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Michigan Personal Property Taxes — What You Need to Know for 2008
SALT Tax Alert, February 2008
When it comes to Michigan personal property taxes (“PPT”), there are key points that taxpayers must know to minimize tax obligations. Failure to pay attention to these details may result in a permanent loss of the ability to claim tax credits and to be taxed at a lower millage rate. The following is an outline of the items all taxpayers should know for 2008!
Personal Property Tax Statement Due Date
The Michigan Personal Property Tax Statement (“return”) is statutorily due on February 20 of each year, despite some jurisdictions indicating a February 1 due date on tax return forms. In contrast to most tax return filings, the PPT return must be "received by" the assessor by February 20 versus being "mailed by”. If possible, returns being filed near the due date should be hand delivered to the local assessor and a date stamped receipt obtained.
Property Classification, Valuation and Appeals
Typically in late January to early February, Michigan real property owners are provided with a Notice of Assessment, Taxable Value, and Property Classification ("Assessment Notice") from the local assessor for each real property parcel. Likewise, Michigan personal property taxpayers are provided with an Assessment Notice around the beginning of March for each personal property parcel. Classification errors reported in an Assessment Notice must be appealed to the local March Board of Review, otherwise appeal rights are surrendered until the next year. 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.
Taxpayers should compare the taxable value reported on a personal property Assessment Notice with the taxable value determined based on the corresponding personal property tax return filed with the local assessor. If a Michigan assessor believes the filed return underreports the taxable assets, he or she may disregard the return and set the taxable value based on an amount he or she deems appropriate. For taxpayers that wish to dispute an assessor determined taxable value, a valuation appeal must be filed with the March Board of Review or by May 31 with the Michigan Tax Tribunal. Note that the valuation appeal and an appeal of the classification are two separate items and that the classification appeal must be done at the March Board of Review as noted above.
Failure to review the accuracy of an Assessment Notice and, if applicable, make timely appeals can be very costly (i.e., loss of a Michigan Business Tax credit and higher millage rates).
Please note that some jurisdictions such as the City of Detroit and the City of Grand Rapids require an Assessor’s Review before an appearance before the March Board of Review will be granted.
MBT Industrial Personal Property Tax Credit
Similar to the credit available under the Single Business Tax, the Michigan Business Tax Act1 (“MBT”) provides a 35% refundable credit for taxes paid on "eligible personal property." The MBT credit relates to property taxes levied after December 31, 2007, which will be applicable to taxes levied based on the PPT returns due this month. To qualify for this credit, the taxpayer must have timely filed its PPT return for the year the taxes are levied. Thus, if a taxpayer fails to file a PPT return, or the return is not "received by" the assessor on or before February 20, the MBT credit is not available.
"Eligible personal property" is defined in the MBT as personal property that is "classified" as "industrial personal property" under the General Property Tax Act2, or personal property subject to the Plant Rehabilitation and Industrial Development Districts Act3 that is situated on land classified as industrial real property under section 34c of the General Property Tax Act. Thus, the classification of both real and personal property is paramount in determining what property taxes qualify for the credit, and it is imperative to verify that the classification is correct when the Assessment Notice is received.
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 (i.e., real estate) used for manufacturing and processing purposes, with or without buildings.
Personal Property Tax Rate
In conjunction with the enactment of the MBT, changes were made to the applicable millage rates for industrial and commercial personal property. In short, the millage rates were generally reduced by 24 mills for industrial personal property and 12 mills for commercial personal property. Whereas in the past, the classification had no direct impact on the local taxing jurisdictions because the millage rate for both industrial and commercial personal property was the same, the change in rates now has a direct impact. In response to this change, the State Tax Commission issued a bulletin to assessors during 2007 reminding them of the proper classifications. Therefore, we recommend that taxpayers not rely on the 2007 classification and instead verify the 2008 classification when the Assessment Notice is received.
Manufacturers and other taxpayers potentially eligible for the refundable MBT credit and additional millage reduction for industrial personal property 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".
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.
1 Act 36 of 2007, Section 413 (MCL §208.1413)
2 Act 206 of 1893
3 Act 198 of 1974 (Industrial facilities taxes or IFTs)
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