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October Tax Appeals Update

October 8, 2012

Michigan Properties and Toll Northville Cases

In Michigan Properties LLC v Meridian Township and Toll Northville LP v Northville the Michigan Supreme Court expanded the authority of the March Board of Review and the Tax Tribunal to correct erroneous taxable values.

Prior to the Court’s decision in these cases, taxpayers and local units alike were prohibited from obtaining an adjustment to taxable value for the current year based on an error in taxable made in a previous year, unless that previous year taxable value was timely appealed or the error fit into one of the narrow statutory provisions for a retroactive adjustment.

Obviously, while this expanded authority can cut both ways for taxpayers and local units, there will be many opportunities for taxpayers to take advantage of this new case law in situations where appeals affecting taxable value in a prior year may not have been filed.

Interest on Tax Tribunal Refunds

Legislation has recently been enacted that increases the interest rate that local governments must pay on refunds resulting from property tax appeals. Over the past few years the annual interest rate on Tax Tribunal refunds has hovered slightly over 1%. The statutory rate was tied to the 90 day Treasury bill rate and was so low that it was less than the rate at which many local governments could borrow money. Many believed these low rates worked as a disincentive for local units to settle pending tax appeals. The new legislation ties the interest rate to the prime rate. So, for the second half of 2012, interest on Tribunal ordered refunds will accrue at 4.25% instead of the current 1.09%.

Principal Residence Exemption

Public Act 114 of 2012 provides for partial year Principal Residence Exemptions (PRE). The new law changes the filing deadline from May 1 to June 1 and creates a second filing deadline of November 1 for winter taxes. Starting in 2012, a claimant filing a PRE affidavit on or before June 1 may qualify for the PRE exemption for the 2012 tax year. In addition, a person who becomes an owner/occupant between June 1 and November 1 of a given year may file an affidavit and qualify for the PRE exemption for the winter tax portion of that year's taxes. The new eligibility/filing deadlines are not retroactive.

Treasury’s Power to Deny Principal Residence Exemptions is Limited

Mikelonis v Dept of Treasury (Mich App. No. 304054) involved a taxpayer who inadvertently received a principal residence exemption (PRE) for several years. The Department of Treasury audited and sought to recover taxes and interest for the past three years. However, despite receiving the PRE for several years, the taxpayer had never filed a PRE affidavit. The Court found that Treasury‘s authority to deny PRE exemptions is limited to exemptions that are actually “claimed” and rejected Treasury’s attempt to define “claimed” as “receiving the benefit of.” Based on this case, where a PRE is received but never actually claimed, the local unit can remove the PRE going forward, but Treasury cannot retroactively deny the exemption.

If you have any questions about this alert or any other tax appeals matters, please contact any of the attorneys or consultants.

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