Michigan House Bill HB5119

Michigan 2025-2026 Regular Session

• Introduced: 10/23/25
• Refer: 10/23/25

Caption

Individual income tax: withholding requirements; work opportunity withholdings tax credit for certain tax exempt organizations; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 714. TIE BAR WITH: HB 5118'25

Impact

The introduction of HB 5119 is likely to have significant implications for state tax regulations, primarily benefiting organizations that typically operate with limited resources. Supporters of the bill argue that it will enhance employment prospects in underrepresented communities by incentivizing tax-exempt organizations to engage with individuals who may otherwise face employment barriers. This move is seen as a practical approach toward economic development, indirectly impacting the state’s overall employment landscape. However, employers will need to navigate the new requirements for claiming these credits, ensuring compliance with both state and federal guidelines to maximize the available benefits.

Summary

House Bill 5119 aims to amend the Income Tax Act of 1967 by introducing a new provision for a work opportunity tax credit specifically designed for tax-exempt organizations under section 501(c) of the Internal Revenue Code. This credit will allow eligible employers to claim a tax credit against the withholdings tax for qualified wages paid to qualified employees, which are defined in the bill as employees who reside in Michigan and are certified as part of a targeted group by the Michigan unemployment insurance agency. The credit amount specified is set at 50% of what the employer could claim under the federal work opportunity tax credit rules, thus offering an incentive for these organizations to hire individuals from targeted groups, effectively aiming to boost employment opportunities for marginalized workers beginning with tax years starting January 1, 2026.

Contention

While proponents champion the bill for its potential positive impact on employment and economic inclusivity, concerns have been raised regarding the long-term implications of granting such tax credits. Critics argue that while the intent is commendable, it may inadvertently divert essential tax revenue away from state programs and services, thereby impacting the state's overall funding capacity. Additionally, there are apprehensions about how these tax credits will be marketed and utilized by employers, prompting discussions about accountability measures to ensure that the benefits truly reach the targeted populations and do not merely serve as an advantage for organizations without tangible outcomes in increased employment opportunities.