The Michigan Strategic Fund approved a revised agreement with Ford Motor Company that caps the state’s liability for previously authorized job retention tax credits and provides incentives for Ford to double its investment in Michigan in the future, Gov. Rick Snyder said.
“Ford has a strong incentive to continue to grow in Michigan as it helps the state rein in the costs of prior incentives,” Snyder said. “Today’s agreement will help us to better manage state budgets for the next 10 years, giving us a clearer indication of the resources available for important services for Michigan residents. Ford is to be commended for being the first company to assist us in addressing the liability issues associated with the MEGA program.”
The MSF resolution approved combines two previous MEGA agreements with the company and limits its potential tax credit claims to 40,200 retained jobs through the end of 2025. To receive the maximum credits, the agreement would require Ford to invest an additional $3.1 billion for a total of $6.2 billion since 2009.
As part of the agreement, the state’s obligations are capped and the company will provide periodic forecasts of its estimated tax credits to the state to assist the MSF and state of Michigan in budget planning.
“Today’s action brings a certainty that has been missing from the process under the MEGA program,” said Steve Arwood, CEO of the Michigan Economic Development Corporation. “Ford’s investments in Michigan have been important to our economic rebound. The agreement assures we will see continued employment for tens of thousands of people in well-paying jobs in our state. This is a strong step forward that caps our obligations and provides greater clarity for state budgeting purposes through regular reporting on company plans for making claims.”
MEGA agreements, approved by the former Michigan Economic Growth Authority between 1995 and 2011, provided for tax credits to companies that planned to expand operations in Michigan that would create new jobs or retain existing ones. The credits could be applied to a company’s Michigan Business Tax (and, the Single Business Tax before it) to lower its annual state taxes.
New investment by the Michigan automotive industry totals nearly $17 billion since 2009. Rapid and robust investment growth since the recession has meant significant job creation and retention in Michigan. As a result, the state faces potential multi-million dollars charges against its budget each year. Additionally, this situation has made it difficult to forecast the impact of these credits from one year to the next. The modified MEGA brings needed transparency and certainty to the state’s budgeting process and addresses the challenges faced in previous years.
“Michigan is central to Ford’s business, and we value our strong partnership with the state,” said Joe Hinrichs, President of The Americas, Ford Motor Company. “In a globally competitive environment, the modified MEGA agreement provides an additional reason for Ford to continue considering further investment in Michigan.”
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