HB 4961 Michigan House · 2025-2026 Regular Session

Individual income tax: income; treatment of certain provisions under the internal revenue code and revenue distributions; modify. Amends secs. 12, 30, 36, 607, 695 & 805 of 1967 PA 281 (MCL 206.12 et seq.) & repeals sec. 51d of 1967 PA 281 (MCL 206.51d). TIE BAR WITH: HB 4183'25, HB 4951'25, HB 4968'25

HB 4961 amends Michigan's individual income tax code to change how certain provisions from the federal Internal Revenue Code and specific revenue distributions are treated for state tax purposes. It modifies sections 12, 30, 36, 607, 695, and 805 of the 1967 tax law (MCL 206.12 et seq.) and repeals section 51d (MCL 206.51d). These changes directly affect individual taxpayers by altering how federal tax rules and certain state revenue streams impact their Michigan tax liability. The bill became law immediately after Governor approval on October 7, 2025.

Bill status signed all 5 stages cleared

Introduction

Sep 2025

Committee Review

Oct 2025

House Passage

Oct 2025

Senate Passage

Oct 2025

Signed into Law

Oct 2025

Introduced Sep 16, 2025 Signed Oct 8, 2025

Maddy AI version diff · 4 comparisons

What changed between versions

Substitute (H-1) → House Concurred Bill · 9 edits

MAJOR

This bill significantly updates Michigan's income tax code to align with recent federal tax law changes, including adjustments for R&D expenses, depreciation rules, and the Tax Cuts and Jobs Act transition rules. It introduces new deductions for specific groups like disabled veterans, Holocaust victims, and tribal members, while eliminating deductions for oil and gas production and expanding tuition-related tax benefits. The legislation also restructures how state tax revenue is distributed to various funds over the next decade.

Scope change

The bill expands the scope of eligible taxpayers by adding new deduction categories for disabled veterans, Holocaust victims, and resident tribal members, while narrowing the scope by eliminating deductions for oil and gas production income and expenses.

DEFINITION

Updated the definition of 'Internal revenue code' to clarify the effective date for tax calculations, incorporating changes from the Tax Cuts and Jobs Act.

ELIGIBILITY

Added new deductions for disabled veterans regarding student loan discharge, Holocaust victims receiving asset recovery, and resident tribal members for nonbusiness income.

Eliminated deductions for income and expenses related to oil and gas production to align with state severance tax policies.

Introduced new deductions for education savings accounts (529 plans) and ABLE savings accounts, allowing taxpayers to deduct contributions and qualified withdrawals.

Revised retirement and pension benefit deduction limits based on birth year, with new provisions for public safety employees and changes to how surviving spouses claim deductions.

FISCAL

Established a multi-year schedule for distributing income tax revenue to specific state funds, including the neighborhood road fund, Michigan housing fund, and healthy Michigan fund, with amounts increasing annually.

REQUIREMENT

Modified the calculation of taxable income for estates and trusts to reflect new federal tax law requirements regarding R&D expenses and depreciation.

Added requirements for calculating federal taxable income as if certain federal tax provisions (like bonus depreciation and R&D expensing) were not in effect, starting in 2025.

TIMELINE

Set specific effective dates for various new provisions, such as the disabled veteran student loan deduction starting in 2025 and the first-time home buyer savings account deduction starting in 2022.

House Introduced Bill → As Passed by the House · 8 edits · Sep 25, 2025

MODERATE

This bill significantly overhauls Michigan's income tax definitions and deductions to align with federal tax law changes, specifically regarding R&D expenses and depreciation. It introduces new definitions for 'flow-through entities' and expands the list of deductible expenses to include items like student loan forgiveness for disabled veterans, wrongful imprisonment compensation, and contributions to new savings accounts for education and first-time homebuyers. The legislation also adjusts how taxable income is calculated for estates, trusts, and foreign operating entities.

Scope change

The bill expands the scope of eligible deductions to include specific new categories such as ABLE savings accounts, first-time home buyer savings accounts, and various retirement benefits, while simultaneously tightening definitions for flow-through entities to exclude certain publicly traded partnerships.

DEFINITION

Added a specific definition for 'flow-through entity' to clarify which business structures are treated as pass-through for tax purposes.

ELIGIBILITY

Introduced new deductions for student loan cancellation for disabled veterans and compensation for victims of wrongful imprisonment.

Created new deductions for contributions to and qualified withdrawals from education savings accounts and ABLE savings accounts.

Added a deduction for contributions to first-time home buyer savings accounts and penalties for non-qualified withdrawals.

Added a deduction for qualified tips and overtime compensation for tax years between 2026 and 2029.

Introduced a new deduction for resident tribal members regarding nonbusiness income earned during the term of a tribal-state agreement.

REQUIREMENT

Updated the calculation of federal taxable income to ignore specific federal tax provisions related to R&D expenses and bonus depreciation.

FISCAL

Revised the distribution schedule for state income tax revenue, allocating specific amounts to various state funds for different fiscal years.

Floor votes · House Sep 25, 2025

How they voted

This bill passed the Senate by voice vote (no roll call recorded).

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Oct 8, 2025

Introduced

filed with Secretary of State 10/07/2025 01:34 PM

lower

Oct 8, 2025

Signed into law

approved by the Governor 10/07/2025 12:18 PM

lower

Oct 3, 2025

Lower · Passed

Senate amendment(s) concurred in Roll Call #248 Yeas 102 Nays 7 Excused 0 Not Voting 1

lower

Oct 3, 2025

Introduced

returned from Senate with amendment(s) with immediate effect and full title

lower

Oct 3, 2025

Upper · Passed

PASSED; GIVEN IMMEDIATE EFFECT ROLL CALL # 262 YEAS 22 NAYS 14 EXCUSED 1 NOT VOTING 0

upper

Oct 3, 2025

Amended

AMENDMENT(S) DEFEATED

upper

Oct 2, 2025

Upper · Passed

AMENDMENT(S) CONCURRED IN

upper

Oct 2, 2025

Upper · Passed

REPORTED BY COMMITTEE OF THE WHOLE FAVORABLY WITH AMENDMENT(S)

upper

Sep 29, 2025

Committee

REFERRED TO COMMITTEE OF THE WHOLE

upper

Sep 29, 2025

Upper · Passed

PASSED BY HOUSE WITH IMMEDIATE EFFECT

upper

Sep 25, 2025

Introduced

title amended

lower

Sep 25, 2025

Lower · Passed

passed; given immediate effect Roll Call #233 Yeas 95 Nays 4 Excused 0 Not Voting 11

lower

Sep 25, 2025

Introduced

amended

lower

Sep 25, 2025

Lower · Passed

substitute (H-1) adopted

lower

Sep 25, 2025

Lower · Passed

motion to discharge committee approved

lower

Sep 16, 2025

Committee

referred to Committee on Finance

lower

Sep 16, 2025

Introduced

introduced by Representative Rep. Ann Bollin

lower

1 primary · 0 co-sponsors