HIRE MI Bills: HB 5413, 5414, 5415

Summary

This question-and-answer handout on the HIRE MI bills, HB 5413, 5414 and 5415, states that the program is not a request for new funding and that its financial support comes from withholding taxes on new jobs directly supported by a project. It says companies would take an anticipated 3-5 years to ramp up construction and hiring, and would then receive the employment tax reimbursement for 5-10 years while paying all other relevant state and local taxes. It states that a company receives reimbursement only for actual employment taxes paid, so a company that does not create and maintain the minimum number of required jobs receives no funding. Charts illustrate project tax flow and compare HIRE MI with other programs, including SOAR.

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HIRE MI Bills: HB 5413, 5414, 5415

Q: How much will this cost the
General Fund?

A: This is not a request for new funding. The
financial support for this program comes
from a tax capture withholding from the
creation of new jobs directly supported by
the project. This means there is no General
Fund spending impact to the State. HIRE

MI will also be instrumental in securing
these projects - and the tax revenue they
will generate - in Michigan, instead of other
states. Without HIRE MI, the General Fund
would not realize any future revenue from
these projects either.

Q: How long will it take for this
program to impact the budget?

A: It would take an anticipated 3-5 years for
companies to fully ramp up construction
and hiring to the point where they would
be able to submit for a reimbursement
under the HIRE MI program. During that
ramp up time, they will be contributing
state and local revenue through business
taxes, property taxes, construction sales

& use taxes and employment taxes.

Then, for 5-10 years the company would
recognize the benefit of the employment
tax reimbursement, while also still paying
all other relevant state and local taxes. After
that point, the project becomes a source of
significant new long-term revenue at both
the state and local level.

Q: Won't this take funding away from
education, housing or other priority
areas in the budget?

A: HIRE MI is paid for by reimbursing actual
employment taxes paid by the company
on eligible, new jobs directly supported

by the project. This means it does not take
away any resources that would otherwise
exist for other efforts, including housing
and education. In fact, the program builds
a foundation for significant new long-term
revenue at both the state and local level
once the term of the incentive is complete.

Q: How do we make sure the
companies are creating the jobs they
commit to?

A: HIRE MI has built in enforcement - the
company only receives reimbursement for
actual employment taxes paid. If there are
no wages paid and no employment taxes
paid there are no dollars with which to be
reimbursed. Bottom line - if the company
does not create and maintain the minimum
number of required jobs and pay the wages,
they receive no funding through HIRE MI.

Q: What taxes will companies be able
to apply this reimbursement on direct,
qualified jobs to?

A: Companies will apply this reimbursement
to employment taxes, once they are fully
ramped up (est. 3-5 years), and through the
terms of their contract (est. 5-10 years). All
other taxes paid, including business taxes,
property taxes and sales and use taxes will
go in full into the General Fund from the
first year forward.

MICHIGAN ECONOMIC
Illustration of Project Tax Flow Under HIRE MI

Year 1 Year 2 Year 3 Year 4

| Property Taxes

| Business Taxes Sales and Use Taxes

Year é Year? Year 8 Year?

B Employment Taxes

5

Year10 Year11 Year t2

ee Number of Employees

*Estimated taxes for visual purposes only to show construction, job ramp up, and reimbursement period under HIRE Mi

Michigan Business

HIRE MI
HB 5413-15

Critical Industry

Development Program

Three-year term

$10 million cap per project

Performance-based cash grants, with
clawback provisions

¢ 50 job minimum with no location
requirements

¢ 25 job minimum in counties with
population less than 90,000 (rural
MBDP)

* 25 job minimum for projects that
fall within an “innovation industry”
(innovation MBDP)

* <25 job minimum for project that
meets specific location or industry
criteria (micro MBDP)

Five-year to ten-year term

$200M annual cap

Built-in compliance: Failure to
maintain required job numbers
results in forfeit of withholding tax
capture

* Aminimum of 250 certified
new jobs in the State with a
median annual wage that is
equal to 125% or more of the
prosperity regional median
wage.

¢ Aminimum of 25 certified new
jobs in the State with a median
annual wage that was equal to
150% or more of the prosperity
regional median wage.

No Wages = No Employment Taxes Paid
No Employment Taxes Paid = No HIRE MI Reimbursement

MICHIGAN ECONOMIC

Program (SOAR)
No set term period

Overall program cap of
$500 million FY24, but no
per project cap

Performance-based cash
grants, with clawback
provisions

Significant job creation
expected - requires state
support exceeding what
is available through other
job creation tools

$495-240212


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