, made optional or come from another pot to ensure the original intent of the fund remains as powerful of an incentive as possible.

Good Jobs for Michigan (GJFM)
The  committee also heard testimony on Senate Bills 579-581, legislation that would revive the Good Jobs for Michigan (GJFM) program that sunset in 2019 and renaming the initiative to the Hire MI Program. GJFM was an effort to promote job growth by incentivizing companies to create and fill new positions at certain salary threshholds. In exchange, the program allows these businesses to retain their new employees’ income tax withholdings for certain time periods.

Under the legislation, changes to the Hire MI program are as follows:

  • Increasing the wage requirements for a job to be eligible.
  • Decreasing the number of jobs required by a business to create, but requiring that jobs created are permanent, and full-time positions.
  • Changed the cap from $200 million in total, to $100 million annually.
  • Eliminate the cap on written agreements that the Michigan Strategic Program could enter into within a year.
  • Sunset the legislation 5 years after the effective date.

Research and Development (R&D) Tax Credit:
This week, the Michigan House Committee on Economic Development and Small Business heard testimony from bill sponsors and some stakeholders regarding the creation of a Research and Development (R&D) tax credit. House Bills 5099-5102 allow the Michigan Strategic Fund (MSF) to determine which eligible businesses receive a credit and create a $100 million annual pot that the MSF may distribute for R&D purposes. Although the MI Chamber is supportive of an R&D tax credit based on member feedback thus far, the structure outlined in the current package of bills is of concern because the credit is not broad-based and does not move the needle for new and existing Michigan businesses. Here’s a summary of this feedback so far as well as recommended prinicples. It is likely the committee votes on this package of bills next week.

“Although we generally agree and appreciate the sponsors emphasizing that R&D tax credits are a beneficial economic development tool, we believe it should be structured to benefit companies both attracting and retaining jobs in critical industries innovating in Michigan. Michigan’s goal for an R&D tax credit should be to improve Michigan’s business and economic climate for companies of all sizes and offer fair, simple, and impactful incentives.”

Recommended priniciples:

  • Fairness. To urge fairness for businesses that have already been investing in Michigan’s R&D space, we’d urge sponsors consider both new and existing businesses for eligibility, those that pay the Corporate Income Tax (CIT) and the Michigan Business Tax (MBT).
  • Simplicity and reliability. As written, the bill gives the Michigan Strategic Fund (MSF) unfettered authority to make subjective decisions about who receives a tax credit. Instead, look to the Michigan Department of Treasury to administer this program for two reasons:
    • Allowing Treasury to administer a broad-based credit, rather than an application-based credit, provides annual reliability and predictability for businesses seeking this relief.
    • A broad-based credit removes the immense hurdle eligible businesses would have to face to only apply for a credit. A simple broad-based credit ensures the incentive is as encouraging and desirable as possible.
  • Impactful. The $100 million annual cap, the $2 million cap per filer for large businesses and the $250,000 cap per filer for small businesses is too low and would not incentivize larger capital investments. Raising the aforementioned caps would allow for more impact.

Tell us what YOU think
The Michigan Chamber needs your feedback on the state’s business climate and the above changes to Michigan’s economic development incentives. Please take this quick survey or contact Leah Robinson at lrobinson@michamber.com.

Advocacy News – Oct. 20, 2023

Incentives have become an even hotter topic across the nation as competition for major job-creating investments increasingly heats up. This is true for Michigan as the state has lost out on significant projects and continues to lose overall population.

Background:
Most recently, in 2021 the Michigan Legislature created the Strategic Outreach and Attraction Reserve (SOAR) Fund, designed to allow Michigan to offer significant economic incentives for businesses to expand or build large projects in the Great Lakes State. Two related programs were also crafted then for attraction and retention purposes: the Critical Industry Program (CIP), a program that allows Michigan to use its dollars efficiently to bring or expand businesses in our state, and the Strategic Site Readiness Program (SSRP) focused on creating investment-ready sites to attract businesses. The Michigan Chamber of Commerce supported these efforts in 2021.

What’s happening now:
SOAR
The Michigan Senate Committee on Economic and Community Development has begun hearing testimony on Senate Bills 559-562 and 569 — legislation that would expand change the name of the SOAR Fund to the “Make it in Michigan Fund” (MMF) and create an additional program titled the “Michigan 360 Program,” focused on local community economic development projects and placemaking efforts.

The Michigan Chamber shared the following feedback and concerns to ensure funding mechanisms that allow Michigan to be as competitive as possible on the national stage. The MI Chamber looks forward to working with legislators as the bill package progresses.

  • Avoid new and subjective criteria for businesses applying for incentives that fall within the MMF.
    • Rationale: The current legislation specifies applying businesses must “support or enable progress” towards the federal Justice40 program and document they will “honor a decision by its workers to form a union and will commit not to interfere in unionization efforts.” This language lacks clarity and definition and inappropriately seeks to make subjective value judgments about the types of businesses worthy of consideration, which could close the door to projects from the start.
  • Don’t deprioritize the Critical Industry Program (CIP) and the Strategic Site Readiness Program (SSPR).
    • Rationale: Expanding the MMF to include the “Michigan 360 Program,” a program focused on local community economic development projects and placemaking, would weaken the original intent of the SOAR Fund and ultimately hinder Michigan’s ability to compete with other states for new jobs and investments. CIP and SSRP projects should remain the highest priority to ensure Michigan can compete for transformational projects.
  • Don’t divert dollars from the outset, lessening Michigan’s ability to compete by requiring economic assistance of no less than 20% of the total project investment for CIP and SSRP projects allocated to the Michigan 360 program.
    • Rationale: While local investments are certainly important, we are concerned that diverting dollars to new programs will further dilute Michigan’s attraction efforts. The 20% threshold should be lowered, made optional or come from another pot to ensure the original intent of the fund remains as powerful of an incentive as possible.

Good Jobs for Michigan (GJFM)
The  committee also heard testimony on Senate Bills 579-581, legislation that would revive the Good Jobs for Michigan (GJFM) program that sunset in 2019 and renaming the initiative to the Hire MI Program. GJFM was an effort to promote job growth by incentivizing companies to create and fill new positions at certain salary threshholds. In exchange, the program allows these businesses to retain their new employees’ income tax withholdings for certain time periods.

Under the legislation, changes to the Hire MI program are as follows:

  • Increasing the wage requirements for a job to be eligible.
  • Decreasing the number of jobs required by a business to create, but requiring that jobs created are permanent, and full-time positions.
  • Changed the cap from $200 million in total, to $100 million annually.
  • Eliminate the cap on written agreements that the Michigan Strategic Program could enter into within a year.
  • Sunset the legislation 5 years after the effective date.

Research and Development (R&D) Tax Credit:
This week, the Michigan House Committee on Economic Development and Small Business heard testimony from bill sponsors and some stakeholders regarding the creation of a Research and Development (R&D) tax credit. House Bills 5099-5102 allow the Michigan Strategic Fund (MSF) to determine which eligible businesses receive a credit and create a $100 million annual pot that the MSF may distribute for R&D purposes. Although the MI Chamber is supportive of an R&D tax credit based on member feedback thus far, the structure outlined in the current package of bills is of concern because the credit is not broad-based and does not move the needle for new and existing Michigan businesses. Here’s a summary of this feedback so far as well as recommended prinicples. It is likely the committee votes on this package of bills next week.

“Although we generally agree and appreciate the sponsors emphasizing that R&D tax credits are a beneficial economic development tool, we believe it should be structured to benefit companies both attracting and retaining jobs in critical industries innovating in Michigan. Michigan’s goal for an R&D tax credit should be to improve Michigan’s business and economic climate for companies of all sizes and offer fair, simple, and impactful incentives.”

Recommended priniciples:

  • Fairness. To urge fairness for businesses that have already been investing in Michigan’s R&D space, we’d urge sponsors consider both new and existing businesses for eligibility, those that pay the Corporate Income Tax (CIT) and the Michigan Business Tax (MBT).
  • Simplicity and reliability. As written, the bill gives the Michigan Strategic Fund (MSF) unfettered authority to make subjective decisions about who receives a tax credit. Instead, look to the Michigan Department of Treasury to administer this program for two reasons:
    • Allowing Treasury to administer a broad-based credit, rather than an application-based credit, provides annual reliability and predictability for businesses seeking this relief.
    • A broad-based credit removes the immense hurdle eligible businesses would have to face to only apply for a credit. A simple broad-based credit ensures the incentive is as encouraging and desirable as possible.
  • Impactful. The $100 million annual cap, the $2 million cap per filer for large businesses and the $250,000 cap per filer for small businesses is too low and would not incentivize larger capital investments. Raising the aforementioned caps would allow for more impact.

Tell us what YOU think
The Michigan Chamber needs your feedback on the state’s business climate and the above changes to Michigan’s economic development incentives. Please take this quick survey or contact Leah Robinson at lrobinson@michamber.com.