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SB-301, As Passed Senate, April 21, 2026
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SUBSTITUTE FOR
SENATE BILL NO. 301
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 30 and 623 (MCL 206.30 and 206.623), section
30 as amended by 2025 PA 24 and section 623 as amended by 2021 PA
135, and by adding sections 279 and 679.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 30. (1) "Taxable income" means, for a person other than a 1
corporation, estate, or trust, adjusted gross income as defined in 2
the internal revenue code subject to the following adjustments 3
under this section: 4
(a) Add gross interest income and dividends derived from 5
obligations or securities of states other than Michigan, in the 6
same amount that has been excluded from adjusted gross income less 7
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related expenses not deducted in computing adjusted gross income 1
because of section 265(a)(1) of the internal revenue code. 2
(b) Add taxes on or measured by income to the extent the taxes 3
have been deducted in arriving at adjusted gross income including 4
any direct or indirect allocated share of taxes paid by a flow-5
through entity under part 4. 6
(c) Add losses on the sale or exchange of obligations of the 7
United States government, the income of which this state is 8
prohibited from subjecting to a net income tax, to the extent that 9
the loss has been deducted in arriving at adjusted gross income. 10
(d) Deduct, to the extent included in adjusted gross income, 11
income derived from obligations, or the sale or exchange of 12
obligations, of the United States government that this state is 13
prohibited by law from subjecting to a net income tax, reduced by 14
any interest on indebtedness incurred in carrying the obligations 15
and by any expenses incurred in the production of that income to 16
the extent that the expenses, including amortizable bond premiums, 17
were deducted in arriving at adjusted gross income. 18
(e) Deduct, to the extent included in adjusted gross income, 19
the following: 20
(i) Compensation, including retirement or pension benefits, 21
received for services in the Armed Forces of the United States. 22
(ii) Retirement or pension benefits under the railroad 23
retirement act of 1974, 45 USC 231 to 231v. 24
(iii) Retirement or pension benefits received for services in 25
the Michigan National Guard. 26
(f) Deduct the following to the extent included in adjusted 27
gross income subject to the limitations and restrictions set forth 28
in subsection (9), (10), or (11), as applicable: 29
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(i) Retirement or pension benefits received from a federal 1
public retirement system or from a public retirement system of or 2
created by this state or a political subdivision of this state. 3
(ii) Retirement or pension benefits received from a public 4
retirement system of or created by another state or any of its 5
political subdivisions if the income tax laws of the other state 6
permit a similar deduction or exemption or a reciprocal deduction 7
or exemption of a retirement or pension benefit received from a 8
public retirement system of or created by this state or any of the 9
political subdivisions of this state. 10
(iii) Social Security benefits as defined in section 86 of the 11
internal revenue code. 12
(iv) Beginning on and after January 1, 2007, retirement or 13
pension benefits not deductible under subparagraph (i) or 14
subdivision (e) from any other retirement or pension system or 15
benefits from a retirement annuity policy in which payments are 16
made for life to a senior citizen, to a maximum of $42,240.00 for a 17
single return and $84,480.00 for a joint return. The maximum 18
amounts allowed under this subparagraph shall be reduced by the 19
amount of the deduction for retirement or pension benefits claimed 20
under subparagraph (i) or subdivision (e) and by the amount of a 21
deduction claimed under subdivision (p). For the 2008 tax year and 22
each tax year after 2008, the maximum amounts allowed under this 23
subparagraph shall be adjusted by the percentage increase in the 24
United States Consumer Price Index for the immediately preceding 25
calendar year. The department shall annualize the amounts provided 26
in this subparagraph as necessary. 27
(v) The amount determined to be the section 22 amount eligible 28
for the elderly and the permanently and totally disabled credit 29
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provided in section 22 of the internal revenue code. 1
(g) Adjustments resulting from the application of section 271. 2
(h) Adjustments with respect to estate and trust income as 3
provided in section 36. 4
(i) Adjustments resulting from the allocation and 5
apportionment provisions of chapter 3. 6
(j) Deduct the following payments made by the taxpayer in the 7
tax year: 8
(i) The amount of a charitable contribution made to the advance 9
tuition payment fund created under section 9 of the Michigan 10
education trust act, 1986 PA 316, MCL 390.1429. 11
(ii) The amount of payment made under an advance tuition 12
payment contract as provided in the Michigan education trust act, 13
1986 PA 316, MCL 390.1421 to 390.1442. 14
(iii) The amount of payment made under a contract with a private 15
sector investment manager that meets all of the following criteria: 16
(A) The contract is certified and approved by the board of 17
directors of the Michigan education trust to provide equivalent 18
benefits and rights to purchasers and beneficiaries as an advance 19
tuition payment contract as described in subparagraph (ii). 20
(B) The contract applies only for a state institution of 21
higher education as defined in the Michigan education trust act, 22
1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior 23
college in Michigan. 24
(C) The contract provides for enrollment by the contract's 25
qualified beneficiary in not less than 4 years after the date on 26
which the contract is entered into. 27
(D) The contract is entered into after either of the 28
following: 29
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(I) The purchaser has had the purchaser's offer to enter into 1
an advance tuition payment contract rejected by the board of 2
directors of the Michigan education trust, if the board determines 3
that the trust cannot accept an unlimited number of enrollees upon 4
an actuarially sound basis. 5
(II) The board of directors of the Michigan education trust 6
determines that the trust can accept an unlimited number of 7
enrollees upon an actuarially sound basis. 8
(k) If an advance tuition payment contract under the Michigan 9
education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, or 10
another contract for which the payment was deductible under 11
subdivision (j) is terminated and the qualified beneficiary under 12
that contract does not attend a university, college, junior or 13
community college, or other institution of higher education, add 14
the amount of a refund received by the taxpayer as a result of that 15
termination or the amount of the deduction taken under subdivision 16
(j) for payment made under that contract, whichever is less. 17
(l) Deduct from the taxable income of a purchaser the amount 18
included as income to the purchaser under the internal revenue code 19
after the advance tuition payment contract entered into under the 20
Michigan education trust act, 1986 PA 316, MCL 390.1421 to 21
390.1442, is terminated because the qualified beneficiary attends 22
an institution of postsecondary education other than either a state 23
institution of higher education or an institution of postsecondary 24
education located outside this state with which a state institution 25
of higher education has reciprocity. 26
(m) Add, to the extent deducted in determining adjusted gross 27
income, the net operating loss deduction under section 172 of the 28
internal revenue code. 29
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(n) Deduct a net operating loss deduction for the taxable year 1
as determined under section 172 of the internal revenue code 2
subject to the modifications under section 172(b)(2) of the 3
internal revenue code and subject to the allocation and 4
apportionment provisions of chapter 3 for the taxable year in which 5
the loss was incurred. 6
(o) Deduct, to the extent included in adjusted gross income, 7
benefits from a discriminatory self-insurance medical expense 8
reimbursement plan. 9
(p) Beginning on and after January 1, 2007, subject to any 10
limitation provided in this subdivision, a taxpayer who is a senior 11
citizen may deduct to the extent included in adjusted gross income, 12
interest, dividends, and capital gains received in the tax year not 13
to exceed $9,420.00 for a single return and $18,840.00 for a joint 14
return. The maximum amounts allowed under this subdivision shall be 15
reduced by the amount of a deduction claimed for retirement or 16
pension benefits under subdivision (e) or a deduction claimed under 17
subdivision (f)(i), (ii), (iv), or (v). For the 2008 tax year and each 18
tax year after 2008, the maximum amounts allowed under this 19
subdivision shall be adjusted by the percentage increase in the 20
United States Consumer Price Index for the immediately preceding 21
calendar year. The department shall annualize the amounts provided 22
in this subdivision as necessary. The deduction under this 23
subdivision is not available to a senior citizen born after 1945. 24
(q) Deduct, to the extent included in adjusted gross income, 25
all of the following: 26
(i) The amount of a refund received in the tax year based on 27
taxes paid under this part and any direct or indirect allocated 28
share of a refund received by a flow-through entity under part 4. 29
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(ii) The amount of a refund received in the tax year based on 1
taxes paid under the city income tax act, 1964 PA 284, MCL 141.501 2
to 141.787. 3
(iii) The amount of a credit received in the tax year based on a 4
claim filed under sections 520 and 522 to the extent that the taxes 5
used to calculate the credit were not used to reduce adjusted gross 6
income for a prior year. 7
(r) Add the amount paid by the state on behalf of the taxpayer 8
in the tax year to repay the outstanding principal on a loan taken 9
on which the taxpayer defaulted that was to fund an advance tuition 10
payment contract entered into under the Michigan education trust 11
act, 1986 PA 316, MCL 390.1421 to 390.1442, if the cost of the 12
advance tuition payment contract was deducted under subdivision (j) 13
and was financed with a Michigan education trust secured loan. 14
(s) Deduct, to the extent included in adjusted gross income, 15
any amount, and any interest earned on that amount, received in the 16
tax year by a taxpayer who is a Holocaust victim as a result of a 17
settlement of claims against any entity or individual for any 18
recovered asset pursuant to the German act regulating unresolved 19
property claims, also known as Gesetz zur Regelung offener 20
Vermogensfragen, as a result of the settlement of the action 21
entitled In re: Holocaust victim assets litigation, CV-96-4849, CV-22
96-5161, and CV-97-0461 (E.D. NY), or as a result of any similar 23
action if the income and interest are not commingled in any way 24
with and are kept separate from all other funds and assets of the 25
taxpayer. As used in this subdivision: 26
(i) "Holocaust victim" means a person, or the heir or 27
beneficiary of that person, who was persecuted by Nazi Germany or 28
any Axis regime during any period from 1933 to 1945. 29
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(ii) "Recovered asset" means any asset of any type and any 1
interest earned on that asset, including, but not limited to, bank 2
deposits, insurance proceeds, or artwork owned by a Holocaust 3
victim during the period from 1920 to 1945, withheld from that 4
Holocaust victim from and after 1945, and not recovered, returned, 5
or otherwise compensated to the Holocaust victim until after 1993. 6
(t) Deduct all of the following: 7
(i) To the extent not deducted in determining adjusted gross 8
income, contributions made by the taxpayer in the tax year less 9
qualified withdrawals made in the tax year from education savings 10
accounts, calculated on a per education savings account basis, 11
pursuant to the Michigan education savings program act, 2000 PA 12
161, MCL 390.1471 to 390.1486, not to exceed a total deduction of 13
$5,000.00 for a single return or $10,000.00 for a joint return per 14
tax year. The amount calculated under this subparagraph for each 15
education savings account shall not be less than zero. 16
(ii) To the extent included in adjusted gross income, interest 17
earned in the tax year on the contributions to the taxpayer's 18
education savings accounts if the contributions were deductible 19
under subparagraph (i). 20
(iii) To the extent included in adjusted gross income, 21
distributions that are qualified withdrawals from an education 22
savings account to the designated beneficiary of that education 23
savings account. 24
(u) Add, to the extent not included in adjusted gross income, 25
the amount of money withdrawn by the taxpayer in the tax year from 26
education savings accounts, not to exceed the total amount deducted 27
under subdivision (t) in the tax year and all previous tax years, 28
if the withdrawal was not a qualified withdrawal as provided in the 29
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Michigan education savings program act, 2000 PA 161, MCL 390.1471 1
to 390.1486. This subdivision does not apply to withdrawals that 2
are less than the sum of all contributions made to an education 3
savings account in all previous tax years for which no deduction 4
was claimed under subdivision (t), less any contributions for which 5
no deduction was claimed under subdivision (t) that were withdrawn 6
in all previous tax years. 7
(v) A taxpayer who is a resident tribal member may deduct, to 8
the extent included in adjusted gross income, all nonbusiness 9
income earned or received in the tax year and during the period in 10
which an agreement entered into between the taxpayer's tribe and 11
this state pursuant to section 30c of 1941 PA 122, MCL 205.30c, is 12
in full force and effect. As used in this subdivision: 13
(i) "Business income" means business income as defined in 14
section 4 and apportioned under chapter 3. 15
(ii) "Nonbusiness income" means nonbusiness income as defined 16
in section 14 and, to the extent not included in business income, 17
all of the following: 18
(A) All income derived from wages whether the wages are earned 19
within the agreement area or outside of the agreement area. 20
(B) All interest and passive dividends. 21
(C) All rents and royalties derived from real property located 22
within the agreement area. 23
(D) All rents and royalties derived from tangible personal 24
property, to the extent the personal property is utilized within 25
the agreement area. 26
(E) Capital gains from the sale or exchange of real property 27
located within the agreement area. 28
(F) Capital gains from the sale or exchange of tangible 29
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personal property located within the agreement area at the time of 1
sale. 2
(G) Capital gains from the sale or exchange of intangible 3
personal property. 4
(H) All pension income and benefits, including, but not 5
limited to, distributions from a 401(k) plan, individual retirement 6
accounts under section 408 of the internal revenue code, or a 7
defined contribution plan, or payments from a defined benefit plan. 8
(I) All per capita payments by the tribe to resident tribal 9
members, without regard to the source of payment. 10
(J) All gaming winnings. 11
(iii) "Resident tribal member" means an individual who meets all 12
of the following criteria: 13
(A) Is an enrolled member of a federally recognized tribe. 14
(B) The individual's tribe has an agreement with this state 15
pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in 16
full force and effect. 17
(C) The individual's principal place of residence is located 18
within the agreement area as designated in the agreement under sub-19
subparagraph (B). 20
(w) Eliminate all of the following: 21
(i) Income from producing oil and gas to the extent included in 22
adjusted gross income. 23
(ii) Expenses of producing oil and gas to the extent deducted 24
in arriving at adjusted gross income. 25
(x) Deduct all of the following: 26
(i) To the extent not deducted in determining adjusted gross 27
income, contributions made by the taxpayer in the tax year less 28
qualified withdrawals made in the tax year from an ABLE savings 29
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account, pursuant to the Michigan achieving a better life 1
experience (ABLE) program act, 2015 PA 160, MCL 206.981 to 206.997, 2
not to exceed a total deduction of $5,000.00 for a single return or 3
$10,000.00 for a joint return per tax year. The amount calculated 4
under this subparagraph for an ABLE savings account shall not be 5
less than zero. 6
(ii) To the extent included in adjusted gross income, interest 7
earned in the tax year on the contributions to the taxpayer's ABLE 8
savings account if the contributions were deductible under 9
subparagraph (i). 10
(iii) To the extent included in adjusted gross income, 11
distributions that are qualified withdrawals from an ABLE savings 12
account to the designated beneficiary of that ABLE savings account. 13
(y) Add, to the extent not included in adjusted gross income, 14
the amount of money withdrawn by the taxpayer in the tax year from 15
an ABLE savings account, not to exceed the total amount deducted 16
under subdivision (x) in the tax year and all previous tax years, 17
if the withdrawal was not a qualified withdrawal as provided in the 18
Michigan achieving a better life experience (ABLE) program act, 19
2015 PA 160, MCL 206.981 to 206.997. This subdivision does not 20
apply to withdrawals that are less than the sum of all 21
contributions made to an ABLE savings account in all previous tax 22
years for which no deduction was claimed under subdivision (x), 23
less any contributions for which no deduction was claimed under 24
subdivision (x) that were withdrawn in all previous tax years. 25
(z) Deduct, to the extent included in adjusted gross income, 26
compensation received in the tax year pursuant to the wrongful 27
imprisonment compensation act, 2016 PA 343, MCL 691.1751 to 28
691.1757. 29
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(aa) For tax years that begin on and after January 1, 2025, a 1
taxpayer who is a disabled veteran may deduct, to the extent 2
included in adjusted gross income, income reported on a federal 3
income tax form 1099-C that is attributable to the cancellation or 4
discharge of a student loan by the United States Department of 5
Education pursuant to the total and permanent disability discharge 6
program, 34 CFR 685.213. As used in this subdivision, "disabled 7
veteran" means an individual who meets either of the following 8
criteria: 9
(i) Has been determined by the United States Department of 10
Veterans Affairs to be permanently and totally disabled as a result 11
of military service and entitled to veterans' benefits at the 100% 12
rate. 13
(ii) Has been rated by the United States Department of Veterans 14
Affairs as individually unemployable. 15
(bb) For tax years that begin on and after January 1, 2021, 16
and subject to the limitation under this subdivision, deduct, to 17
the extent not deducted in determining adjusted gross income, 18
wagering losses deducted under section 165(d) of the internal 19
revenue code on the taxpayer's federal income tax return for the 20
same tax year. For a nonresident, only wagering losses that are 21
attributable to wagering transactions placed at or through a casino 22
or licensed race meeting located in this state may be deducted and 23
must not exceed the gains on wagering transactions allocated to 24
this state under section 110(2)(d). As used in this subdivision, 25
"casino" and "licensed race meeting" mean those terms as defined in 26
section 110. 27
(cc) Except as otherwise provided under subparagraph (i), for 28
tax years that begin on and after January 1, 2022, deduct all of 29
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the following: 1
(i) To the extent not deducted in determining adjusted gross 2
income, contributions made by the taxpayer in the tax year less 3
qualified withdrawals made in the tax year from a first-time home 4
buyer savings account, pursuant to the Michigan first-time home 5
buyer savings program act, 2022 PA 6, MCL 565.1001 to 565.1013, not 6
to exceed a total deduction of $5,000.00 for a single return or 7
$10,000.00 for a joint return per tax year. The amount calculated 8
under this subparagraph for a first-time home buyer savings account 9
shall not be less than zero. The deduction under this subparagraph 10
does not apply for tax years that begin after December 31, 2026. 11
(ii) To the extent not deducted in determining adjusted gross 12
income, interest earned in the tax year on the contributions to the 13
taxpayer's first-time home buyer savings account. 14
(iii) To the extent included in adjusted gross income, 15
distributions that are qualified withdrawals from a first-time home 16
buyer savings account to the qualified beneficiary of that savings 17
account. 18
(dd) For tax years that begin on and after January 1, 2022, 19
add, to the extent not included in adjusted gross income, the 20
amount of money withdrawn by the taxpayer in the tax year from a 21
first-time home buyer savings account, not to exceed the total 22
amount deducted under subdivision (cc) in the tax year and all 23
previous tax years, if the withdrawal was not a qualified 24
withdrawal as provided in the Michigan first-time home buyer 25
savings program act, 2022 PA 6, MCL 565.1001 to 565.1013. This 26
subdivision does not apply to withdrawals that are less than the 27
sum of all contributions made to a first-time home buyer savings 28
account in all previous tax years for which no deduction was 29
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claimed under subdivision (cc), less any contributions for which no 1
deduction was claimed under subdivision (cc) that were withdrawn in 2
all previous tax years. 3
(ee) Subject to the limitations under this subdivision, for 4
tax years beginning after December 31, 2025 and before January 1, 5
2029, deduct, to the extent not deducted in determining adjusted 6
gross income, an amount equal to the sum of the following 7
deductions allowed to be claimed on the taxpayer's federal income 8
tax return for the same tax year: 9
(i) Qualified tips under section 224 of the internal revenue 10
code. For a nonresident, only qualified tips that are attributable 11
to services performed in this state may be deducted. 12
(ii) Qualified overtime compensation under section 225 of the 13
internal revenue code. For a nonresident, only qualified overtime 14
compensation that is attributable to services performed in this 15
state may be deducted. 16
(ff) For tax years beginning after December 31, 2024, adjusted 17
gross income must be calculated as if both of the following 18
conditions applied, subject to any necessary adjustments under 19
subparagraph (iii): 20
(i) Sections 168(n) and 174A of the internal revenue code were 21
not in effect. 22
(ii) Sections 163(j), 168(k), 174, and 179 of the internal 23
revenue code applied as those provisions were in effect on December 24
31, 2024. 25
(iii) The state treasurer shall, if necessary, modify the 26
application of any references in the internal revenue code to the 27
sections identified in subparagraphs (i) and (ii) in a reasonable 28
manner to carry out the purpose of this subdivision, including, but 29
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not limited to, modifying the application of section references 1
that were amended under Public Law 119-21. 2
(gg) For tax years beginning after December 31, 2021, adjusted 3
gross income must be calculated as if the transition rules under 4
section 70302 of Public Law 119-21, including, but not limited to, 5
any provisions related to the application of section 174A of the 6
internal revenue code, do not apply. 7
(hh) Add, to the extent deducted in determining adjusted gross 8
income, wages paid for organ donation leave for which a credit 9
under section 279 or 679 is claimed. 10
(2) Except as otherwise provided in subsection (7), and 11
section 30a, a personal exemption of $3,700.00 multiplied by the 12
number of personal and dependency exemptions shall be subtracted in 13
the calculation that determines taxable income. The number of 14
personal and dependency exemptions allowed shall be determined as 15
follows: 16
(a) Each taxpayer may claim 1 personal exemption. However, if 17
a joint return is not made by the taxpayer and the taxpayer's 18
spouse, the taxpayer may claim a personal exemption for the spouse 19
if the spouse, for the calendar year in which the taxable year of 20
the taxpayer begins, does not have any gross income and is not the 21
dependent of another taxpayer. 22
(b) A taxpayer may claim a dependency exemption for each 23
individual who is a dependent of the taxpayer for the tax year. 24
(c) A taxpayer may claim an additional exemption under this 25
subsection in the tax year for which the taxpayer has a certificate 26
of stillbirth from the department of health and human services as 27
provided under section 2834 of the public health code, 1978 PA 368, 28
MCL 333.2834. 29
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(3) Except as otherwise provided in subsection (7), a single 1
additional exemption determined as follows shall be subtracted in 2
the calculation that determines taxable income in each of the 3
following circumstances: 4
(a) $1,800.00 for each taxpayer and every dependent of the 5
taxpayer who is a deaf person as defined in section 2 of the deaf 6
persons' interpreters act, 1982 PA 204, MCL 393.502; a paraplegic, 7
a quadriplegic, or a hemiplegic; a person who is blind as defined 8
in section 504; or a person who is totally and permanently disabled 9
as defined in section 522. When a dependent of a taxpayer files an 10
annual return under this part, the taxpayer or dependent of the 11
taxpayer, but not both, may claim the additional exemption allowed 12
under this subdivision. 13
(b) For tax years beginning after 2007, $250.00 for each 14
taxpayer and every dependent of the taxpayer who is a qualified 15
disabled veteran. When a dependent of a taxpayer files an annual 16
return under this part, the taxpayer or dependent of the taxpayer, 17
but not both, may claim the additional exemption allowed under this 18
subdivision. As used in this subdivision: 19
(i) "Qualified disabled veteran" means a veteran with a 20
service-connected disability. 21
(ii) "Service-connected disability" means a disability incurred 22
or aggravated in the line of duty in the active military, naval, or 23
air service as described in 38 USC 101(16). 24
(iii) "Veteran" means an individual who served in the active 25
military, naval, marine, coast guard, or air service and who was 26
discharged or released from the individual's service with an 27
honorable or general discharge. 28
(4) An individual with respect to whom a deduction under 29
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subsection (2) is allowable to another taxpayer during the tax year 1
is not entitled to an exemption for purposes of subsection (2), but 2
may subtract $1,500.00 in the calculation that determines taxable 3
income for a tax year. 4
(5) A nonresident or a part-year resident is allowed that 5
proportion of an exemption or deduction allowed under subsection 6
(2), (3), or (4) that the taxpayer's portion of adjusted gross 7
income from Michigan sources bears to the taxpayer's total adjusted 8
gross income. 9
(6) In calculating taxable income, a taxpayer shall not 10
subtract from adjusted gross income the amount of prizes won by the 11
taxpayer under the McCauley-Traxler-Law-Bowman-McNeely lottery act, 12
1972 PA 239, MCL 432.1 to 432.47. 13
(7) For each tax year beginning on and after January 1, 2013, 14
the personal exemption allowed under subsection (2) shall be 15
adjusted by multiplying the exemption for the tax year beginning in 16
2012 by a fraction, the numerator of which is the United States 17
Consumer Price Index for the state fiscal year ending in the tax 18
year prior to the tax year for which the adjustment is being made 19
and the denominator of which is the United States Consumer Price 20
Index for the 2010-2011 state fiscal year. For the 2022 tax year 21
and each tax year after 2022, the adjusted amount determined under 22
this subsection shall be increased by an additional $600.00. The 23
resultant product shall be rounded to the nearest $100.00 24
increment. For each tax year, the exemptions allowed under 25
subsection (3) shall be adjusted by multiplying the exemption 26
amount under subsection (3) for the tax year by a fraction, the 27
numerator of which is the United States Consumer Price Index for 28
the state fiscal year ending the tax year prior to the tax year for 29
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which the adjustment is being made and the denominator of which is 1
the United States Consumer Price Index for the 1998-1999 state 2
fiscal year. The resultant product shall be rounded to the nearest 3
$100.00 increment. 4
(8) As used in this section, "retirement or pension benefits" 5
means distributions from all of the following: 6
(a) Except as provided in subdivision (d), qualified pension 7
trusts and annuity plans that qualify under section 401(a) of the 8
internal revenue code, including all of the following: 9
(i) Plans for self-employed persons, commonly known as Keogh or 10
HR10 plans. 11
(ii) Individual retirement accounts that qualify under section 12
408 of the internal revenue code if the distributions are not made 13
until the participant has reached 59-1/2 years of age, except in 14
the case of death, disability, or distributions described by 15
section 72(t)(2)(A)(iv) of the internal revenue code. 16
(iii) Employee annuities or tax-sheltered annuities purchased 17
under section 403(b) of the internal revenue code by organizations 18
exempt under section 501(c)(3) of the internal revenue code, or by 19
public school systems. 20
(iv) Distributions from a 401(k) plan attributable to employee 21
contributions mandated by the plan or attributable to employer 22
contributions. 23
(b) The following retirement and pension plans not qualified 24
under the internal revenue code: 25
(i) Plans of the United States, state governments other than 26
this state, and political subdivisions, agencies, or 27
instrumentalities of this state. 28
(ii) Plans maintained by a church or a convention or 29
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KAS S02028'25 (S-2)_SB301_APS_1 nq716d
association of churches. 1
(iii) All other unqualified pension plans that prescribe 2
eligibility for retirement and predetermine contributions and 3
benefits if the distributions are made from a pension trust. 4
(c) Retirement or pension benefits received by a surviving 5
spouse if those benefits qualified for a deduction prior to the 6
decedent's death. Benefits received by a surviving child are not 7
deductible. 8
(d) Retirement and pension benefits do not include: 9
(i) Amounts received from a plan that allows the employee to 10
set the amount of compensation to be deferred and does not 11
prescribe retirement age or years of service. These plans include, 12
but are not limited to, all of the following: 13
(A) Deferred compensation plans under section 457 of the 14
internal revenue code. 15
(B) Distributions from plans under section 401(k) of the 16
internal revenue code other than plans described in subdivision 17
(a)(iv). 18
(C) Distributions from plans under section 403(b) of the 19
internal revenue code other than plans described in subdivision 20
(a)(iii). 21
(ii) Premature distributions paid on separation, withdrawal, or 22
discontinuance of a plan prior to the earliest date the recipient 23
could have retired under the provisions of the plan. 24
(iii) Payments received as an incentive to retire early unless 25
the distributions are from a pension trust. 26
(9) Except as otherwise provided in subsection (10) or (11), 27
in determining taxable income under this section, the following 28
limitations and restrictions apply: 29
20
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
(a) For a person born before 1946, this subsection provides no 1
additional restrictions or limitations under subsection (1)(f). 2
(b) Except as otherwise provided in subdivision (c), for a 3
person born in 1946 through 1952, the sum of the deductions under 4
subsection (1)(f)(i), (ii), and (iv) is limited to $20,000.00 for a 5
single return and $40,000.00 for a joint return. After that person 6
reaches the age of 67, the deductions under subsection (1)(f)(i), 7
(ii), and (iv) do not apply and that person is eligible for a 8
deduction of $20,000.00 for a single return and $40,000.00 for a 9
joint return, which deduction is available against all types of 10
income and is not restricted to income from retirement or pension 11
benefits. A person who takes the deduction under subsection (1)(e) 12
is not eligible for the unrestricted deduction of $20,000.00 for a 13
single return and $40,000.00 for a joint return under this 14
subdivision. 15
(c) Beginning January 1, 2013 for a person born in 1946 16
through 1952 and beginning January 1, 2018 for a person born after 17
1945 who has retired as of January 1, 2013, if that person receives 18
retirement or pension benefits from employment with a governmental 19
agency that was not covered by the federal social security act, 42 20
USC 301 to 1397mm, the sum of the deductions under subsection 21
(1)(f)(i), (ii), and (iv) is limited to $35,000.00 for a single return 22
and, except as otherwise provided under this subdivision, 23
$55,000.00 for a joint return. If both spouses filing a joint 24
return receive retirement or pension benefits from employment with 25
a governmental agency that was not covered by the federal social 26
security act, 42 USC 301 to 1397mm, the sum of the deductions under 27
subsection (1)(f)(i), (ii), and (iv) is limited to $70,000.00 for a 28
joint return. After that person reaches the age of 67, the 29
21
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
deductions under subsection (1)(f)(i), (ii), and (iv) do not apply and 1
that person is eligible for a deduction of $35,000.00 for a single 2
return and $55,000.00 for a joint return, or $70,000.00 for a joint 3
return if applicable, which deduction is available against all 4
types of income and is not restricted to income from retirement or 5
pension benefits. A person who takes the deduction under subsection 6
(1)(e) is not eligible for the unrestricted deduction of $35,000.00 7
for a single return and $55,000.00 for a joint return, or 8
$70,000.00 for a joint return if applicable, under this 9
subdivision. 10
(d) Except as otherwise provided under subdivision (c) for a 11
person who was retired as of January 1, 2013, for a person born 12
after 1952 who has reached the age of 62 through 66 years of age 13
and who receives retirement or pension benefits from employment 14
with a governmental agency that was not covered by the federal 15
social security act, 42 USC 301 to 1397mm, the sum of the 16
deductions under subsection (1)(f)(i), (ii), and (iv) is limited to 17
$15,000.00 for a single return and, except as otherwise provided 18
under this subdivision, $15,000.00 for a joint return. If both 19
spouses filing a joint return receive retirement or pension 20
benefits from employment with a governmental agency that was not 21
covered by the federal social security act, 42 USC 301 to 1397mm, 22
the sum of the deductions under subsection (1)(f)(i), (ii), and (iv) 23
is limited to $30,000.00 for a joint return. 24
(e) Except as otherwise provided under subdivision (c) or (d), 25
for a person born after 1952, the deduction under subsection 26
(1)(f)(i), (ii), or (iv) does not apply. When that person reaches the 27
age of 67, that person is eligible for a deduction of $20,000.00 28
for a single return and $40,000.00 for a joint return, which 29
22
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
deduction is available against all types of income and is not 1
restricted to income from retirement or pension benefits. For tax 2
years that begin before January 1, 2026 and after December 31, 3
2028, if a person takes the deduction of $20,000.00 for a single 4
return and $40,000.00 for a joint return, that person shall not 5
take the deduction under subsection (1)(f)(iii) and shall not take 6
the personal exemption under subsection (2). For tax years that 7
begin before January 1, 2026 and after December 31, 2028, that 8
person may elect not to take the deduction of $20,000.00 for a 9
single return and $40,000.00 for a joint return and elect to take 10
the deduction under subsection (1)(f)(iii) and the personal exemption 11
under subsection (2) if that election would reduce that person's 12
tax liability. For tax years that begin on and after January 1, 13
2026 and before January 1, 2029, if a person takes the deduction of 14
$20,000.00 for a single return or $40,000.00 for a joint return, 15
that person shall not take the personal exemption under subsection 16
(2). A person who takes the deduction under subsection (1)(e) is 17
not eligible for the unrestricted deduction of $20,000.00 for a 18
single return and $40,000.00 for a joint return under this 19
subdivision. 20
(f) For a joint return, the limitations and restrictions in 21
this subsection shall be applied based on the date of birth of the 22
older spouse filing the joint return. If a deduction under 23
subsection (1)(f) was claimed on a joint return for a tax year in 24
which a spouse died and the surviving spouse has not remarried 25
since the death of that spouse, the surviving spouse is entitled to 26
claim the deduction under subsection (1)(f) in subsequent tax years 27
subject to the same restrictions and limitations, for a single 28
return, that would have applied based on the date of birth of the 29
23
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
older of the 2 spouses. For tax years beginning after December 31, 1
2019, a surviving spouse born after 1945 who has reached the age of 2
67 and has not remarried since the death of that spouse may elect 3
to take the deduction that is available against all types of income 4
subject to the same limitations and restrictions as provided under 5
this subsection based on the surviving spouse's date of birth 6
instead of taking the deduction allowed under subsection (1)(f), 7
for a single return, based on the date of birth of the older 8
spouse. 9
(10) In determining taxable income under this section, a 10
taxpayer may elect to deduct retirement or pension benefits as 11
provided under subsection (1)(f) with the following limitations and 12
restrictions or elect to apply the limitations and restrictions in 13
subsection (9), or subsection (11) if applicable: 14
(a) For the 2023 tax year, a taxpayer who was born after 1945 15
and before 1959 may deduct an amount of retirement or pension 16
benefits not to exceed 25% of the maximum amount of retirement or 17
pension benefits that the taxpayer would be allowed to deduct for 18
the tax year under subsection (1)(f)(iv) if the taxpayer's 19
retirement or pension benefits were subject to the limitations of 20
that subsection only. 21
(b) For the 2024 tax year, a taxpayer who was born after 1945 22
and before 1963 may deduct an amount of retirement or pension 23
benefits not to exceed 50% of the maximum amount of retirement or 24
pension benefits that the taxpayer would be allowed to deduct for 25
the tax year under subsection (1)(f)(iv) if the taxpayer's 26
retirement or pension benefits were subject to the limitations of 27
that subsection only. 28
(c) For the 2025 tax year, a taxpayer who was born after 1945 29
24
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
and before 1967 may deduct an amount of retirement or pension 1
benefits not to exceed 75% of the maximum amount of retirement or 2
pension benefits that the taxpayer would be allowed to deduct for 3
the tax year under subsection (1)(f)(iv) if the taxpayer's 4
retirement or pension benefits were subject to the limitations of 5
that subsection only. 6
(d) For the 2026 tax year and each tax year after 2026, a 7
taxpayer may deduct retirement or pension benefits as provided 8
under subsection (1)(f), except that the amounts deductible under 9
subsection (1)(f)(i) and (ii) combined are subject to the same 10
maximum amounts allowed under subsection (1)(f)(iv) for a single 11
return and a joint return for that same tax year. 12
(e) For a joint return, the limitations and restrictions in 13
this subsection shall be applied based on the date of birth of the 14
older spouse filing the joint return. If a deduction under 15
subsection (1)(f) was claimed on a joint return for a tax year in 16
which a spouse died and the surviving spouse has not remarried 17
since the death of that spouse, the surviving spouse is entitled to 18
claim the deduction under subsection (1)(f) in subsequent tax years 19
subject to the same restrictions and limitations under this 20
subsection, for a single return, that would have applied based on 21
the date of birth of the older of the 2 spouses. 22
(11) For tax years beginning on and after January 1, 2023, in 23
determining taxable income under this section, a taxpayer with 24
retirement or pension benefits received for services as a public 25
police or fire department employee subject to 1969 PA 312, MCL 26
423.231 to 423.247, a state police trooper or state police sergeant 27
subject to 1980 PA 17, MCL 423.271 to 423.287, or a corrections 28
officer employed by a county sheriff in a county jail, work camp, 29
25
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
or other facility maintained by a county that houses adult 1
prisoners may elect to deduct retirement or pension benefits as 2
provided under subsection (1)(f) without any additional limitations 3
or restrictions or elect to apply the limitations and restrictions 4
in subsection (9) or (10). 5
(12) As used in this section: 6
(a) "Oil and gas" means oil and gas subject to severance tax 7
under 1929 PA 48, MCL 205.301 to 205.317. 8
(b) "Senior citizen" means that term as defined in section 9
514. 10
(c) "United States Consumer Price Index" means the United 11
States Consumer Price Index for all urban consumers as defined and 12
reported by the United States Department of Labor, Bureau of Labor 13
Statistics. 14
Sec. 279. (1) Subject to the limitations under this section, 15
for tax years beginning on and after January 1, 2026, a qualified 16
taxpayer that provides paid organ donation leave to an eligible 17
employee may claim a credit against the tax imposed under this part 18
in an amount equal to 100% of the wages paid to an eligible 19
employee during any period during which the eligible employee is on 20
organ donation leave. The maximum amount of organ donation leave 21
with respect to any eligible employee for which a credit may be 22
claimed under this section must not exceed 12 weeks. The credit 23
allowed under this section must be claimed for the tax year in 24
which the eligible employee completed use of the paid organ 25
donation leave, and for purposes of calculating the amount of the 26
credit, the qualified taxpayer may include wages paid during the 27
immediately preceding tax year. 28
(2) For a taxpayer who is a member of a flow-through entity 29
26
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
that is a qualified taxpayer that qualifies for the credit under 1
this section, that taxpayer may claim a proportionate share of the 2
credit against the member's tax liability under this part based on 3
the member's distributive share of business income reported from 4
that flow-through entity or an alternative method approved by the 5
department. 6
(3) If the credit allowed under this section for the tax year 7
and any unused carryforward of the credit allowed by this section 8
exceed the qualified taxpayer's tax liability for the tax year, 9
that portion that exceeds the tax liability for the tax year must 10
not be refunded but may be carried forward to offset tax liability 11
in subsequent tax years for 3 years or until used up, whichever 12
occurs first. 13
(4) As used in this section: 14
(a) "Eligible employee" means an employee who has provided the 15
employer with written physician verification that the employee is 16
an organ donor. 17
(b) "Organ donation leave" means that period of absence from 18
employment received by an eligible employee related to the organ 19
donation after all other leave benefits provided to that employee 20
have been exhausted. Organ donation leave may be used by an 21
eligible employee before, during, and after the organ donation. 22
(c) "Organ donor" means an individual who donates, in whole or 23
part, 1 or more of the individual's human organs to another 24
individual to be transplanted using a medical procedure to the body 25
of the other individual. Organ donor includes an individual who 26
donates bone marrow using the peripheral blood stem cell apheresis 27
method. 28
(d) "Qualified taxpayer" means a taxpayer that is an employer 29
27
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
that has a written policy offering eligible employees paid organ 1
donation leave that is in addition to any other paid leave benefits 2
policy provided to employees and the rate of payment under that 3
policy for paid organ donation leave is not less than 100% of the 4
wages normally paid to that same employee for services performed 5
for the employer. 6
(e) "Wages" means that term as defined in section 3306(b) of 7
the internal revenue code. 8
Sec. 623. (1) Except as otherwise provided in this part, there 9
is levied and imposed a corporate income tax on every taxpayer with 10
business activity within this state or ownership interest or 11
beneficial interest in a flow-through entity that has business 12
activity in this state unless prohibited by 15 USC 381 to 384. The 13
corporate income tax is imposed on the corporate income tax base, 14
after allocation or apportionment to this state, at the rate of 15
6.0%. 16
(2) The corporate income tax base means a taxpayer's business 17
income subject to the following adjustments, before allocation or 18
apportionment, and the adjustment in subsection (4) after 19
allocation or apportionment: 20
(a) Add interest income and dividends derived from obligations 21
or securities of states other than this state, in the same amount 22
that was excluded from federal taxable income, less the related 23
portion of expenses not deducted in computing federal taxable 24
income because of sections 265 and 291 of the internal revenue 25
code. 26
(b) Add all taxes on or measured by net income including the 27
tax imposed under this part to the extent that the taxes were 28
deducted in arriving at federal taxable income including any direct 29
28
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
or indirect allocated share of taxes paid by a flow-through entity 1
under part 4. 2
(c) Add any carryback or carryover of a net operating loss to 3
the extent deducted in arriving at federal taxable income. 4
(d) To the extent included in federal taxable income, deduct 5
dividends and royalties received from persons other than United 6
States persons and foreign operating entities, including, but not 7
limited to, amounts determined under section 78 of the internal 8
revenue code or sections 951 to 965 of the internal revenue code. 9
(e) Except as otherwise provided under this subdivision, to 10
the extent deducted in arriving at federal taxable income, add any 11
royalty, interest, or other expense paid to a person related to the 12
taxpayer by ownership or control for the use of an intangible asset 13
if the person is not included in the taxpayer's unitary business 14
group. The addition of any royalty, interest, or other expense 15
described under this subdivision is not required to be added if the 16
taxpayer can demonstrate that the transaction has a nontax business 17
purpose, is conducted with arm's-length pricing and rates and terms 18
as applied in accordance with sections 482 and 1274(d) of the 19
internal revenue code, and 1 of the following is true: 20
(i) The transaction is a pass through of another transaction 21
between a third party and the related person with comparable rates 22
and terms. 23
(ii) An addition would result in double taxation. For purposes 24
of this subparagraph, double taxation exists if the transaction is 25
subject to tax in another jurisdiction. 26
(iii) An addition would be unreasonable as determined by the 27
state treasurer. 28
(iv) The related person recipient of the transaction is 29
29
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
organized under the laws of a foreign nation which has in force a 1
comprehensive income tax treaty with the United States. 2
(f) To the extent included in federal taxable income, deduct 3
interest income derived from United States obligations. 4
(g) Eliminate all of the following: 5
(i) Income from producing oil and gas to the extent included in 6
federal taxable income. 7
(ii) Expenses of producing oil and gas to the extent deducted 8
in arriving at federal taxable income. 9
(h) For a qualified taxpayer, eliminate all of the following: 10
(i) Income derived from a mineral to the extent included in 11
federal taxable income. 12
(ii) Expenses related to the income deductible under 13
subparagraph (i) to the extent deducted in arriving at federal 14
taxable income. 15
(i) Add, to the extent deducted in determining federal taxable 16
income, wages paid for organ donation leave for which a credit 17
under section 279 or 679 is claimed. 18
(3) For purposes of subsection (2), the business income of a 19
unitary business group is the sum of the business income of each 20
person included in the unitary business group less any items of 21
income and related deductions arising from transactions including 22
dividends between persons included in the unitary business group. 23
(4) Deduct any available business loss incurred after December 24
31, 2011. As used in this subsection, "business loss" means a 25
negative business income taxable amount after allocation or 26
apportionment. For purposes of this subsection, a taxpayer that 27
acquires the assets of another corporation in a transaction 28
described under section 381(a)(1) or (2) of the internal revenue 29
30
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
code may deduct any business loss attributable to that distributor 1
or transferor corporation. The business loss shall must be carried 2
forward to the year immediately succeeding the loss year as an 3
offset to the allocated or apportioned corporate income tax base, 4
then successively to the next 9 taxable years following the loss 5
year or until the loss is used up, whichever occurs first. 6
(5) As used in this section, "oil and gas" means oil and gas 7
that is subject to severance tax under 1929 PA 48, MCL 205.301 to 8
205.317. 9
Sec. 679. (1) Subject to the limitations under this section, 10
for tax years beginning on and after January 1, 2026, a qualified 11
taxpayer that provides paid organ donation leave to an eligible 12
employee may claim a credit against the tax imposed under this part 13
in an amount equal to 100% of the wages paid to an eligible 14
employee during any period during which the eligible employee is on 15
organ donation leave. The maximum amount of organ donation leave 16
with respect to any eligible employee for which a credit may be 17
claimed under this section must not exceed 12 weeks. The credit 18
allowed under this section must be claimed for the tax year in 19
which the eligible employee completed use of the paid organ 20
donation leave, and for purposes of calculating the amount of the 21
credit, the qualified taxpayer may include wages paid during the 22
immediately preceding tax year. 23
(2) If the credit allowed under this section for the tax year 24
and any unused carryforward of the credit allowed by this section 25
exceed the qualified taxpayer's tax liability for the tax year, 26
that portion that exceeds the tax liability for the tax year must 27
not be refunded but may be carried forward to offset tax liability 28
in subsequent tax years for 3 years or until used up, whichever 29
31
Final Page
KAS S02028'25 (S-2)_SB301_APS_1 nq716d
occurs first. 1
(3) As used in this section: 2
(a) "Eligible employee" means an employee who has provided the 3
employer with written physician verification that the employee is 4
an organ donor. 5
(b) "Organ donation leave" means that period of absence from 6
employment received by an eligible employee related to the organ 7
donation after all other leave benefits provided to that employee 8
have been exhausted. Organ donation leave may be used by an 9
eligible employee before, during, and after the organ donation. 10
(c) "Organ donor" means an individual who donates, in whole or 11
part, 1 or more of the individual's human organs to another 12
individual to be transplanted using a medical procedure to the body 13
of the other individual. Organ donor includes an individual who 14
donates bone marrow using the peripheral blood stem cell apheresis 15
method. 16
(d) "Qualified taxpayer" means a taxpayer that is an employer 17
that has a written policy offering eligible employees paid organ 18
donation leave that is in addition to any other paid leave benefits 19
policy provided to employees and the rate of payment under that 20
policy for paid organ donation leave is not less than 100% of the 21
wages normally paid to that same employee for services performed 22
for the employer. 23
(e) "Wages" means that term as defined in section 3306(b) of 24
the internal revenue code. 25