Mid-January 2026 Newsletter

What new Michigan laws mean for employers in 2026

A few of the bills lawmakers passed in 2025 took effect on Jan. 1 – with implications for employers across the state.

Here’s what Michigan businesses should know as 2026 begins:

• Minimum wage and tipped wage increases. Michigan’s minimum wage increased to $13.73 per hour, with a path to $15 by 2027 and future inflation adjustments. The tipped wage also rose and will continue phasing up to 50% of the standard wage by 2031. While lawmakers amended the schedule following a Supreme Court ruling and intense advocacy by many parties, employers continue to face rising labor costs and compliance complexity.

• Unemployment benefits expansion. The maximum weekly unemployment benefit increased to $530, with further increases scheduled. Combined with a longer benefit duration, the Michigan business comunity remains highly concerned about upward pressure on unemployment insurance taxes and long-term system solvency.

• Road funding and new taxes. Implementation of a bipartisan road funding package is underway, shifting how transportation is funded and where dollars flow. Changes include higher per-gallon fuel taxes, redirection of corporate income tax revenue to roads and a new 24% wholesale marijuana tax on an already strained cannabis industry – now in effect following a court ruling and still under legal challenge.

• Tax changes with mixed impacts. Workers will no longer pay state income tax on overtime or tips, and some retirees gain new deductions. At the same time, businesses face higher taxes due to Michigan’s troubling and misguided decision to "decouple" from key new federal deductions tied to R&D and depreciation.

• New transparency rules for earmarks. Lawmakers must now publicly post state appropriation earmark requests at least 45 days before passage. Businesses remain ineligible for earmarks, while nonprofits face new eligibility thresholds.

Why it matters: Even in a year of relatively light legislative inaction, policy changes impact employers – underscoring why consistent business engagement and advocacy remain essential heading into a high-stakes 2026 election year.

House Republicans file suit to block work project spending after AG opinion

House Republicans filed a lawsuit Friday contesting Attorney General Dana Nessel's opinion that the law allowing House Republicans to unilaterally disapprove $645 million in work project funds is unconstitutional.

The lawsuit – House v. Department of Technology, Management and Budget, et. al. (COC Docket No. 26-000007) requests immediate relief to prevent multiple departments from sending out the $645 million in funds disapproved by the House Appropriations Committee in December 2025.

Judge Michael Gadola was assigned to the case.

"It is clear Democrats rigged this whole process to stop House Republicans' fight to eliminate waste, fraud, and abuse in our budgets and go around the thing they hate the most– the Hall Ethics, Accountability, and Transparency plan (HEAT)," Hall said in a statement. "While the Democrat politicians and Lansing insiders fight for more wasteful spending, we're suing to fight to protect the hard-earned dollars of Michigan families and taxpayers."

The House is also asking the court to enter a temporary restraining order and grant a preliminary injunction to prevent the money from being sent out while the overall questions are considered by the court.

"Whatever administrative inconvenience defendants might suffer from a pause in spending is trivial compared to the irreparable injury to the constitutional structure and the public treasury that would result from permitting the executive to bypass the Legislature entirely," the House argues.

The lawsuit argued that the House Appropriations Committee's disapprovals have firm constitutional grounding and do not violate Michigan's separation of powers doctrine, as stated by the attorney general's opinion.

The House also argued that the committee action on behalf of the Legislature does not violate the Michigan Constitution's bicameralism and presentment requirements because the committee's actions were not legislative in nature and did not involve determinations of policy.

"The committee neither conducted debate nor took testimony before voting to disapprove the work projects proposals. … Indeed, a significant portion of the public criticism of the committee's action was that it was done with 'zero discussion' and 'no public comment or debate among appropriations members,'" the lawsuit said.

Citing a previous Supreme Court ruling in Blank v. Department of Corrections, the lawsuit argues that the lack of discussion or debate supports the committee was not making a policy decision and therefore was not taking legislative action requiring bicameral approval and presentment.

The House attorneys said if the mechanism that allows the House Appropriations Committee to disapprove work projects is unconstitutional, then the entire law, which also allows the State Budget Office to designate work projects, is unconstitutional.

"Even if the attorney general were correct that the legislative check is unconstitutional, the executive cannot simply sever the condition while retaining the power it was meant to restrain," the lawsuit says. "Without the legislative power to disapprove, the director has no authority to extend these appropriations at all, and the funds must undeniably lapse by operation of law."

Additionally, the House Republicans said the state acted too quickly to spend the funds after Attorney General Dana Nessel issued her opinion.

"Time is of the essence. The State Budget Office's 'activation' is the electronic equivalent of unlocking the vault," the House argued in its motion for a temporary restraining order. "Departments are now free to encumber and spend these funds immediately. There is no waiting period. There is no further administrative hurdle. Absent a temporary restraining order, the status quo will be shattered, and hundreds of millions of dollars could flow out of the Treasury before a preliminary injunction hearing can even be scheduled."

Separate from the lawsuit, House Republicans raised concerns about how Nessel defined work projects in her opinion, saying it calls into question either the validity of some work projects or Nessel's opinion.

In her opinion, Nessel discusses work projects designation as it relates to the constitutionality of the law the House Appropriations Committee used to disapprove the funding.

She states that after an appropriation is enacted, the Legislature's role ends, and it's the executive branch's duty to execute that appropriation. Nessel goes on to say that whether the executive branch faithfully executed the law consistent with legislative intent regarding work projects depends on the purpose of the funds, not how long the funds are available.

"A work-project designation does not change what the funds are spent on; it affects only how long they remain available to be spent for that legislatively determined purpose. In other words, the purpose remains fixed by the original appropriation," Nessel said.

This is where House Republicans are raising a red flag on the opinion.

"The attorney general's opinion ignores the plain facts in front of us," Bollin said in a statement on Thursday. "The work project request submitted by the State Budget Office did not simply extend timelines. They repeatedly changed the purpose of the funding that the Legislature had approved."

An example Republicans pointed to was funding within the Department of Corrections. The work project request asks that unspent money, which was originally appropriated for operations, be turned over into a work project to be used for infrastructure projects.

"That directly contradicts the claim that work projects only affect availability, not use," Bollin said.

House Republicans also point to other examples within the Department of Treasury and the Department of Technology, Management and Budget, where funds are shifted from departmental operations to infrastructure or IT projects.

The Citizens Research Council of Michigan published a report examining the work projects process shortly after the House Appropriations Committee disapproved the funding last year, which gives weight to the concerns House Republicans have raised about the process, namely, as it relates to the Legislature's duty to review and approve the money as an act of Legislative oversight.

"Work project designations are not simply a perfunctory administrative action taken by the executive branch. They represent new appropriation authorization that extends the life of what is otherwise a single-year appropriation that, under law, needs to lapse at the close of the relevant fiscal year," the report said. "The legislature needs to have a role in approving or disapproving the executive branch's proposals in the same way it has the critical responsibility for reviewing the Governor's full budget proposals each year."

The attorney general's office decline to comment specifically on the questions House Republicans raised about the opinion.

"The attorney general is confident in the legal analysis and conclusions reached in her opinion and believes the courts will agree," said Kim Bush, spokesperson for the attorney general's office.

Lawmakers propose scrapping data center tax breaks

Lawmakers in at least four states — Arizona, Michigan, Virginia and Washington — are pushing for legislation that would end sales tax breaks for data centers, a sign of the growing backlash to so-called hyperscale facilities under construction across the country.

Supporters say massive facilities financed by wealthy tech companies don't need a tax discount. They argue that data centers drive up electricity prices and harm the environment while adding few permanent jobs.

Plus, their constituents don't want data centers in their communities.

"These data centers are universally opposed by the people," said Michigan Rep. James DeSana, a Republican. "I have not found a town that they're going into that wants them."

DeSana has teamed up with Rep. Dylan Wegela, a Democratic socialist, to file three bills that would repeal Michigan's sales tax break for data centers.

At least 32 states exempt data center equipment from sales taxes, according to a 2024 survey by corporate law firm Husch Blackwell. The details vary, with most states requiring businesses to hire a certain number or people or make a certain level of investment to qualify for the tax break.

At least 10 states offer other incentives, such as property tax abatements or income tax credits, the law firm survey found. An additional state, Kansas, added a sales tax break last year.

Some state leaders in recent years have expanded tax incentives to attract mega-projects from tech companies such as Google, Meta and OpenAI, which are racing to build the infrastructure needed to power artificial intelligence. Today's data center projects can be as large as dozens of football fields.

States that repeal or shrink data center tax breaks risk losing projects to neighboring states, tech industry advocates say, which would mean losing out on construction jobs, property tax revenue and economic growth.

"Data centers are the backbone of the 21st century economy," said Dan Diorio, vice president of state policy at the Data Center Coalition, a trade group.

Investments in data centers helped drive U.S. economic growth last year, economists have found. Investments in information processing equipment contributed as much to GDP growth in the first half of 2025 as consumer spending, according to research from Apollo Global Management, an asset management firm.

Diorio said he expects more state leaders to consider expanding data center tax breaks this year than to consider shrinking them, similar to previous years.

"For as many states that we've seen look at potential repeal, or other potential modifications, we've seen many more states continue to expand and add sales tax exemptions," he said.

Sales tax breaks for data center equipment purchases are a logical extension of tax breaks states typically offer manufacturers and other businesses to encourage investment, said Jared Walczak, a senior fellow at the Tax Foundation, a free market think tank based in Washington, D.C.

Michigan Gov. Gretchen Whitmer, a Democrat, last year enacted a law exempting certain data center equipment purchases from the state's 6% sales tax from 2016 through 2050.

"The jobs created and increased tax revenue could provide Michigan communities with tens of millions of dollars for schools and operating costs," the governor's office said in a news release at the time.

Whitmer later cheered OpenAI's plan to build a 2.2 million-square-foot data center in a rural area near Ann Arbor, heralding it as "the largest economic project in Michigan history."

But the mood could be shifting this year.

Public opposition to data center projects is growing. Many lawmakers are concerned about the facilities' impact on electricity prices and water use. And some are looking for ways to raise revenue as budgets tighten.

Sales tax breaks for data centers are already costing states such as Texas and Virginia about $1 billion a year in foregone revenue, according to Good Jobs First, a Washington, D.C.-based nonprofit that scrutinizes corporate tax breaks.

Data centers "should be paying the same sales tax that everyone else has to … in the commercial sector," Virginia Sen. Danica Roem said.

The Democrat said she plans to introduce a budget amendment to repeal Virginia's sales tax exemption for the facilities.

Washington Gov. Bob Ferguson, a Democrat, has proposed ending Washington's sales tax exemption for replacement server equipment starting on July 1.

Eliminating the tax break could raise $63 million next fiscal year and $203.5 million through Fiscal Year 2029, Ferguson's budget plan estimates. Washington and most states begin their fiscal years on July 1.

Ending data center sales tax breaks will likely not be a big revenue-raiser for states, Diorio said, as approved projects typically have already claimed multi-year exemptions and investors may choose to build future projects elsewhere.

In Michigan, DeSana and Wegela's bill package could face an uphill climb. State lawmakers narrowly approved the tax break just two years ago with Whitmer's support.

But the two bill sponsors say opposition to data centers has grown since then, both among lawmakers and the public.

DeSana said he expects opposition to data centers to be a winning issue in the November midterm elections.

"Let them run on that and see how that works out for them," DeSana said of his colleagues who back subsidizing the facilities.

ARTICLES OF POLITICAL INTEREST:

Garlin Gilchrist ends gubernatorial bid, runs for SOS

President Trump returning to Michigan for economic club speech

Michigan’s bid to rebuild mental health care has ‘significant conflicts’

Michigan political leaders react to 3-year Affordable Care Act extension

Duggan's campaign stirs up Michigan's election season

Marijuana News, Updates, & Articles of Interest

THE DCD MARIJUANA TEAM:  YOUR COMPETITIVE EDGE!

DCD continues to exist as the premier resource helping municipalities navigate the waters of cannabis policy. We would be more than happy to answer any questions you may have regarding medical or recreational cannabis policy, procedure, and more. DCD is available for presentations to municipal boards, for one-on-one meetings, and for consultations.

We are here to help you with: municipal lobbying, license application writing and assistance, business plans, state required operations manuals and compliance, facility design, corporate structure, and design and branding. 

We are experts in both medical and recreational cannabis policy and have been in the space for over ten years.  We welcome any opportunity to work with you in the future!

ARTICLES OF CANNABIS INTEREST:

Judge allows lawsuit challenging Michigan’s new 24% marijuana tax to proceed

Trump’s cannabis order will still leave users at risk of prosecution, experts say

Why rescheduling cannabis falls short

Florida Senator Introduces New Bill To Legalize Recreational Marijuana

DCD is rebranding, and our bottom line is your bottom line. We are striving to create and foster strong relationships with clients and lawmakers, deliver results with strong ethics and class, but above all else, out-hustle and out-smart our competition every day to be the very best. We’re making chess moves while others are playing checkers. Everything we do is with you in mind, we’re doing things we’ve never done before and aggressively pursuing opportunities. The time is now. DCD has taken our firm to the next level and your involvement and investment paired with our knowledge and expertise is going to launch the great state of Michigan forward.