Michigan House Republicans
Rep. Hall: New small-business tax savings law offers much-needed fairness
RELEASE|December 27, 2021
Contact: Matt Hall

House Tax Policy Committee Chair Matt Hall, of Marshall, today highlighted recently signed legislation to save small businesses hundreds of millions of dollars collectively on federal taxes.

House Bill 5376, now Public Act 135 of 2021, allows certain small businesses to claim their state and local tax deductions at the federal level. Hall helped guide the plan through the legislative process and to the governor’s desk. The second-term legislator said it is important to continue to fight for fairness for local businesses after the governor previously vetoed similar legislation.

“This was a priority issue for the House Tax Policy Committee. I have heard from many hard-working local business owners on how important this relief is after the impacts of COVID-19 and government orders in response which shut them down,” Hall said. “This proposal had broad, bipartisan support in the Legislature and will have an impact for nearly 250,000 businesses in Michigan. I am glad the governor has decided to side with small businesses after vetoing this adjustment initially.”

Federal law allows the deduction of a taxpayer’s state and local tax (SALT) burden on the federal tax return, up to $10,000 for individuals. Small businesses organized as flow-through entities, such as limited liability companies, S corporations, and partnerships, pay their state income taxes on an individual return, so the $10,000 limit applies. Meanwhile, typically larger C corporations can claim an uncapped SALT deduction.

The new law creates an option for flow-through businesses in Michigan to be annually taxed at an entity level, allowing their deductions to remain at the federal level.

The Michigan Chamber of Commerce previously estimated that flow-through entities in Michigan would save nearly $200 million on their federal taxes every year under the proposal. The flow-through entity tax option is available for businesses starting with tax year 2021.

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