Michigan legislation expands business development program


Terry Conley
Southfield (Detroit)
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Steve Carter
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Mike Eickhoff
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Brian Szymanski
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Jake Singletary
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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

Background 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

Commentary 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.

1 Act 458 (S.B. 40), Laws 2018, approved by governor on Dec. 26, 2018; Legislative Analysis of S.B. 40, Michigan House Fiscal Agency, Dec. 28, 2018; S.B. 40: Summary as Enacted, Michigan Senate Fiscal Agency, Jan. 24, 2019.
2 MICH. COMP. LAWS § 125.2088r(7)(d).
3 Act 250 (S.B. 556), Laws 2011, enacting MICH. COMP. LAWS § 125.2088r.
4 Michigan Business Development Program, Michigan Economic Development Corporation, Dec. 2016.
5 MICH. COMP. LAWS § 125.2088r(7)(d).
6 Id.
7 Id.
8 This application of the new definition is implied by an email sent by the Michigan Economic Development Corporation. Legislative Update – Positive Change for Economic Development, Michigan Economic Development Corporation, Jan. 18, 2019.

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