Individual income tax: credit; credit for contributions to scholarship-granting organizations and deduction of funds distributed to student opportunity scholarship accounts; provide for. Amends sec. 30 of 1967 PA 281 (MCL 206.30) & adds secs. 279 & 679. TIE BAR WITH: SB 320'25
SB 321 amends Michigan’s Income Tax Act to create a new individual income tax credit for contributions to scholarship-granting organizations participating in the student opportunity scholarship program. Beginning with tax years starting on or after January 1, 2025, a taxpayer may claim a credit equal to up to 100% of qualifying contributions, subject to preapproval by the Department of Treasury, annual statewide credit caps, carryforward rules, and documentation requirements. The bill also adds a related deduction for funds distributed to student opportunity scholarship accounts used for qualifying education expenses.
The bill also makes a series of technical and policy changes to the state’s taxable income calculations in section 30. It preserves and restates numerous existing deductions, exemptions, and add-backs for items such as retirement and pension income, Social Security, education savings accounts, ABLE accounts, first-time home buyer savings accounts, wrongful imprisonment compensation, wagering losses, and certain tribal income, while also updating references and effective dates. The bill is tied to SB 320, meaning it does not take effect unless that companion bill is enacted.
The bill would amend MCL 206.30 and add new sections 279 and 679 to the Income Tax Act of 1967, expanding the list of state income tax preferences and creating a new refundable? no, nonrefundable credit structure for donations to scholarship-granting organizations. It would require Treasury preapproval, impose a $500 million annual statewide cap on reserved credits across the two new sections, allow five-year carryforwards, and require reporting to the Legislature on program use and fiscal impact. It also adds a deduction for distributions from student opportunity scholarship accounts and ties the tax benefit to the student opportunity scholarship program established in separate legislation.
The bill’s structure suggests generally supportive policy intent around school-choice-style scholarship contributions and education assistance, with detailed administrative safeguards indicating an effort to make the credit workable and fiscally controlled. Because there were no committee transcripts or recorded votes provided, there is no direct evidence of debate, but the tie-bar to SB 320 and the extensive preapproval and reporting requirements indicate the proposal was designed to move as part of a broader package and to address oversight concerns.
The main points of potential contention are the size and structure of the tax credit, the use of state revenue to subsidize private scholarship donations, and the $500 million annual cap with automatic 20% increases when demand is high. Another likely issue is administrative complexity: taxpayers must obtain preapproval, track certificates, and comply with timing and carryforward rules, while Treasury must manage application queues and public reporting. The bill also preserves a number of existing retirement and pension tax preferences, which may be viewed differently depending on whether stakeholders focus on education funding, tax fairness, or revenue impacts.