Michigan businesses navigating the impacts of recent federal and state tax changes may see some welcome relief. The Michigan Department of Treasury has announced it will waive penalty and interest for certain underpaid 2025 Corporate Income Tax (CIT) estimated payments—offering support during a year marked by unusual complexity in the tax landscape.
What’sdriving the relief?
Two major 2025 tax law changes created conflicting adjustments to corporate taxable income:
1. Federal One Big Beautiful Bill Act
Signed July 4, 2025,the One Big Beautiful Bill (OBBB)reinstatedandexpandedseveral federal business deductions. For many corporations, this significantly reduced federal taxable income.
2. Michigan’s Public Act 24 (PA 24)
OnOct.7, 2025, Michigan opted to decouple from variousOBBBprovisions, requiringMichigantaxpayers to add backto their statereturncertaindeductionsallowed under federal rules.That placed taxpayers in the difficult position ofattemptingto estimate 2025 liability while federal and state rules were shifting in real time—and in opposite directions.
Recognizing this,MichiganTreasury concluded that taxpayers had “reasonable cause” for underpayments tied to these changes.
What relief is available?
Michigan Treasury will waive penalty and interest assessed on underpaid CIT estimated payments if the underpayment is attributable totheOBBBand Michigan’s PA 24 decoupling.
Who is eligible forrelief,when?
The relief applies to:
- CIT taxpayers only. (Not individuals or flowthrough entities.)
- Estimated payments due July 2025 through January 2026, includingthose due on:
- July 15, 2025.
- October 15, 2025.
- January 15, 2026.
- Fiscal-year filerswhose estimated payments fell within the abovetimeframe.
- Taxpayerswhopay their full 2025 CIT liability by the annual return due date
(April 30, 2026,for calendar-year filers).
Important: The relief isnot automatic
Taxpayersdeemedeligiblemust follow a two-step process:
1. Receive a Treasury notice
Treasury will issue either:
- Anotice ofadditionaltaxdue, or
- Anotice ofrefundadjustment, which will identify the underpayment and the related penalty/interest.
2. Submit a written waiver request
After receiving the notice, taxpayers must send a written request referencing Treasury’s guidance andidentifyingthe amount reported on Form 4891, line 13 (the PA 24 miscellaneous adjustment).
Note:Treasury doesnotrequire a detailed explanation;citing PA 24 is sufficient.
What about individuals and flowthrough entities?
This relief is limited to CIT. Other taxpayers may still request penalty waivers under standard reasonable cause rules, but those requests will be evaluated on a case-by-case basis.
WhatBusinessesShouldDoNow
If you believe your organization might be eligible for this relief, we recommend you:
- Reviewyour2025 CIT estimated payment activity.
- Identifyimpacts from OB3 and PA 24.
- Monitor forany Treasury notice issuedregardingunderpayments.Prepare tosubmita waiver request promptly when a notice is received.
Have questions aboutMichigan’srelief for 2025 CIT estimated paymentsand whatit couldmean for your organization? èƵ’sstate and local taxadvisorscan help.