MMA Testimony — House Economic Development and Small Business Committee, HB 5099

Summary

Testimony of Mike Johnston, Executive Vice President of Government Affairs and Workforce Development for MMA, to the House Economic Development and Small Business Committee on HB 5099 (Hood), HB 5100 (Martus), HB 5101 (Rogers) and HB 5102 (Puri), the R&D tax credit package. The testimony says Michigan is one of just 14 states without an R&D tax credit built in its tax code, and that MMA and other business organizations prefer a broad based approach implemented by Treasury, making the credit automatic and available to all companies. It adds that MMA understands the budget for an R&D tax credit is in the neighborhood of $100 million.

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                                                     MMA Testimony
                     House Economic Development and Small Business Committee
                 HB 5099 (Hood), HB 5100 (Martus), HB 5101 (Rogers, HB 5102 (Puri)
Mr. Chairman and Committee members, thank you for the opportunity to speak today on the R&D tax credit package. I
am Mike Johnston Executive Vice President of Government Affairs and Workforce Development for MMA. I am here on
behalf of MMA, but my comments reflect our shared with other business organizations. I don’t normally speak for other
organizations, but with agreement from them, I am doing so today. The committee has likely received separate letters
from each of the organization this morning.

First let me say, we collectively are very interested in establishing an R&D Tax Credit in Michigan. We are one of just 14
states without a R&D tax credit built in our tax code. We very much appreciate you and the sponsors bringing forth bills
that clearly communicate this state recognizes and appreciates the value of innovation as a driver for future economic
growth. Whether companies are creating the next life-saving drug, the next battery technology, or the next telescope to
explore the universe, innovation is the key to future economic success.

However, I am here to say we, collectively, prefer taking a different approach that better integrates the R&D tax credit
into the Michigan business climate. We prefer a more broad based approach, implemented by Treasury making the
credit automatic and available to all companies currently in Michigan as well as those newly considering investing in
Michigan. R&D can be done anywhere. When companies are making decisions about locations for long-term
investments like R&D investments, they need predictability and certainty that tax credits supporting that effort will
remain in place. Wondering whether or not a credit will be granted in the future creates greater uncertainty when
compared to most other states.

Building the R&D tax credit into the tax code brings several advantages from a business perspective. First, it is
predictable and reliable. Second, its administratively simple and efficient in that it is automatically implemented through
annual tax filings to Treasury, especially if the definitions reflect federal definitions. Thirdly, the credit is available to all
businesses large and small, regardless of their field of endeavor. And lastly, a broad based approach helps define the
business climate in Michigan as encouraging innovation.

Let me address an obvious question. We understand through conversations with the administration and legislative
leaders, that, at this point the budget for an R&D tax credit is in the neighborhood of $100 million. We recognize and
agree in the context of a large industrial economy, $100 million doesn’t go very far in terms of value for any individual
company. However, there is broad agreement among my members and the business community that integrating the tax
credit into the tax code is the best approach for Michigan’s business climate.

In closing, Mr. Chair, again we truly appreciation you and the sponsors bringing forth an R&D tax credit to improve
Michigan’s economy, we simply prefer a more automatic and broad based approach.

I am happy to take any questions.


Mike Johnston
EVP, Government Affairs and Workforce Development
johnston@mimfg.org
517-487-8554


                         620 South Capitol Avenue • Lansing, MI 48933 • Phone: 517-372-5900 • www.mimfg.org
                                             Manufacturing Focused. Member Driven.


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