Any business seeking a MEGA tax credit must qualify using the following process set forth in the proposed legislation, and subject to amendment:
First, the business must be an "eligible business," which means that it creates new jobs in Michigan after the effective date of the MEGA act, in manufacturing, research and development, wholesale and trade, or office operations. Retail businesses--including department stores, restaurants and hotels--are not eligible businesses and may not receive a MEGA credit.
Next, an "eligible business," must meet another set of criteria in order to apply for designation as an "authorized business."
1. The business must create a minimum of 75 "qualified new jobs" if expanding in Michigan, or 150 qualified new jobs if locating in Michigan, within 12 months of opening the facility. A "qualified new job" means a full time job in excess of the number of jobs existing in the year before the new facility opens.
2. The business must agree to maintain the 75 (or 150) new jobs each year that a credit is received.
3. The business must agree to maintain a number of employees greater than the number employed in the year before the new facility is opened.
4. The average wage paid for the new jobs must be greater than the average wage paid by private sector firms in that county.
5. The business must certify that the expansion or location would not have occurred in Michigan without the tax credit.
6. Local government must make a financial or economic commitment to the business for the facility.
7. The business must not have begun construction or announced the specific location of the facility.
In the third step, the MEGA board determines if the business meets the criteria above, and whether:
1. The expansion or location will "benefit the people of this state by increasing opportunities for employment and by strengthening the economy of this state."
2. The tax credit is needed due to a significant cost disparity--including economic incentives offered by a competing state--between this state, and the competing state.
3. The business has a sound financial record based on the financial statements of the last 3 years.
The final step is for the MEGA board and the business to execute a written agreement that officially makes the business an "authorized business," able to receive an SBT credit. The MEGA board determines the length of the credits (not to exceed 20 years) and the percentage of the credits (up to 100 percent of the income tax paid by the new employees). This agreement must provide that a misrepresentation in the application or a violation of the agreement may result in revocation of the "authorized business" status and loss of the tax credit.
If a business is denied a MEGA credit, it may appeal the decision, first before an administrative law judge, and then in circuit court.
Once the business is authorized to receive a credit, its SBT liability is reduced each year the credit is applicable by the total amount of state income tax paid by the new employees, plus the amount of any increase in SBT liability due to the new investment. The MEGA board must submit an annual report to the Legislature.