Michigan House Bill HB5484

Michigan 2025-2026 Regular Session

• Introduced: 1/27/26
• Refer: 1/27/26

Caption

Individual income tax: flow-through entities; sourcing and apportionment provisions; update. Amends secs. 102, 103, 105, 110, 112, 115, 122 & 123 of 1967 PA 281 (MCL 206.102 et seq.) & repeals secs. 111, 113, 114, 131, 132, 133 & 134 of 1967 PA 281 (MCL 206.111 et seq.).

Summary

HB5484 updates Michigan’s Income Tax Act rules for allocating and apportioning income, with a particular focus on how business income and receipts are sourced to Michigan for taxpayers operating in multiple states. The bill revises definitions and formulas used to determine when a taxpayer is taxable in another state, how resident and nonresident individuals, estates, and trusts allocate income, and how capital gains, business income, and nonbusiness income are treated. It also updates the sales-factor apportionment rules for a wide range of industries and transaction types, including tangible personal property, leases, royalties, services, transportation, telecommunications, financial services, and media receipts.

Impact

The bill would significantly revise Michigan tax sourcing rules in the Income Tax Act, especially for flow-through entities and multistate businesses. It replaces older cost-of-performance concepts for many services with market-based sourcing beginning January 1, 2026, meaning receipts are generally attributed to Michigan based on where the customer receives the benefit or uses the property. It also updates sourcing rules for loans, credit card receivables, investment and trading income, transportation, telecommunications, and media-related receipts, and repeals several existing sections of the act, including sections 111, 113, 114, and 131 through 134. These changes would affect taxpayers, tax preparers, and the Department of Treasury by changing how taxable income is apportioned among states.

Sentiment

Because no committee transcripts or recorded votes are provided, there is no direct evidence of debate or partisan division in the available materials. Based on the bill text and caption, the measure appears to be a technical but substantial tax modernization bill aimed at updating sourcing and apportionment provisions rather than creating a new tax. The overall tone of the legislation is administrative and policy-oriented, suggesting an effort to conform Michigan’s rules to more current multistate sourcing standards.

Contention

The main points of potential contention are the shift to market-based sourcing and the breadth of the industries affected. Businesses with multistate operations may favor clearer, updated rules, but some taxpayers could object to the new sourcing methods if they increase Michigan-apportioned income or compliance complexity. Financial services, telecommunications, transportation, media, and investment-related businesses are especially affected because the bill contains detailed special rules for those sectors. Another possible issue is the repeal of existing statutory provisions, which may raise concerns about transition, interpretation, and administrative implementation before the 2026 effective-date changes take full effect.