Reporting Requirement

Boilerplate language from the Michigan General Omnibus Budget requires Treasury to report the effects of federal policy changes. 2025 Public Act 22, Article 5, Part 2, Sec. 223. Specifically, Treasury must provide the following:

[A]n annual report to the standard report recipients detailing federal policy changes that do, or are expected to do, any of the following:

1. Affect the operations of the department or agency, including reductions in federal revenue.
2. Affect an industry, community, population, or other group regulated or served by, or that otherwise engages with, the department or agency.
3. Create a regulatory gap that could negatively impact the public.

Effects of Federal Policy Changes

Reconciliation Legislation

H.R. 1, also known as the “One Big Beautiful Bill” had the following impacts on Treasury’s operations and customers.

Achieving a Better Life (ABLE) Act

The federal ABLE Act was expanded to increase the age of disability onset from age 26 to age 46, including older veterans, and the contribution limit was increased from $10,000 to $20,000.

1. The expansion of age eligibility has essentially doubled the number of qualifying individuals in Michigan, which has so far resulted in a roughly 50% increase in the monthly average of new accounts administered by Treasury. This has required the unit to expand outreach efforts, increase their presence in disability advocacy, and update marketing materials.
2. More individuals with disabilities and their families are now eligible to save funds for Qualified Disability Expenses that support health, independence, and quality of life without jeopardizing eligibility for necessary federal benefits.

529 Plans

The 529 Plan was expanded to increase tax-free withdrawals of $20,000 per qualified beneficiary. The plan funds now cover curriculum (e.g., workbooks, educational software), books, tutoring, special needs therapies, standardized tests, credentialing, and can now be applied to trade programs.

1. Treasury’s operations have not been impacted; the MET program is specifically for higher education, and the federal changes do not fall into that category.
2. More Michiganders can now choose to benefit from Michigan’s 529 plan, the Michigan Education Savings Plan (MESP), and the annual benefit will increase for participants of the program.

“No tax on tips” and “No tax on overtime”

“Qualified tips” and “qualified overtime compensation” are generally deductible from federal income tax for taxable years 2025 – 2028, subject to limitations.

1. Treasury’s operations have not been directly affected by the federal policy change.
2. Michigan’s population of taxpayers who work in occupations that customarily receive tips or who earn qualified overtime compensation will experience slightly lower federal tax liabilities for four years. Because those deductions do not impact adjusted gross income, the state income tax liabilities of that population are not affected; however, under 2025 PA 24, Michigan taxpayers may deduct the same income, subject to the same federal limitations, on their Michigan returns for tax years 2026-2028. Employers of eligible individuals are subject to new reporting requirements.

“No tax on car loan interest”

Effective for federal income tax for 2025 through 2028, individuals may deduct up to $10,000 of interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. Lease payments do not qualify, and the final assembly must have been in the U.S.  Income limitations apply.

1. Treasury’s operations have not been directly affected by the federal policy change.
2. Michigan’s population of taxpayers who purchase eligible vehicles and meet other eligibility criteria will experience lower federal tax liabilities for four years. Because those deductions did not impact adjusted gross income, the state income tax liabilities of that population are not affected.

Deduction for Seniors:

Effective for federal income tax for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction on their federal return of $6,000. Income limitations apply.

1. Treasury’s operations have not been directly affected by the federal policy change.
2. Michigan’s population of taxpayers aged 65 and older may experience slightly lower federal tax liabilities for four years. Because the deduction does not impact adjusted gross income, the state income tax liabilities of that population are not affected.

Various modifications to business expense provisions:

The legislation sped up the deductibility of certain business expenses, such as bonus depreciation (IRC 168(k) and (n)), immediate expensing election (IRC 179), research and experimental expenses (174; 174A), and business interest expenses (163(j)).

1. Treasury’s operations have not been directly affected by the federal policy change.
2. The federal changes impact the federal income tax liabilities of business and individual taxpayers, lowering liability in the short term but balancing out over time. As a result of the federal legislation, Michigan passed  PA 2025 PA 24, decoupling individual and corporate income taxes from these changes. Because the State has decoupled from those changes, special decoupling adjustments will need to be reported by state taxpayers.

Executive Orders (EOs)

EO 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” signed on January 20, 2025

An earlier EO required claimants of the home heating credit, funded by federal LIHEAP, to report the filer’s, spouse’s, and household members’ genders, along with various other demographic information. Required gender categories were Self-Identified Male, Self-Identified Female, Other, or Unknown.  For 2026 heat assistance, EO 14168 changed the required reporting category from “gender” to “biological sex,” and removed “self-identified” from the options.

1. Treasury operations were minimally impacted; revisions to the Home Heating Credit (Form CR-7) were required.
2. Claimants and other household members who are in the LGBTQ+ community may be negatively impacted; it’s possible that the changes could inhibit potential claimants and their household members from filing home heating credit claims.

Tariffs

See Treasury’s memo, Executive Directive 2026-2 Treasury Response.pdf