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’s driving 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) reinstated and expanded several federal business deductions. For many corporations, this significantly reduced federal taxable income.
2. Michigan’s Public Act 24 (PA 24)
On Oct. 7, 2025, Michigan opted to decouple from various OBBB provisions, requiring Michigan taxpayers to add back to their state return certain deductions allowed under federal rules. That placed taxpayers in the difficult position of attempting to estimate 2025 liability while federal and state rules were shifting in real time — and in opposite directions.
Recognizing this, Michigan Treasury 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 to the OBBB and Michigan’s PA 24 decoupling.
Who is eligible for relief, when?
The relief applies to:
- CIT taxpayers only. (Not individuals or flowthrough entities.)
- Estimated payments due July 2025 through January 2026, including those due on:
- July 15, 2025.
- October 15, 2025.
- January 15, 2026.
- Fiscal-year filers whose estimated payments fell within the above timeframe.
- Taxpayers who pay their full 2025 CIT liability by the annual return due date
(April 30, 2026, for calendar-year filers).
Important: The relief is not automatic
Taxpayers deemed eligible must follow a two-step process:
1. Receive a Treasury notice
Treasury will issue either:
- A notice of additional tax due, or
- A notice of refund adjustment, 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 and identifying the amount reported on Form 4891, line 13 (the PA 24 miscellaneous adjustment).
Note: Treasury does not require 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.
What Businesses Should Do Now
If you believe your organization might be eligible for this relief, we recommend you:
- Review your 2025 CIT estimated payment activity.
- Identify impacts from OB3 and PA 24.
- Monitor for any Treasury notice issued regarding underpayments. Prepare to submit a waiver request promptly when a notice is received.
Have questions about Michigan’s relief for 2025 CIT estimated payments and what it could mean for your organization? Rehmann’s state and local tax advisors can help.