Business Costs

Southwest Michigan First's experience with and knowledge of business taxes and incentives allow us to help companies identify and understand the opportunities available through the State of Michigan, counties and individual municipalities in our region. Please contact us at 269.553.9588 for assistance in deciding which programs might work for you and facilitating the process between your company and the above mentioned government organizations. 

Business Taxes What you need to know...
Michigan Corporate Income Tax

The Michigan Corporate Income Tax (CIT) was signed into law by Governor Rick Snyder on May 25, 2011. The CIT imposes a 6% corporate income tax on C corporations and taxpayers taxed as corporations federally. The CIT has one credit, the small business alternative credit, which offers an alternate tax rate of 1.8% of adjusted business income. There are no other credits, except those under the MBT election (addressed below). Insurance companies and financial institutions pay alternative taxes. The CIT replaces the Michigan Business Tax (MBT) for most taxpayers, effective January 1, 2012. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT. The gross receipts threshold does not apply to financial institutions or insurance companies.

Additionally, on May 25, 2011, the Governor signed into law the MBT election which enables certain MBT taxpayers with certificated or awarded credits to continue using those credits once the CIT is in place. Such taxpayers may elect to continue filing and paying under the MBT until the expiration of the previously-awarded certificated credits.

Source: Michigan Department of Treasury

Inventory Tax In the State of Michigan, there is no inventory tax, no matter where you locate. All inventory is exempt from state and local taxes.
Property Tax Michigan’s property tax system includes competitive, cost-effective exemptions and abatement programs. Firms receive automatic 24-mill reduction on industrial personal property and automatic 12-mill reduction on commercial personal property. In addition, firms may still apply for tax abatements and property rehabilitation incentives.

Full property tax exemptions apply to inventory, special tooling and pollution control equipment.

Homesteads are defined as primary residences that are officially occupied by May 1 of the recorded year. All other residences, including secondary residences, are considered non-homestead.

Property taxes are a function of a property's taxable value and the applicable millage rate. The millage rate is the amount of tax paid per every $1,000 of taxable value. That value is roughly equal to 50% of the fair market value of the property. These taxes are levied on two types of property in the State of Michigan, "real property" (land and buildings) and "personal property" (machines, equipment, fixtures and signs used by businesses). Each year, the City Assessor's office estimates the value of all property in the city -- both real and personal -- as of December 31, otherwise known as "tax day." The valuation and condition of the owner's property on this date is used to determine its value. A "Notice of Assessment, Taxable Valuation and Property Classification" is then sent to all property owners about March 1. The notice indicates three values for each property:

  • Assessed Value is equal to approximately half of the estimated market value of the property.
  • State Equalized Value (SEV) is the Assessed Value multiplied by an "equalization factor," a number that is determined by the County Equalization Department which is usually 1. Therefore, Assessed Value and State Equalized Value are usually the same.
  • Taxable Value is the value used to compute the taxes on the property.

Property taxes are calculated using the following formula: Taxable Value ÷ $1,000 x Millage Rate = Tax Levy (amount of taxes to be paid).

Also of note, annual property assessment increases are limited by the State Constitution to the lesser of 5% or the rate of inflation.

As a benefit to businesses, property tax exemptions are available for:

  1. Special tools, dies, jigs and patterns in manufacturing.
  2. Air and water pollution control abatement equipment.

See the most current millage rates from the Kalamazoo County Equalization Department.

Personal Property Tax

In an ongoing effort to make the state a more attractive place for businesses to invest and grow, Michigan is phasing out its Personal Property Tax (PPT) for most businesses beginning in 2014. This reform will substantially reduce compliance and administrative costs for businesses and will be especially attractive to manufacturers who rely on expensive capital investments in tools and other equipment.

School Tax School Tax in Michigan is figured into Property Tax and is part of the millage rates indicated above.
Local Sales Tax 0% as Michigan allows no local sales tax.
Sales Tax 6% is the state sales tax on sales of tangible goods. No local sales taxes are allowed. Purchases of manufacturing equipment, pollution control equipment, and energy used in the industrial process are fully exempt from sales taxes.
Real Estate Sales Tax If the value of the real estate transferred is $100.00 or more, a one-time payment of the state and county transfer tax is required.
  • Rate of County tax is $.55 for each $500.00 or fraction thereof.
  • Rate of State tax is $3.75 for each $500.00 or fraction thereof.
License Tax $0
Local Business Tax/Tax for Business License

$0

Southwest Michigan First will work with the appropriate Michigan state agencies, including the Department of Environmental Quality Assistance and the Department of Energy, Labor & Economic Growth, to ensure that the company obtains the necessary state licenses to do business.

Personal Income Tax Michigan's personal income tax rate is one of the lowest in the nation - a flat 4.25%.
Unemployment Insurance To protect workers who lose their jobs through no fault of their own, Michigan businesses pay unemployment insurance on the first $9,000 of wages paid to each worker in a calendar year. Established employers may pay as little as 0.06%.
Workers' Compensation Michigan has a competitive workers' compensation (WC) insurance system. Michigan’s "open competition" system allows market forces to set the WC insurance rates, thus enabling companies to shop among nearly 300 insurance carriers for the best, lowest-cost options. Self-insurance, group self-insurance, deductible plans and other options are available, as well.

The information provided above is only a summary of the most current information available. Southwest Michigan First assumes no liability for its use in legal, tax, accounting or other professional matters. Please consult a tax specialist when considering all business ventures.

 

Incentive Program Benefit Eligibility (not comprehensive)
Renaissance Zones Renaissance Zones are virtually tax free geographical areas for any business or resident presently in, or moving into, the zone. Must physically be located in:
Brownfield Redevelopment CFinancial assistance is available to help offset the cost of redeveloping contaminated, blighted or functionally obsolete property. Utilizing tax increment financing, which captures the new property taxes generated by a development project, a business can be reimbursed on a dollar for dollar basis over time for certain Eligible Activities. Eligible Activities may include environmental site assessment & remediation, demolition, lead & asbestos abatement, site preparation and public infrastructure improvements.

Property must be contaminated, blighted, functionally obsolete, or owned by the Land Bank.

Additional Brownfield Redevelopment information available through the following State agencies:

Industrial Property Tax Abatement (P.A. 198) Industrial property tax abatements provide incentives for Michigan manufacturers to build new plants, expand existing plants, renovate aging plants or add new machinery and equipment. Also eligible for the abatement are high-technology operations defined as advanced computing, advanced materials, biotechnology, electronic device technology, engineering or laboratory testing, medical device technology, product research and development and advanced vehicles technology. Each municipality may have their own policy and terms for the length of the abatement.
Personal Property Tax Relief in Distressed Communities (P.A. 328) This abatement allows distressed communities, county seats and certain border county communities to abate personal property taxes by the full millage rate on new investments made by eligible businesses. Cities, villages and townships that contain distressed areas (as defined under the Michigan State Housing Development Authority Act), and all county seats (as defined under the Neighborhood Enterprise Zone Act) are eligible to participate.
Border County Incentives

A new warehouse, distribution or logistic facility that locates in an eligible border county may receive a 50% reduction in property taxes through P.A. 198. To qualify, at least 90% of the facility, excluding the surrounding green space, must be used for the above purposes and occupy a building or structure of at least 100,000 square feet in size.

Eligible businesses that locate in a border county and receive approval from the Michigan State Treasurer and President of the Michigan Strategic Fund may receive a 100% personal property tax abatement on new investment through P.A. 328.

Eligible businesses that locate in a county that borders another state or Canada may qualify for special tax incentives under P.A. 198 and P.A. 328.  Eligible counties in Southwest Michigan include Berrien, Branch, Cass and St. Joseph.
SmartZones SmartZones provide distinct geographical locations where technology-based firms, entrepreneurs and researchers locate in close proximity top all of the community assets that assist in their endeavors. Companies located in the SmartZones benefit from resource collaborations, Small Business Innovation Research assistance, Small Business Technology Transfer assistance and venture capital preparation and introductions. Regional SmartZone locations are:
Michigan Works! To retain the current workforce, the Michigan Works! program offers several workforce assistance programs, including Employee Enhancement Training, through the Incumbent Worker Program. This program allows companies to spend up to $3,500 to train each employee, depending on the training program. Services include screening and hiring services, on-the-job training funds, Worker Opportunity Tax Credits and ongoing training strategies. Past training programs have included computer skills, LEAN manufacturing, ISO and trade apprenticeships.
Utility and Energy Savings Programs Consumers Energy – Substantial business energy savings rebates are available for achieving energy efficiencies.

Indiana Michigan Power Economic Development Rate – Companies may apply for an economic development rider applicable to any new load (as defined by the tariff) that is installed at a plant. The application will need to be filed in 2011, as the rider expires at the end of the year and there are no known plans for extension.

Eligibility depends on the location and service provider.
Western Michigan University (WMU) Green Manufacturing Initiative This grant-funded program at WMU is designed to create more energy efficient and environmentally benign processes in order to enhance productivity and increase output of manufacturers. The team assigned to the initiative includes engineering students who provide the actual assessment and recommendations.  
Procurement Technical Assistance Centers Procurement Technical Assistance Centers (PTACs) of Michigan are your first step in getting government contracts and can assist your company throughout the entire process from start to finish: registering to become a government contract, identifying bid opportunities, walking you through and simplifying the bidding process, helping you to expedite payments through electronic invoicing and even helping you post award with the evaluation of contract awards.  

 

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