Michigan House Bill HB5925

Michigan 2025-2026 Regular Session

• Introduced: 4/30/26
• Refer: 4/30/26

Caption

Corporate income tax: deductions; federal deduction for certain outsourcing expenses; add back. Amends sec. 623 of 1967 PA 281 (MCL 206.623).

Impact

If passed, this bill will fundamentally alter the way corporate income tax is calculated for businesses operating within Michigan. Specifically, it sets a corporate income tax rate at 6.0% and introduces a framework for adding back certain deductions related to outsourcing activities. The bill's measures aim to entice businesses by allowing deductions for expenses linked to operations that were previously based in the state, which could shift the tax landscape significantly for corporate entities with cross-state business activities.

Summary

House Bill 5925 aims to amend the Income Tax Act of 1967, specifically targeting Section 623, which pertains to the corporate income tax obligations of businesses operating within Michigan. The main focus of the bill is to define and refine the corporate income tax base, which directly affects how businesses report and allocate their taxes. A key provision in this bill is the introduction of deductions for certain expenses considered as 'specified outsourcing expenses', which can include trade or business expenses incurred due to relocating business operations outside of Michigan.

Conclusion

Overall, House Bill 5925 represents a significant potential shift in Michigan's corporate tax code, aiming to adapt to modern business practices, especially those involving outsourcing. The resulting implications for corporate taxation, local economies, and small businesses underscore the need for careful consideration as the bill progresses through the legislative process.

Contention

However, there are notable points of contention regarding this bill. Advocates of the bill argue that it will encourage businesses to retain or relocate their operations within Michigan by providing tax incentives for certain expenditures. Critics, on the other hand, caution that such measures may disproportionately benefit larger corporations at the expense of small businesses that cannot leverage these outsourcing deductions. There are also concerns that encouraging businesses to relocate their operations could undermine local economies and job markets while shifting the tax burden to other entities.