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Revenue Administrative Bulletin 2021-23



Approved: December 21, 2021



Pursuant to MCL 205.6a, a taxpayer may rely on a Revenue Administrative Bulletin issued by the Department of Treasury after September 30, 2006 and shall not be penalized for that reliance until the bulletin is revoked in writing. However, reliance by the taxpayer is limited to issues addressed in the bulletin for tax periods up to the effective date of an amendment to the law upon which the bulletin is based or for tax periods up to the date of a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired that overrules or modifies the law upon which the bulletin is based.


RAB 2021- 23.  This Revenue Administrative Bulletin (RAB) describes the Individual Income Tax treatment of refunds of motor vehicle insurance premiums as approved by the Michigan Catastrophic Claims Association (MCCA) on November 3, 2021.


  1. Are motor vehicle insurance premium refunds received in 2022 included in the computation of the Michigan Individual Income Tax base?
  1. Are the refunds included in total household resources or household income?


  1. The refund of a motor vehicle insurance premium is not included in the computation of Michigan taxable income for the individual income tax unless the premium was deducted as a business expense in a prior year. A refund of a federally nondeductible item is not considered to be income.
  1. The refund of an individual's motor vehicle premium is not included in the computation of total household resources or household income unless it is included in federal adjusted gross income (AGI). If the premium had been deducted as a business expense, the recovery of the expense would be in federal AGI, and that amount must be included in total household resources or household income.


In 1978, when no fault auto insurance was instituted in Michigan, the legislature required the establishment of a catastrophic claims association to indemnify no-fault insurers from losses in excess of $250,000 for personal protection insurance coverage. The MCCA was established for this purpose. Michigan law requires that every auto insurer be a member of the MCCA and authorizes the association to assess its member insurance companies to fund the association, who pass the amount along to their policyholders in auto insurance premiums

On November 3, 2021, the MCCA voted to return an approximate $3.0 billion surplus to its member insurance companies by March 9, 2022.[1] Within 60 days of receipt by each member insurance company, the amount must be refunded to individual policyholders in the form of a premium refund equal to $400.00 for each vehicle covered by an auto insurance policy as of 11:59 p.m. on October 31, 2021.[2] Individual policyholders are therefore expected to receive this refund in 2022.

  1. Taxation of excess MCCA premiums refunded to Michigan policyholders
    Section 30(1) of the Income Tax Act,[3] MCL 206.30(1), prescribes the computation of Michigan taxable income as:

    "Taxable income" means, for a person other than a corporation, estate, or trust, adjusted gross income as defined in the internal revenue code subject to the following adjustments . . . [4]

    The statutory adjustments to federal AGI for the computation of Michigan taxable income do not require any adjustment for the refund of an auto insurance premium. The taxation of excess premiums refunded from the MCCA is therefore determined according to the inclusion or exclusion of that refund in federal AGI.

    In determining federal AGI under the Internal Revenue Code (IRC), a refund or recovery of a nondeductible item is generally not considered income, and therefore, excluded from the computation of AGI. However, if the recovery is of an item previously reported as a deduction on the recipient's federal income tax return which reduced the recipient's federal tax, then the refund must be included in federal AGI in the year of the refund or recovery.[5] 

    The refund of surplus assessments as authorized by MCCA results in the refund of a portion of a policyholder's auto insurance premium. Because there is no federal income tax deduction for the payment of automobile insurance premiums for most individuals, a refund of such premiums will neither be included in federal adjusted gross income nor Michigan taxable income. However, if the premium was previously deducted on the policyholder's federal income tax return - for example, reported as a deductible business expense - then the refund of that previously-deducted expense may be included in federal adjusted gross income and, by extension, Michigan taxable income. 

  2. Treatment of motor vehicle insurance premiums in computing Total Household Resources and Household Income

"Total household resources" is used to determine eligibility for the Home Heating Credit and Homestead Property Tax Credit.[6] Similarly, "household income" is used to determine eligibility for the Farmland Preservation Tax Credit.[7] Both terms are defined to include "all income received by all persons of a household in a tax year,"[8] where "income" is defined, in relevant part, as:

[T]he sum of federal adjusted gross income as defined in the internal revenue code plus all income specifically excluded or exempt from the   computations of the federal adjusted gross income.[9]

A refund of an automobile insurance premium is not included in total household resources or household income unless it is required to be included in federal AGI. A refund of an automobile insurance premium is generally only required to be included in federal AGI if the premium payment had previously been deducted on the recipient's federal income tax return.


[1] Press Release, Michigan Catastrophic Claims Association, MCCA Board Announces Support for Consumer Refunds Resulting from Audit No-fault Reforms (November 3, 2021),

[2] For more information, visit,5269,7-303-13648_60666_109325---,00.html.

[3] MCL 206.1 et seq.

[4] MCL 206.30(1).

[5] See IRC section 111.

[6] For more information on Total Household Resources, see RAB 2015-18.

[7] MCL 324.36109(1).

[8] MCL 206.508(4) (emphasis added).

[9] MCL 206.510(1).