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MI Personal Property Tax Reform and 2014 Assessments and Board of Reviews

February 21, 2014
Michigan personal property tax reform: in the beginning…

The implementation of the first piece of Michigan’s multi-faceted personal property tax reform plan is now underway and issues have already arisen. As described in a prior Honigman Alert: i) a taxpayer’s commercial or industrial personal property in a particular assessing jurisdiction (city or township) is exempt if the personal property owned, leased, or possessed by that taxpayer and related entities has a market value less than $80,000; and ii) taxpayers must file an affidavit by February 10 each year to claim the exemption.

Confusion exists among both taxpayers and assessors concerning aspects of the new law. Noteworthy is that the new law does not change the entity to which the tax is assessed. Thus, typically the personal property tax on leased property will be assessed to the owner, not the lessee. However, more than one taxpayer may have to “count” the value of some equipment against the $80,000 market value threshold. For example, in determining eligibility for the exemption, both Company A (owner/lessor) and Company B (lessee) must count the value of the equipment that A leases to B in a jurisdiction. 

Also, the “$80,000” exemption is an “all or nothing” proposition. Taxpayers who exceed the threshold receive no exemption. Furthermore, if the assessor denies the exemption taxpayers should seek counsel about how to preserve their right to appeal to the Michigan Tax Tribunal. Failure to take appropriate action may preclude an appeal.

The entire personal property tax reform plan remains subject to repeal, if in August of 2014 Michigan voters do not approve a ballot question regarding the distribution of State funds used to partially reimburse local governments for lost revenue. Yesterday, legislative leaders proposed additional legislation that will ensure that local governments are fully reimbursed for any tax revenue lost due to the plan. This move is likely to neutralize what was expected to be the most vocal opposition to the ballot question.  

If the referendum passes, the more significant part of the personal property reform plan would take effect in 2016 with exemption for eligible manufacturing personal property (EMPP) placed into service after December 31, 2012. Also, beginning in 2016, EMPP that has been in service for at least 10 years will be exempt. By 2023, all EMPP will be exempt. The definition of EMPP was amended last year to include all personal property primarily used for industrial processing or direct integrated support of industrial processing.

2014 assessments and boards of review

This is the season when assessment notices are being sent. Soon March Boards of Review will be meeting. For some properties, the ability to appeal to the Tax Tribunal is lost if Board of Review protests are not timely and properly filed. Honigman property tax professionals are available to assist as assessment notices are reviewed and issues or questions arise. For more information regarding this or any other property tax matter, please contact any of our tax appeals attorneys or property tax professionals.