Renewable Energy Renaissance Zones

Summary

In 2006, Michigan enacted legislation allowing for the creation of Renewable Energy Renaissance Zones (RERZ). Renaissance zones offer significant tax benefits to facilities located within their boundaries. Facilities within a renaissance zone do not pay the Michigan Business Tax*, state education tax, personal and real property taxes, or local income taxes (where applicable). These taxes may be abated for up to 15 years, with the abatements being phased out in 25% increments over the last three years of the zone designation. For residents of renaissance zones designated before 2012, taxpayers are exempt from paying certain income taxes, if they have been a resident of the renaissance zone for 183 consecutive days.

For the purposes of renaissance zone designation, “renewable energy facility” means a facility that creates energy, fuels, or chemicals directly from the wind, the sun, trees, grasses, bio-solids, algae, agricultural commodities, processed products from agricultural commodities, or residues from agricultural processes, wood or forest processes, food production and processing, or the paper products industry. Renewable energy facility also includes a facility that creates energy, fuels, or chemicals from solid biomass, animal wastes, or landfill gases. Renewable energy facility also includes a facility that focuses on research, development, or manufacturing of systems or components of systems used to create energy, fuel, or chemicals from the items described in this subdivision. Renewable energy facility also includes a facility that focuses on research, development, or manufacturing of systems or components of systems that involve the conversion of chemical energy for advanced battery technology.

The original law allowed for the designation of up to 10 RERZs, but a 2008 amendment expanded the number to 15 and added a requirement that at least 5 of the zones focus primarily on the production of cellulosic biofuels. In order to have an area designated as an RERZ, a county or community must submit an application to the Michigan Strategic Fund Board (MSF). Renaissance zone designations are approved by the Michigan State Administrative Board based upon recommendations from the Michigan Strategic Fund (MSF). Evaluations will be made based on local economic impacts, job creation, project viability, and other relevant criteria. Renaissance zones must be one distinct, continuous geographic area and must be supported by a tax abatement resolution from the city, village, or township in which the facility is located.

Interested communities and businesses are encouraged to contact the Michigan Economic Development Corporation (MEDC) to discuss potential projects in detail.

* 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 Renaissance Zone credits, may choose to either continue to file under the MBT to continue claiming their credits, or file under the CIT.