Bill would give Michiganders a 50% tax credit to spur local small-dollar investing

Representative Jenkins Arno introduced House Bill 4816 on Oct. 28, 2025, proposing a state income tax credit to encourage Michigan residents to make direct, small-dollar investments in qualified Michigan businesses. The credit would equal 50% of an investor’s qualified contribution, testimony illustrated a $6,000-per-year investment cap that would produce a $3,000 maximum credit, the proponents said. The credit would be claimed after an investment is made and could be carried forward for up to 10 years if not fully used.

Proponents told the House Committee on Finance the credit is intended to activate so-called retail investors — nonaccredited individuals — to participate in local business ownership and to recirculate capital within communities. Chris Miller, a special projects consultant at Plain Wave in Lenawee County, said Michigan once built local economies through localized reinvestment and that today much capital “exits our communities.” He said the bill builds on prior Michigan policy, including the 2013 Michigan Invest Locally Exemption (MILE Act), and aims to restore local participation in investment.

Jananne Jaundy of Michigan State University’s Center for Regional Economic Innovation testified the credit would be one tool to help low-income communities keep and grow local wealth by enabling local residents to invest in businesses they want in their neighborhoods. Lansing developer Brent Forsberg described a proposed community investment fund and a neighborhood redevelopment project in Southwest Lansing, saying the credit could lower the effective cost and administrative barriers for small-dollar investors and support local career-pathway training tied to construction projects.

Committee members sought clarifications about the bill’s eligibility tests and fiscal exposure. Representative Posthumus asked whether the qualifying-business sales test meant that 80% of a business’s sales must be generated in Michigan; witnesses said the bill borrowed an IRS-style ‘‘80% rule’’ concept and that staff would provide precise statutory language to the committee. Representative Young asked whether the state would need to annually appropriate funds to hold school aid harmless; proponents and witnesses said the likely fiscal effect is unknown, but they cited a Nova Scotia example where a similar program raised private investment and generated broader tax revenue that offset the cost of credits. Witnesses also reported initial consultations with the state Treasury and said Treasury had not opposed prior versions of the proposal.

Key provisions described in testimony and subject to committee clarification: - Credit equals 50% of a qualified investment; testimony cited a $6,000 annual investment example resulting in a $3,000 maximum credit. (Representative Jenkins Arno; Chris Miller) - Credit is applied after investment and may be carried forward up to 10 years. (Chris Miller) - Qualified businesses must meet a majority-in-state test; the bill uses an IRS-derived ‘‘80% rule’’ concept for defining in‑state activity. (Chris Miller) - Proposed minimum investment levels discussed by witnesses included a $100 minimum, intended to enable micro-investors. (Chris Miller)

No formal vote on HB 4816 was recorded in the committee transcript; the measure was presented and discussed at length and committee members requested follow-up information about the statutory definitions and the potential fiscal impact to school aid and state revenues.

The committee read several organizational support cards (Michigan Manufacturing Association, Detroit Regional, Michigan Municipal League) but those representatives did not take testimony at the table. Committee staff said they would provide further clarifying language on qualifying-business definitions and fiscal estimates for members to review.

If advanced beyond committee, the bill’s fiscal effect would depend on uptake by investors and the structure of qualifying businesses; proponents pointed to out-of-state examples to suggest the program could generate net economic activity that offsets credit costs, but they and committee members emphasized that Michigan-specific fiscal analysis would be required before final judgment.