Michigan Personal Property Tax
Are Your Annual Assessment Notices Correct?
SALT Tax Alert, March 6, 2006 

Each year around early March, Michigan personal property taxpayers are provided with a Notice of Assessment, Taxable Value, and Property Classification ("Assessment Notice") from the local Assessor for each personal property parcel. Errors and inaccuracies reported in an Assessment Notice must be appealed to the local March Board of Review, otherwise appeal rights are surrendered until the next year, except for the limited instances known as "qualified errors". As noted in the examples below, failure to review the accuracy of the Assessment Notice and, if applicable, make timely appeals can be very costly.

Taxpayers should compare the taxable value reported on an Assessment Notice with the taxable value determined based on the corresponding personal property tax statement ("Statement") filed with the local assessor. If a Michigan assessor believes the filed Statement underreports the taxable assets, he or she may disregard the Statement and set the taxable value based on an amount he or she deems appropriate. Real-life situations where assessors ignored a filed Statement and the taxpayer did not appeal to the March Board of Review include:

Example 1
Taxable personal property with an original cost of $2.5 million, or approximately 50% of the taxpayer's tangible personal assets, was sold to a sister company that was located in the same taxing jurisdiction. Although the seller and the purchaser filed Statements with the same local assessor and properly reported their taxable personal property, the decrease in the seller's assets was not explained with the seller's Statement. Consequently, the assessor assumed a reporting error and set the seller's current year taxable value equal to the taxable value in the previous year. Total taxpayer cost: $35,000 a year for two years.

Example 2
Taxpayer moved during the prior year to a location in a new jurisdiction. The Statement filed with the old jurisdiction was reported as "final" with zero assets. The assessor from the old jurisdiction set the taxable value based on the taxpayer's prior year Statement. Total taxpayer cost: $100,000-plus for one year.

Example 3
Taxpayer was granted an industrial facilities tax exemption for $35 million of personal property tax assets. Assets on-hand as of the December 31 assessment date was $19 million. The taxpayer filed its Statement based on the $19 million of assets owned and on-hand, but the assessor set the taxable value based on the $35 million allowed by the granted exemption. Total taxpayer cost: $200,000-plus for one year.

Remember to Review Property Classification
For tax years 2006 through 2009, owners of "industrial personal property" are allowed a refundable single business tax credit equal to 15% of the personal property tax paid on such assets. Industrial personal property is generally defined as all machinery and equipment, furniture and fixtures, and dies on industrial parcels.

Industrial parcels are generally defined as platted or unplatted parcels used for manufacturing and processing purposes, with or without buildings.

Most Assessment Notices issued in Michigan are based on the State Tax Commission model. The model notice includes a line item for indicating the property classification.

Manufacturers and other taxpayers potentially eligible for the refundable single business tax credit should review their Assessment Notice property classification for both their real and personal property parcels to verify that they are classified as industrial. Instances have been discovered where some industrial parcels are erroneously classified as "commercial".

Plante & Moran can assist you in reviewing your personal property tax statement and the related Notice of Assessment, Taxable Value, and Property Classification. Please contact us if you have questions and for more information.

Disclaimer:  The information provided in this alert is only a general summary and is being distributed with the understanding that Plante & Moran, PLLC is not rendering legal, tax, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assumes no liability whatsoever in connection with its use.