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Property Tax Appeals Update

August 1, 2014
Proposal 1 could phase out some personal property taxes

Next Tuesday Michigan voters will decide whether to approve the phase out of personal property taxation involving small assessments and industrial taxpayers. Specifically, the ballot question asks whether a portion of the state’s use tax should be assigned to local governments to reimburse them for tax revenues no longer collected on personal property. If the ballot question fails, the entire phase-out plan will be repealed.

The personal property exemption for small assessments actually started in 2014. Businesses with personal property having a true cash value of $80,000 or less in a particular assessing jurisdiction could claim an exemption for that property. If a business owned, leased or was in possession of personal property with a true cash value of more than $80,000 in that jurisdiction, the full tax was owed. Under the plan, taxpayers must file an affidavit with the local assessor each year by February 10 to claim the exemption for personal property with a true cash value of $80,000 or less. In a few instances this year, we did see assessors ask to see calculations using the State Tax Commission valuation tables to verify the exemption claim. If the voters approve the phase-out there could be such requests in the future.

The phase-out plan provides that industrial personal property placed into service after December 31, 2012 will become exempt in 2016. Any industrial personal property in place for at least 10 years will also be exempt. As a result, in each tax year after 2016 a new vintage year of industrial personal property will become exempt until all industrial personal property is exempt by 2023.

Proposal 1, even if enacted, does not completely eliminate the tax on personal property. Commercial personal property that is not otherwise exempt and utility personal property will remain taxable. In addition, the plan includes and is not currently limited to a state levied, special assessment on industrial personal property. The special assessment will be imposed on certain industrial personal property and will equate to approximately 20% of what the tax would have been if the personal property were not exempt.

Legislature to consider changes to tax appeal procedure

A state senator is proposing a number of changes to the property tax appeal process. The proposed changes include moving the annual appeal deadline to July 31 for all types of property (the current deadline is May 31 for commercial and industrial property). Proposals also include allowing 60 days to appeal administrative rulings, standardizing the appeal processes for various exemptions and allowing petitions for the correction of assessment errors to include the current year and three previous years. The Legislature will be pressed to address all of these issues before the end of the year, but at least some of them may well get a hearing and could be enacted this year.

For more information regarding this alert or any another property tax appeals related issue, please contact any of our Tax Appeals attorneys.