Offset Credit - Optional

Eligible Withholding Tax filers may qualify to offset their periodic Withholding Tax payments with the Research and Development (R&D) Tax Credit if all of the following conditions are met:

• The business is a monthly or quarterly Withholding Tax filer during the tax year following the expense year.
• An R&D Credit Application has been submitted on time.

The expense year is the calendar year when Michigan Qualified R&D Expenses (MQREs) were incurred.

• Offsetting payments for the R&D Tax Credit is not required.
• The offset period depends on when the Proration Notice is published:
  • If published before the business files and pays their tax return due April 20, the offset period may begin in April.
  • If published after the business files and pays their tax return due April 20, the offset period may begin with the next monthly or quarterly tax return after the notice is published.
• Withholding Tax filers offsetting periodic payments for the R&D Tax Credit must report their full tax liability on their monthly or quarterly tax returns filed during the offset period, but may reduce payments during that period, up to the amount of the adjusted credit.
• Payments cannot be reduced below $0 for any period.
• R&D Tax Credit offsets may be applied as determined by the business. Offsets may be claimed in full at the beginning or end of the offset period, distributed unevenly throughout the period, applied evenly across payments, or managed using another method, as long as payments are reduced in accordance with other limitations.
• The entire adjusted credit must be claimed on the annual return filed for the tax year following the expense year, and any overpayment remaining at that time will be refunded.
• If payments are reduced beyond the credit amount, penalties and interest will apply.