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State and Federal Incentives and Laws

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Michigan Tax Incentives

Hybrid Electric Vehicle Research and Development Tax Credit

For tax years beginning on or after January 1, 2008, and ending before January 1, 2016, a taxpayer engaged in research and development of a qualified hybrid system that has the primary purpose of propelling a motor vehicle may claim a tax credit under the Single Business Tax. This tax credit is equal to 3.9% of all wages, salaries, fees, bonuses, commissions, or other payments made in the taxable year for the benefit of employees for services performed in a qualified facility. The maximum amount of credit allowed for any one taxpayer is $2 million in a single tax year. The qualified taxpayer may also claim a tax credit under the Michigan Business Tax equal to 3.9% of all wages, salaries, fees, bonuses, commissions, or other payments made in the taxable year on behalf of or for the benefit of employees for services performed in a qualified facility. The maximum amount of credit allowed for any one taxpayer is $3 million in a single tax year. (Reference Senate Bill 944, 2007, House Bill 5409, 2007 and Michigan Compiled Laws 208.1101 to 208.1601 and 208.32)

Alternative Fuel Research and Development Tax Exemption

The Michigan Strategic Fund (MSF) has designated an Alternative Energy Zone (AEZ) within Wayne State University's Research and Technology Park in Detroit to promote the research, development, and manufacturing of alternative energy technologies, including alternative fuel vehicles (AFV). Businesses located within the AEZ that are engaged in qualified activities are eligible for exemption from state and local taxes, to be determined by the Michigan NextEnergy Authority (MNEA). Alternative energy technology companies located in the AEZ may also be eligible for a refundable payroll credit under the Single Business Tax. For more information, see the MNEA Web site. (Reference Michigan Compiled Laws 207.821-207.827)

Reduced Biofuels Tax

A tax of $0.12 per gallon is imposed on gasoline containing at least 70% ethanol and diesel fuel containing at least 5% biodiesel. Ethanol is defined as denatured fuel ethanol that is suitable for use in a spark-ignition engine when mixed with gasoline and must meet the American Society for Testing and Materials (ASTM) D-5798 specifications. Biodiesel is defined as a fuel composed of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats and, in accordance with standards specified for 100% biodiesel fuel and meets ASTM D-6571 specification, as approved by the Michigan Department of Agriculture. (Reference Michigan Compiled Laws 207.1008)

Alternative Fuel Development Property Tax Exemption

A tax exemption may apply to industrial property which is used for, among other purposes, high-technology activities or the creation or synthesis of biodiesel fuel. High-technology activities include those related to advanced vehicle technologies such as electric, hybrid, or alternative fuel vehicles and their components. In order to qualify for the tax exemptions, an industrial facility must obtain an exemption certificate for the property from the State Tax Commission. (Reference Senate Bill 207, 2007, and Michigan Compiled Laws 207.552 and 207.803)