Refundable Photovoltaic Manufacturing Tax Credit

Summary

Note: Public Act 38 of 2011 repealed the Michigan Business Tax (MBT) and implemented the Corporate Income Tax (CIT). Public Act 39 was passed in conjunction with the CIT and allows for credits awarded under the MBT to be retained for the duration of the agreements. Businesses receiving certain credits, including MEGA credits, may choose to either continue to file under the MBT to continue claiming their credits, or file under the CIT. No additional MEGA credits will be awarded after 2011.

In September 2008, Michigan enacted legislation allowing businesses engaged in the development and manufacturing of photovoltaic (PV) energy, PV systems or other PV technologies to claim a tax credit against the Michigan Business Tax. The law was amended in 2009 to expand the availability of tax credits and extend a prior deadline associated with claiming the incentive. The law now allows an eligible taxpayer or a qualified taxpayer that constructs a qualifying PV manufacturing facility to claim a credit against the Michigan Business Tax, equal to 25% of the capital investment made in the new facility during the tax year, up to $15 million. In order to qualify for the tax credit, the business must enter into an agreement with the Michigan Economic Growth Authority (MEGA) by December 31, 2011 to build a qualifying facility. The MEGA is permitted to enter into an agreement with one eligible taxpayer for a tax credit of greater than $15 million but not more than $25 million.

The total amount of tax credits allowed is limited to $75 million. The definitions of eligible taxpayer and qualified taxpayer are distinct, and contain different qualifying criteria related to capital investment and job creation. As highlighted above, this has ramifications for determining the maximum amount of the tax credit that might be claimed. A qualified taxpayer must enter an agreement with the MEGA to create at least 500 new jobs and make a minimum capital investment of $50 million, of which $25 million must take place prior to the issuance of a tax credit certificate. An eligible taxpayer must enter an agreement with the MEGA to create at least 250 qualified new jobs and make a minimum capital investment of $100 million, of which $25 million must take prior to the issuance of a tax credit certificate. The tax credit may generally be taken over two years in equal installments, although the MEGA may enter into one agreement that allows a taxpayer to take the full $15 million tax credit in the same year in which a tax credit certificate is issued. Credits that exceed the taxpayer's tax liability for a given year are refundable.

Originally, this credit allowed a business that made a capital investment in a qualified facility of at least $50 million and with the expectation of creating at least 700 new jobs to claim a tax credit of 50% of the capital costs associated with building the facility up to $25 million. However, a business was required to enter into an agreement to build such a facility with the Michigan Economic Growth Authority by November 1, 2008. Thus, it appears that the law was originally intended as an incentive for a specific manufacturer that had already expressed interest in building a PV manufacturing facility.