Michigan House Bill HB4603

Michigan 2025-2026 Regular Session

• Introduced: 6/10/25
• Refer: 6/10/25

Caption

Corporate income tax: rate; pay ratio surcharge for certain corporations; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 684.

Summary

House Bill 4603 would amend Michigan’s Income Tax Act to create a new annual corporate income tax surcharge for taxpayers that are required to disclose executive pay ratios under SEC rules. Beginning with tax years starting on or after October 1, 2025, the surcharge would be calculated as a percentage of a taxpayer’s Michigan tax liability before credits, based on the company’s disclosed CEO-to-median-worker pay ratio. Companies with ratios at or below 50-to-1 would owe no surcharge, while higher ratios would trigger progressively larger surcharges, up to 50% for ratios of 500-to-1 or more. The bill also authorizes the Michigan Department of Treasury to determine the correct pay ratio and surcharge if an SEC filing omits the ratio or uses an improper calculation. It applies to unitary business groups if any member is subject to the SEC pay-ratio disclosure requirement, and it incorporates the surcharge into the existing tax administration, collection, and enforcement framework under Michigan law. The measure is aimed at corporations with relatively high executive compensation compared with employee pay, and it would function as a tax penalty tied to compensation disclosure rather than a general corporate tax change.

Impact

HB 4603 would add a new section 684 to the Michigan Income Tax Act and create a new surcharge on certain corporations’ income tax liability. It would affect taxpayers subject to SEC pay-ratio disclosure rules, including unitary business groups, and would give the Department of Treasury authority to assess the surcharge when disclosures are missing or inconsistent with federal rules. In practical terms, the bill would increase tax liability for corporations with higher executive-to-worker pay ratios and leave unaffected corporations that are not required to file or pay Michigan income tax under the act.

Sentiment

Based on the bill text and available context, the measure appears to be framed as a policy response to executive compensation inequality and to encourage narrower pay gaps. There is no committee transcript or recorded vote information provided, so no formal legislative debate or vote sentiment can be identified from the available materials. The bill’s structure suggests a strongly regulatory and punitive approach toward high pay ratios, which would likely draw support from those favoring corporate accountability and criticism from business interests concerned about tax burdens and administrative complexity.

Contention

The main point of contention is likely to be the bill’s use of a tax surcharge tied to executive pay ratios, which could be viewed as penalizing companies for compensation practices rather than taxing income in a traditional way. Businesses may object to the steep graduated rates, the reliance on federal SEC disclosures, and Treasury’s authority to determine a pay ratio when filings are incomplete or disputed. Supporters would likely emphasize fairness, wage equity, and pressure on corporations to reduce extreme compensation disparities, while opponents would likely argue that the bill could discourage investment, complicate tax compliance, and create uncertainty for multi-entity corporate groups.