The Overview

Out-of-state insurance companies that invest in Michigan affordable housing can now use the state’s new housing tax credit to lower a special tax Michigan charges them, giving insurers a reason to put money into low-income rental projects. Gov. Gretchen Whitmer (D) signed House Bill 5807 on July 21 as part of a package creating the Michigan Housing Opportunity Tax Credit, which can be claimed starting with tax years that begin Jan. 1, 2027. ​

The state will award up to $42 million in these credits a year, which the housing authority expects to support about 2,500 new homes annually, according to the governor’s office. Michigan has 37 affordable and available rental homes for every 100 extremely low-income renter households, a shortage of about 195,000 homes, according to the National Low Income Housing Coalition.

What the Law Does

Michigan charges a retaliatory tax on insurers based in other states or countries when their home state taxes Michigan insurers more heavily than Michigan taxes its own. Under the law, an insurer that qualifies for a housing opportunity credit can subtract it when figuring that tax, up to the amount the Michigan State Housing Development Authority lists on the project’s allocation report.

The insurer must attach the authority’s eligibility statement to its annual return. If the federal low-income housing tax credit for the same project is later taken back, the insurer must pay back a matching share of the state credit on the return for the year that happens. Companion bills create the credit itself and let other businesses and individuals claim it against income taxes.

Legislative Status

Rep. Joseph Aragona (R-Clinton Township) sponsored the bill, with Democratic Reps. Kristian Grant and Stephen Wooden as cosponsors. The House passed it 92-13 on June 25, the Senate passed a revised version 21-15 on July 3, and the House agreed to the changes 94-12 the same day.

“Every Michigander deserves an affordable, quality place to call home,” Whitmer said when she signed the package. Sen. Jeff Irwin (D-Ann Arbor), who sponsored the Senate bill in the package, said it “provides some new policy that will create thousands of new units” that will take years to plan and build, Michigan Public reported.

The credits can first be claimed in 2027, and the insurance provision puts out-of-state insurers on the same footing as businesses that claim the credit against income taxes. How many homes get built will depend on how quickly the housing authority awards credits and developers line up financing.

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