NOTICE TO TAXPAYERS REGARDING

PUBLIC ACT 207 OF 2022 (ADOPTION LEAVE TAX CREDIT)

Issued:  December 29, 2022

Public Act 207 of 2022 (PA 207) became effective on October 7, 2022.  This legislation amends the Michigan withholding tax (MCL 206.701 et seq.) to provide a limited credit against that tax for qualified employers who voluntarily provide paid adoption leave to their qualified employees.  This Notice is to alert taxpayers that the adoption leave tax credit provided for in PA 207 will not become effective on January 1, 2023. 

The new statutory section (MCL 206.715) provides, in pertinent part, as follows:

Sec. 715. (1) Subject to an appropriation and the limitations under this section, for tax years beginning on and after January 1, 2023, a qualified employer that voluntarily provides paid adoption leave to qualified employees may claim a credit against the taxes required to be withheld and remitted to this state under this chapter in an amount equal to 50% of the wages paid to each qualified employee during any period during the tax year in which the qualified employee is on adoption leave. The maximum amount of credit allowed per qualified employee for a single adoption leave period is $4,000.00. The maximum amount of leave with respect to any qualified employee for which a credit may be claimed under this section must not exceed 12 weeks. Any adoption leave that is paid by this state or a political subdivision of this state or that is required to be paid by law must not be included in determining the amount of the credit under this section for wages paid to a qualified employee for adoption leave.

The first sentence states that the tax credit provided for in this section is “subject to an appropriation.”  A legislative appropriation is a law that authorizes the expenditure of government funds for a specific purpose.  Although the implementation of a tax credit does not involve the expenditure of government funds in the typical manner, Treasury’s allowance of credits claimed by eligible employers pursuant to MCL 206.715 would have the same effect of reducing withholding tax revenue.  To date, the state legislature has not provided the necessary appropriation.  Accordingly, Treasury does not currently have the authority to begin implementing PA 207 and administering the adoption leave credit against the Michigan withholding tax, and it will not have such authority unless and until a specific appropriation with respect to PA 207 is passed by the state legislature. Treasury is publishing this Notice so that taxpayers are aware that the adoption leave tax credit provided for in PA 207 will not become effective on January 1, 2023. 

Treasury will update this Notice and provide more information on the administration of the adoption leave tax credit if the necessary triggering appropriation bill is enacted.