Bill package to revamp economic incentive programs pass Michigan Senate

The Michigan Senate wrapped up its last in-person day before its spring break this week by passing a flurry of economic development legislation.

That includes bills to create a research and development tax credit, resurrect a jobs program that expired in 2019, and reshape an economic incentives program aimed at attracting large-scale business investment.

Lawmakers created the Strategic Outreach and Attraction Reserve, commonly known as the SOAR Fund, in 2021 after the state missed out on a massive project that Ford Motor Company had been shopping around to other states.

It currently has two pots of money, one dedicated toward site readiness and another for critical infrastructure.

A bill package passed this week would add a third pot of money, the Michigan 360 program, to shift the state toward what sponsors describe as “holistic economic development.”

“It will require that 50% of all of the dollars that we allocate into the SOAR fund be utilized for these transformative community investments,” Sen. Mallory McMorrow (D-Royal Oak) said in a floor speech.

The bills aim to address a common criticism of the SOAR Fund, that it has benefited businesses and companies with grants and tax breaks but provided little to Michigan residents.

SOAR has been used to pay for electric vehicle battery production and other projects from companies like Ford and General Motors.  It’s also at the center of other projects Republicans have heavily criticized, like a battery plant planned for the Big Rapids area that would be owned by Gotion Inc., a subsidiary of a Chinese company.

McMorrow compared the state’s failed 2017 bid to offer the online retailer Amazon a large amount of money for its second headquarters to Virginia’s smaller bid that featured more community investments, which eventually won.

She said Michigan 360 would make the state more competitive.

“By focusing on the fundamentals, including transit, housing and climate-resilient durable infrastructure, businesses and talent will seek to locate here and drive further investment in thriving communities,” McMorrow said.

But not everyone is convinced.

Ahead of voting, Sen. Thomas Albert (R-Lowell) was dismissive of the SOAR program overall.

“SOAR is an objective disaster and it should be repealed,” Albert said.

Aside from creating the Michigan 360 program, the bills would rebrand the SOAR Fund as the Make it in Michigan Fund.

Senate Minority Leader Aric Nesbitt (R-Porter Twp.) said the name didn’t matter as long as the policies were the same. He spent around a minute listing out various economic development programs the state has tried in recent years, including programs known as MEGA, the Michigan Mainstreet Grant Program, and the Michigan Economic Opportunity Fund.

“And just when you thought the public relations folks have run out of catchy names, that it came up with to Make it in Michigan, or whatever you call it, it’s the same failed concept. Giving tax dollars to massive corporations, some of the most profitable corporations in the world, often foreign companies, in the hopes they create more jobs in Michigan,” Nesbitt said.

The bills passed along party-line votes in the Senate. But they’ll likely need some Republican buy-in to make it past the House of Representatives.

House Minority Leader Matt Hall (R-Richland Twp.) said he needs to see more accountability from the program before he can support it.

“I want to see things that address clawing back money if they lay off people. I want to put things in there that address the fact that we should have small and medium businesses benefit from this too, not just big companies,” Hall told reporters Wednesday.

Hall listed out several items, like restoring Michigan’s status as a so-called “Right to Work” state, as examples of places he’d like to see the state’s economic policy headed.

Meanwhile, the legislation to restore and rebrand the old Good Jobs for Michigan Program is also heading to the House of Representatives. It would be named HIRE, or the High-wage Incentive for Regional Employment in Michigan Program.

The program aimed to incentivize programs to bring higher paying jobs to Michigan, something Hall said had been an issue with SOAR.

“SOAR doesn’t care what the wages are. That’s one of the things they got right about HIRE and Good Jobs, was, in those programs, they have to be above the median wage,” Hall said.

Sen. Mary Cavanagh (D-Redford) was a co-sponsor of the HIRE legislation. She said the package would differ from previous jobs programs.

That’s partially by requiring businesses to bring in at least either 250 new jobs with a median wage equal to or above 150% of the regional median wage or 50 new jobs at 175% or more above the median wage.

“So not only high paying jobs, but also a return on investment timeline, as well as a little bit of an environmental piece and making sure that the projects that are coming in here in Michigan are projects that we want to succeed and help our residents and help our communities,” Cavanagh said.

While the Make it in Michigan and HIRE bills are heading to the House, some of the research and development tax credit legislation has cleared both legislative chambers and is heading to the governor.

The bills would set tiered amounts for how much a business could claim, depending on its size. That tax break amount would also depend on a company’s base-level spending on research and development in an average year.

Under the plan, all qualifying companies could claim a tax credit for 3% of what they spend on R&D in a year. That would be added on top of a percentage for R&D spending over their usual base level.

For companies with 250 employees or more, that would be 10% of what’s above average spending. For smaller companies, that number would be 15%.

The bills would cap how much larger businesses could claim under the tax credit in a year at $2 million annually. Smaller businesses could claim up to $250,000 each year.

Though there would be some opportunities to claim a larger credit if the eligible R&D involves a research university.

Michigan is currently one of the few midwestern states without a research and development tax credit, according to analysis of an older version of the package from the non-partisan House Fiscal Agency.

Each bill in the package passed the Senate with both bipartisan support and opposition.

Three bills in the package, HBs 4368, 5099, and 5102 are cleared for the governor’s signature. Meanwhile HB 5100 and 5101 need to return to the House for that chamber to agree to changes the Senate made.