T +1 248 233 1241
T +1 312 858 3676
T +1 312 602 8929
T +1 312 602 8173
T +1 312 602 8530
Effective March 29, 2019, Michigan has enacted legislation that modifies and expands the definition of a “qualified new job” as it pertains to the Michigan Business Development Program (“MBDP”).1
The definition of a qualified new job now includes an individual who is not a resident of Michigan but is employed by a business at a project location in Michigan.2
The MBDP was enacted in 2011 to encourage job creation and capital investment in Michigan, and is overseen by the Michigan Strategic Fund in conjunction with the Michigan Economic Development Corporation.3
This program provides grants, low-interest financing, or loan guarantees to expanding businesses that create a substantial amount of jobs and/or commit to significant capital investment within the state.4
The MBDP is a highly discretionary program that provides the Michigan Economic Development Corporation the ability to negotiate the form and level of investment (subject to approval by the Michigan Strategic Fund) with a potential applicant. In order to enter into negotiations, the applicant must commit to minimum thresholds including the creation of at least 50 qualified new jobs. However, the job creation requirement is reduced to 25 if the applicant is located in a rural county or is considered a high-technology business. As part of the negotiation process, applicants must be able to demonstrate their need for the program’s support and have an alternative project site identified.
Expansion of qualified new jobs
Prior to amendment, a qualified new job was defined as a job held by a resident of the state whose Michigan income taxes are withheld by an employer, that exceeds the number of jobs maintained in the state prior to the expansion or new location.5
The recent legislation amends this definition to include “an individual who is not a resident of this state and is employed by a business at a project location that is located in this state.”6
An approved company must certify in writing, at the time of disbursement, that not less than 75% of the employees of that business are residents of the state.7
The amended definition of a qualified new job only applies to agreements executed after March 29, 2019. Existing MBDP agreements will be governed using the prior definition of a qualified new job.8
Expanding the definition of a qualified new job will make it easier for businesses considering an expansion or new location along Michigan’s border with other states or with Canada to qualify for the MBDP. Given the relatively low unemployment rates and increasing competitiveness of the labor market, Michigan businesses have been struggling to fill employment positions with Michigan residents. This has made it difficult for companies to meet the hiring obligations contained in their MBDP agreements and redeem the financial support provided by the MBDP. By allowing companies to hire a certain percentage of out-of-state residents, Michigan is supporting the growth of Michigan businesses and making Detroit and other border cities more competitive with cities more centrally located in the state. While the expansion of this definition does not benefit existing recipients of the MBDP, businesses should consider the impact on future expansions.
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.