Brownfield Redevelopment – Michigan Business
Tax Credit

A Brownfield Redevelopment Tax Credits is an incentive-based tax credit program to foster redevelopment of contaminated (actual or presumed) industrial and commercial sites. Michigan Business Tax credits are available for up to 10 percent of qualified expenses incurred for assessment and remediation of qualified brownfield properties. Tax increment financing (TIF) is also available for certain projects to offset the costs associated with cleanup.

The Michigan Business Tax (MBT) Act (Public Act 36 of 2007 – Section 208.1437), states that a “qualified taxpayer” may claim a credit against
the MBT, provided the taxpayer has a pre-approval letter issued after December 31, 2007 and before January 1, 2013 and the project is completed not more than 5 years after the pre-approval letter is issued.
If the total of all credits for the project is $1 million or less, the credit is based on 10% of the eligible investment.

If the total of all credits for the project is greater than $1 million but not more that $30 million, a credit is available for a percentage of eligible investment to be determined by the Michigan Economic Growth Authority (MEGA), but not to exceed 10% of the eligible investment. Certain location restrictions apply to these credits.

Eligible investment includes demolition, construction, restoration, alteration, renovation, or improvement of buildings or site improvements on eligible property and the addition of machinery, equipment and fixtures. These investments must occur pursuant to a brownfield plan and after a pre-approval letter (PL) has been issued.

A project is the total of all eligible investment on an eligible property. The application process deals with the preapproval of a project and a Certificate of Completion (CC). When the project is actually completed and a CC has been issued, a credit may then be claimed by a taxpayer.

The property can be contaminated, blighted or functionally obsolete if it is located in a core city (qualified local governmental unit, pursuant to PA 146 of 2000), other properties can be located anywhere in Michigan if the property is contaminated.

A qualified taxpayer must own or lease eligible property and, in addition, must certify that DEQ has not sued or issued a unilateral order to the taxpayer to compel response activity to the property or demanded reimbursement from the taxpayer.

In order to apply for a brownfield credit, a project must be included in a brownfield plan and approved by the governing body of the local unit of government.

There is a two-step process for obtaining state approval for a brownfield credit under Section 208.1437. First, a PL must be issued by the state before eligible investment is initiated. When the project is completed, the qualified taxpayer must submit documentation on the eligible investment and identify each taxpayer entitled to a credit for the project. The state will then issue a CC after which the taxpayers may claim an MBT credit.

If the cost of a project is $10 million or less, a taxpayer must obtain a PL from the State Treasurer. The total credits for all projects approved under this section may not exceed $30 million in one calendar year. A taxpayer may also apply to the Treasurer if the cost of the project is greater than $10 million but the taxpayer chooses to seek approval of credits totaling
$1 million or less.

If the cost of the project is greater than $10 million and the taxpayer is seeking a credit greater than $1 million, the taxpayer must apply to MEGA for pre-approval (except as noted above). Pre-approval by MEGA must have the concurrence of the State Treasurer. Upon approval of the project, MEGA will issue a PL containing the percentage of eligible investment (up to 10%) that can be claimed when the CC is obtained.

View Michigan Business Tax Public Act 36 of 2007–Section 208.1437