Panel hears House Fiscal Agency briefing on MEGA tax credits, $9.4 billion liability and verification gaps

The House Oversight Subcommittee on Corporate Subsidies and State Investments heard a briefing from Ben Gilchick, Associate Director of the House Fiscal Agency, on the history, mechanics and fiscal impact of the Michigan Economic Growth Authority (MEGA) refundable tax-credit program.

Gilchick told the committee that MEGA was created in 1995 to attract and retain jobs and investment, that credits were refundable and performance‑based, and that the program was discontinued in 2011 when the Michigan Business Tax (MBT) was replaced by the corporate income tax. “Our overarching mission is to provide objective, nonpartisan expertise to the House of Representatives on legislative fiscal matters,” Gilchick said as he opened the presentation.

The briefing laid out the program’s structure and the scope of its remaining fiscal exposure. According to House Fiscal Agency materials cited by Gilchick, approximately $9.4 billion represents the total value awarded over the life of MEGA agreements (looking backward and forward); the report also shows roughly $3.0 billion in remaining outstanding certificate value the state expects to certify in coming years. Certificates are issued by year of company activity and generally affect state revenues on a roughly two‑year lag, Gilchick said, and no credits will be earned beyond fiscal year 2030 with redemptions expected to cease affecting revenues by fiscal year 2032.

Why it matters: MEGA credits reduce net business tax revenue when refunds exceed tax owed, and large, multi‑year credits can complicate revenue forecasting and budgeting. Committee members raised questions about how the state verifies that companies meet job, wage and investment conditions that determine credit size and eligibility, and about public access to supporting data.

Key facts from the presentation

• Program history and design: MEGA awards were performance‑based refundable credits tied to job creation, job retention, wages and investment. Credits were issued for terms of up to 20 years. A February 2008 formula change for retention credits added health‑care factors and other changes that increased potential credit value in many cases.

• Scale and concentration: House Fiscal Agency materials presented to the committee show that retention credits accounted for about two‑thirds of total MEGA award value despite representing a much smaller share of the number of agreements. The agency reported that about two‑thirds of the program’s total value (by approval amount) was awarded between 2008 and 2011 in response to the Great Recession.

• Liability and timing: The agency cited a roughly $9.4 billion total lifetime award figure and an estimated $3.0 billion of remaining certificates expected to be issued in future years. Gilchick emphasized that certificate issuance and revenue effects lag company tax years by about two fiscal years.

• Program changes and successor programs: MEGA agreements were discontinued in 2011 along with the MBT; companies with existing credits continued to claim them by filing under MBT rules until exhaustion. A smaller, appropriation‑funded Michigan Business Development Program replaced MEGA in practice; that program is grant‑ and loan‑based, awarded through the annual appropriations process and has historically carried annual appropriations under $100 million.

Committee concerns and follow‑up requests

Members repeatedly pressed Gilchick on verification, confidentiality and the ability of outside auditors or the legislature to independently confirm company claims. Minority Vice Chair Wigela cited a 2017 Auditor General finding included in the public discussion that, by one estimate, companies receiving MEGA credits had achieved only 48% of standard new jobs promised and 39% of high‑tech jobs, and had retained 83% of jobs promised. Gilchick said the Department of Treasury and the Michigan Economic Development Corporation (MEDC) have access to taxpayer filings and certification materials and that House Fiscal Agency does not have direct access to individual companies’ tax returns.

Vice Chair Green summarized the concern bluntly: “So we give out essentially billions of dollars without any verification potentially then that because that's we don't know if there's employees, how much investment is. We just are trusting the company's data that they're giving to us to then analyze that they receive those all that money.” Gilchick replied that Treasury reviews filings before certificates are certified and that MEDC staff verify performance under agreements when issuing yearly certificates.

Members asked the agency to pursue additional information. Gilchick said he would “ask some questions with the Department of Treasury and MEDC to see what information I can gather” about individual filing and certification practices, and committee members requested further briefings and documents in later hearings.

Formal actions at the meeting

Representative Bierlein moved to approve the minutes of the March 5 meeting; by unanimous consent (no objection heard) the minutes were approved. No other motions or formal votes on policy or legislation were taken during the session.

What the record does and does not show

The House Fiscal Agency provided historical totals, the mechanics of certificate issuance and examples of retention‑credit formulas used before and after 2008. The presentation materials and committee discussion show the program’s scale, the concentration of liability in retention credits, and timing issues that complicate revenue forecasting. The record shows that Treasury and MEDC perform certification and review functions but also shows that some underlying taxpayer filings and certain company tax details remain confidential and are not available to House Fiscal staff or the public in raw form. The committee asked the agency to seek further detail from Treasury and MEDC; no formal directive or change to certification procedures was adopted at the hearing.

Next steps

Committee members concluded the session by thanking the House Fiscal Agency for the briefing and scheduled follow‑up conversations and additional testimony in future meetings to examine verification, confidentiality and fiscal forecasting for remaining MEGA liabilities.