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May 17, 2021
2021 Edition

Outline of the Michigan Tax System – 2021

Let the games begin!  This update includes entries on three new taxes on gaming and sports wagering.  In-person sports betting at the three Detroit casinos launched in March 2020, while new Internet and sports wagering options became legal in January 2021. There were few other tax policy changes. Fees were increased for vehicle registration transfers, and the historic preservation credit against the state income tax – repealed in 2012 – was restored; but major changes to the tax system were largely absent. 

Sports Wagering and Online Gaming  

Michigan is now one of 22 states with legalized sports betting.  The three Detroit casinos began accepting in-person sports wagers on March 11, 2020.  Less than a week after the implementation, however, all three casinos were temporarily closed due to the pandemic.  Still, over $593,000 was wagered in just those opening days.  With the casinos re-opening on August 5, 2020, at reduced capacity, sports betting resumed, and in-person sports wagers eventually totaled $130 million in in 2020, with $1.5 million in tax revenue generated for the State and Detroit via the 8.4 percent tax on adjusted wagering receipts. 

On January 22, 2021, Michigan’s three Detroit casinos and nine tribal casinos launched online sports wagering, which is subject to the same 8.4 percent tax. Total wagering exceeded $776 million through the end of March 2021, but this includes significant “free play” promotional incentives which are subtracted from gross receipts in calculating the tax.  Total tax revenues were about $1.3 million during this period.    

All but one of the casinos that offer Internet sports betting also began offering Internet gaming options such as poker, blackjack, and slots on January 22.  A marginal tax rate of 20 percent is imposed on the first $4 million in gross receipts; that rate gradually increases to 28 percent once adjusted gross receipts reach $12 million. The scope of Internet gaming will likely further expand when Michigan enters into agreements with other jurisdictions within the United States, including Native American tribes, to facilitate multi-jurisdictional Internet poker.  From January 22 through the end of March 2020, Internet gaming in Michigan has generated $191 million in adjusted receipts and $46 million through the new tax. 

Vehicle Transfer Fees and a New Income Tax Credit 

The annual tax on most motor vehicle registrations in Michigan is based on the manufacturer’s list price. However, registrations can be legally transferred mid-year by owners who purchase new vehicles for an $8 transfer fee.  However, some Michigan residents have taken advantage of this provision by regularly registering an unused older vehicle and then transferring the registration to a higher-value vehicle for the nominal $8 fee. For this reason, in 2019, the Department of State began charging an additional registration tax to account for the higher valued vehicle receiving the registration. 

The $8 transfer fee was increased to $10 and the policy was changed to address this “loophole” more directly through new 2020 legislation.  Registration transfers to new vehicles where there has been a change of ownership are not assessed the full additional tax based on the new vehicle value. Instead, a generic $5 registration difference fee is added to the $10 transfer fee.  Only when a registration is transferred to a vehicle for which ownership is not changed is the full value-based adjustment under the 2019 policy change continued. 

The year also marked the return of the historic preservation tax credit on income taxes for rehabilitation expenditures on an historic building, structure, or space listed on an historic register or located within a qualifying historic district. Public Act 343 of 2020 allows a credit of up to 25 percent of qualified rehabilitation expenditures with a limit of $2.0 million for a single property.  The credit is available to taxpayers who hold a certificate of completed rehabilitation by January 1, 2031.  Total statewide credits are limited to $5.0 million per year. 

Other 2020 tax policy changes of note: 

  • An expansion of eligibility for the small brewer’s credit under the beer tax to 60,000 manufactured barrels during the year; up from 50,000 barrels. 
  • Extensions until December 31, 2025, for the issuance of new commercial rehabilitation and commercial facility exemption certificates. 

These and other tax policy changes are incorporated in this 37th edition of the Citizen Research Council of Michigan’s Outline of the Michigan Tax System.  For decades, the Tax Outline has been considered a critical ready reference for those interested in Michigan’s public finances. It has served policymakers, researchers, and citizens alike as a comprehensive yet accessible reference guide to Michigan’s often complicated tax structure. Summary descriptions outline the base, tax rate, and revenue disposition for major taxes assessed in Michigan at both the state and local levels. These are supplemented by historical information on revenues and long-run trends. For quick reference, archived versions of previous updates dating back to 1997 are also available on the Research Council’s website at https://crcmich.org/publications/outline-of-the-michigan-tax-system-archives

May 17, 2021
2021 Edition

Outline of the Michigan Tax System – 2021

Let the games begin!  This update includes entries on three new taxes on gaming and sports wagering.  In-person sports betting at the three Detroit casinos launched in March 2020, while new Internet and sports wagering options became legal in January 2021. There were few other tax policy changes. Fees were increased for vehicle registration transfers, and the historic preservation credit against the state income tax – repealed in 2012 – was restored; but major changes to the tax system were largely absent. 

Sports Wagering and Online Gaming  

Michigan is now one of 22 states with legalized sports betting.  The three Detroit casinos began accepting in-person sports wagers on March 11, 2020.  Less than a week after the implementation, however, all three casinos were temporarily closed due to the pandemic.  Still, over $593,000 was wagered in just those opening days.  With the casinos re-opening on August 5, 2020, at reduced capacity, sports betting resumed, and in-person sports wagers eventually totaled $130 million in in 2020, with $1.5 million in tax revenue generated for the State and Detroit via the 8.4 percent tax on adjusted wagering receipts. 

On January 22, 2021, Michigan’s three Detroit casinos and nine tribal casinos launched online sports wagering, which is subject to the same 8.4 percent tax. Total wagering exceeded $776 million through the end of March 2021, but this includes significant “free play” promotional incentives which are subtracted from gross receipts in calculating the tax.  Total tax revenues were about $1.3 million during this period.    

All but one of the casinos that offer Internet sports betting also began offering Internet gaming options such as poker, blackjack, and slots on January 22.  A marginal tax rate of 20 percent is imposed on the first $4 million in gross receipts; that rate gradually increases to 28 percent once adjusted gross receipts reach $12 million. The scope of Internet gaming will likely further expand when Michigan enters into agreements with other jurisdictions within the United States, including Native American tribes, to facilitate multi-jurisdictional Internet poker.  From January 22 through the end of March 2020, Internet gaming in Michigan has generated $191 million in adjusted receipts and $46 million through the new tax. 

Vehicle Transfer Fees and a New Income Tax Credit 

The annual tax on most motor vehicle registrations in Michigan is based on the manufacturer’s list price. However, registrations can be legally transferred mid-year by owners who purchase new vehicles for an $8 transfer fee.  However, some Michigan residents have taken advantage of this provision by regularly registering an unused older vehicle and then transferring the registration to a higher-value vehicle for the nominal $8 fee. For this reason, in 2019, the Department of State began charging an additional registration tax to account for the higher valued vehicle receiving the registration. 

The $8 transfer fee was increased to $10 and the policy was changed to address this “loophole” more directly through new 2020 legislation.  Registration transfers to new vehicles where there has been a change of ownership are not assessed the full additional tax based on the new vehicle value. Instead, a generic $5 registration difference fee is added to the $10 transfer fee.  Only when a registration is transferred to a vehicle for which ownership is not changed is the full value-based adjustment under the 2019 policy change continued. 

The year also marked the return of the historic preservation tax credit on income taxes for rehabilitation expenditures on an historic building, structure, or space listed on an historic register or located within a qualifying historic district. Public Act 343 of 2020 allows a credit of up to 25 percent of qualified rehabilitation expenditures with a limit of $2.0 million for a single property.  The credit is available to taxpayers who hold a certificate of completed rehabilitation by January 1, 2031.  Total statewide credits are limited to $5.0 million per year. 

Other 2020 tax policy changes of note: 

  • An expansion of eligibility for the small brewer’s credit under the beer tax to 60,000 manufactured barrels during the year; up from 50,000 barrels. 
  • Extensions until December 31, 2025, for the issuance of new commercial rehabilitation and commercial facility exemption certificates. 

These and other tax policy changes are incorporated in this 37th edition of the Citizen Research Council of Michigan’s Outline of the Michigan Tax System.  For decades, the Tax Outline has been considered a critical ready reference for those interested in Michigan’s public finances. It has served policymakers, researchers, and citizens alike as a comprehensive yet accessible reference guide to Michigan’s often complicated tax structure. Summary descriptions outline the base, tax rate, and revenue disposition for major taxes assessed in Michigan at both the state and local levels. These are supplemented by historical information on revenues and long-run trends. For quick reference, archived versions of previous updates dating back to 1997 are also available on the Research Council’s website at https://crcmich.org/publications/outline-of-the-michigan-tax-system-archives


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