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LEGISLATIVE ALERT: Personal Property Taxes

The Legislature passed a package of bills on December 14 to eliminate personal property tax (PPT) and to provide a mechanism for reimbursement to local taxing units for lost PPT revenues.  The bills were signed by Governor Snyder on December 20.  Certain aspects of this legislation are complicated and remain under review.  Thus, check back for further updates.  In the meantime, we hope that you will find this preliminary summary of each of the bills in the legislation (including the Public Act number assigned to each of the bills) helpful.  Please note that as the result of last minute amendments, the bills eliminating the PPT (marked with an asterisk below) provide that they will be repealed or will not take effect if voters do not approve HB 6026 at a State-wide vote in 2014.  (HB 6026 is the bill that amends the Use Tax Act to provide for reimbursement of local taxing units from a portion of the Michigan use tax.).

SB 1070 (PA 402)*

The bill provides an exemption, beginning December 31, 2013, for commercial and industrial personal property owned by or under the control of a taxpayer if the combined taxable value of all such property owned by the taxpayer is less than $40,000 in the local tax collecting unit.  This has been referred to as the “small business taxpayer” exemption.  Commercial and industrial personal property of a taxpayer where the taxable value of the property in a local unit is $40,000 or more would not be exempt.

SB 1069 (PA 401)*

The bill provides an exemption, beginning December 31, 2015, for "qualified new personal property." That term refers to eligible manufacturing property that has met all of the following conditions after December 31, 2012: (1) initially purchased after December 31, 2012; (2) before January 1, 2013, was not subject to or exempt from taxation and was not in use or placed in service in the state; and (3) before January 1, 2013, was not in use or placed in service outside of the state.  “Eligible manufacturing property” means all personal property that is located on a parcel of real property if that personal property is used more than 50% of the time in “industrial processing” or in “direct integrated support” as defined in the bill.

SB 1071 (PA 403)*

The bill contains an exemption, beginning December 31, 2015, for "qualified previously existing personal property."  That term refers to eligible manufacturing property that, generally speaking, has been subject to or exempt from the collection of taxes for the immediately preceding 10 years, or would have been if located in the state during that period.  “Eligible manufacturing property” is defined the same as in SB 1069.

SB 1065 (PA 397), SB 1066 (PA 398), and SB 1068 (PA 400)*

These bills amend the Plant Rehabilitation and Industrial Development Act, the Technology Park Development Act, and the  Enterprise Zone Act, respectively, to provide for eligible manufacturing personal property (as defined in SB 1069) to remain subject to the specific taxes in those Acts, and exempt from the property tax, until the property becomes exempt under Senate Bills 1069, 1070, or 1071.

SB 1067 (PA 399)*

Similar to SB 1065, SB 1066, and SB 1068, this bill amends Section 9f of the General Property Tax Act (GPTA) to provide that eligible manufacturing personal property (as defined in SB 1069) that is “new personal property” of an “eligible business” and thus exempt under Section 9f shall remain exempt from property tax until the later of: 1) the date that the property becomes exempt under Senate Bills 1069, 1070, or 1071 and 2) the date that the personal property is no longer exempt under Section 9f.

HB 6025 (PA 407)*

This bill creates a new act, the Michigan Metropolitan Areas Metropolitan Authority Act, to create the Metropolitan Areas Metropolitan Authority (MAMA).  Under the bill, MAMA will levy the Metropolitan Areas Component Tax (MACT) as a component of the 6% use tax.  The bill provides further for a complicated formula for MAMA to reimburse local taxing units from MACT funds beginning in fiscal year 2015-2016.  The bill also provides for certain appropriations by the Legislature in fiscal year 2013-2014 and 2014-2015 for distribution by MAMA to local taxing units to reimburse for debt loss.

HB 6022 (PA 404)

This bill amends the Metropolitan Extension Telecommunications Rights- of-Way Oversight Act to give the powers to the authority established in that act to MAMA on October 1, 2013.

HB 6026 (PA 408)*

This bill amends the Use Tax Act to provide for the levy of the MACT as a component of the use tax, beginning October 1, 2015.  The bill further provides that the MACT tax rate portion of the 6% use tax must be sufficient to generate revenues in certain amounts beginning in fiscal year 2015-2016 ($41,700,000) and increasing each year through fiscal year 2022-2023 ($362,400,000).  Thereafter, the MACT rate portion of the 6% use tax revenues must be sufficient to generate the amount needed for reimbursement of local taxing units as provided in the legislation.  As noted above, HB 6026 will be subject to a referendum of State voters at an election in 2014.  If the referendum does not approve HB 6026, the bills marked with an asterisk, including SB 1069-1071 providing for the exemptions from personal property tax, will be repealed or not take effect, as the case may be.

HB 6024 (PA 406)

This bill creates a new act, the Local Unit of Government Essential Services Special Assessment Act.  The Act authorizes the legislative body of a city, village, township, county or a public authority created to provide essential services, beginning January 1, 2016, to specially assess industrial real property and commercial real property within its jurisdiction for the costs of essential services equipment, maintenance of essential services equipment, and the provision of essential services.  Essential services are defined as ambulance, fire, police, and jail services.  Industrial real property and commercial real property are conclusively presumed to be benefited by the provision of essential services equipment and essential services.  However, the special assessment would not apply to small business taxpayers under the $40,000 threshold for the exemption under SB 1070 above.  The bill provides a complicated formula for the amount of the special assessment and also contains a detailed cap on the special assessment for individual properties.  The formula and the cap will require further review.  The bill also requires a public hearing and publication of notice of the hearing before establishing the special assessment for essential services.  Notwithstanding any charter provisions, the special assessment and the creation of the special assessment district are not subject to a referendum vote.  A city, village township, or county may issue bonds in anticipation of the collection of the essential services special assessment.

If you have any questions about this legislation or any other property tax matters, please feel free to contact our office.

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