Tax Abatements (Industrial Facilities Exemption, P.A. 198 of 1974, as amended)

The Plant Rehabilitation and Industrial Development Districts Act, (known as the Industrial Facilities Exemption) PA 98 of 1974, as amended, provides a tax incentive to manufacturers to enable renovation and expansion of aging facilities, assist in the building of new facilities and to promote the establishment of high tech facilities. An Industrial Development District (IDD) or a Plant Rehabilitation District (PRD) must be created prior to initiating a project so it is essential that you consult your local assessor before commencing a project. An Industrial Facilities Exemption (IFE) certificate entitles the facility to a 50% exemption from ad valorem real and/or personal property taxes for a term of 1-12 years as determined by the local unit of government.

Applications are filed, reviewed and approved by the local unit of government, but are also subject to review at the State level by the Property Services Division and the Michigan Economic Development Corporation. The State Tax Commission (STC) is ultimately responsible for final approval and issuance of certificates. Exemptions are not effective until approved by the STC.

Community Development Block Grant (CDBG)

The Michigan Economic Development Corporation (MEDC), on behalf of the Michigan Strategic Fund (MSF), administers the economic and community development portions of he CDBG program. CDBG is a federal grant program utilizing funds received from the U.S. Department of Housing and Urban Development (HUD).

Funding can be used for direct assistance to business and infrastructure to support business expansion or location. Direct assistance to private and for-profit businesses includes support for machinery and equipment purchase, job training, and rail enhancement.

Communities may request grants to provide public infrastructure improvements necessary for the location, expansion, and/or retention of a specific, for-profit business firm(s) which is engaged in an economic base activity (e.g., manufacturing, point of destination tourism, headquarter operations, major multi-state distribution facility). This program is restricted to infrastructure improvements tied to development activities that require additional infrastructure improvements tied to development activities that require additional infrastructure to create new economic opportunities and will result in the creation of full-time equivalent (FTE) positions, of which at least 51 percent of the created positions will be held by persons living in a Low to Moderate Income household.

Private Activity Bonds

Private activity bonds are an attractive source of financial assistance to economic development projects in Michigan. They provide profitable firms with capital cost savings stemming from the difference between taxable and tax-exempt interest rates. The Michigan Strategic Fund (MSF) issues private activity bonds on behalf of the borrower and lends the bond proceeds to the borrower.

For manufacturing projects, 95 of the bond proceeds must be used to acquire land, building and equipment directly related to the manufacturing process. Warehouse space and other ‘non-core’ items are ineligible unless they are directly related to the manufacturing process, and then are limited to 25 of the project. At least 70 of bond proceeds must be spent on ‘core manufacturing’ costs. If you acquire existing facilities, a minimum of 15 of the bond proceeds must be used to renovate the facility. Used equipment is generally ineligible. Loans for such purposes as working capital or inventory are not permitted.

The maximum size of bonds is limited to:

- $1 million free of any restrictions on capital expenditures; or,

- $10 million subject to the condition that the company’s total capital expenditures in the locality over the period of three years before and three years after the date of issuance do not exceed $20 million.

Michigan Business Development Program

The Michigan Business Development Program (MBDP) is an incentive program available from the Michigan Strategic Fund (MSF), in cooperation with the Michigan Economic Development Corporation (MEDC). The program is designed to provide grants, loans or other economic assistance to businesses for highly competitive projects in Michigan that create jobs and/or provide investment. The MBDP is available to eligible businesses that create qualified new jobs and/or make qualified new investment in Michigan. The qualified new jobs must be held by Michigan residents of the Applicant company and be in addition to those maintained in Michigan prior to the project. Eligible investment includes investment made by the business in Michigan in support of the project and approved by the MSF. Preference may be given to businesses in need of additional assistance for deal closing and second stage company gap financing. Any business seeking to qualify for MSF support on the basis of job creation must create a minimum of 50 qualified new jobs. Unless a project is in a rural county (a county with a population of 90,000 or less) or qualifies as a high-technology activity, in which case the business must create a minimum of 25 qualified new jobs. High-technology activities are defined in the Michigan Economic Growth Authority Act, Public Act 24 of 1995. Additionally, the MSF may provide support for certain strategic business development growth opportunities that create fewer jobs than the requirements mentioned above.

MSF support in the form of a grant will be performance based, with preference given to eligible businesses seeking to locate or expand in Michigan rather than in another state. Grants will include flexible terms and conditions, and will include repayment provisions under circumstances approved by the MSF. MSF support in the form of a loan shall also be performance based, with preference given to qualified businesses needing assistance to expand in Michigan. Loans may include flexible terms and conditions, including below market interest rates, extended grace and repayment provisions, forgivable terms and flexible security requirements. Loans will also include provisions requiring repayment of loan funds under circumstances approved by the MSF.