Single Business Tax Year End Planning – Refundable Credit for Industrial Personal Property Tax
SALT Tax Alert, November 2006

Effective for tax years beginning on or after January 1, 2006 , a new refundable credit against the Michigan single business tax (“SBT”) is available equal to 15% of Michigan property taxes paid on industrial personal property. Companies not required to file an SBT return may elect to file a return to claim the credit.

The credit is available only for personal property taxes (“PPT”) levied after December 31, 2005. The levy dates are July 1 (the summer tax levy) and December 1 (the winter or annual tax levy). These dates represent when the tax becomes a lien on the property under the general property tax act. Please note, personal property taxes levied and billed in December 2005 that were paid in 2006 are not eligible for the credit.

The credit is computed on personal property taxes paid in the tax year. For calendar year taxpayers, this is amounts paid by December 31. For fiscal year taxpayers, it is the amounts paid in the fiscal year. For example, a calendar year taxpayer that pays its December 1, 2006, tax bill on or before December 31, 2006, may claim a credit on its 2006 SBT return. If the payment of the December 2006 tax bill is deferred until 2007, the taxpayer may claim the PPT credit on its 2007 SBT return.

In addition, to qualify for the credit, a taxpayer must have timely filed its PPT return. The due date for the return is February 20 of each year. Failure to timely file the PPT return disqualifies the taxpayer for the credit.

Planning Tip: Calendar year taxpayers should review whether the PPT credit will eliminate or reduce the fourth quarter SBT estimated tax payment that is due January 31, 2007.

The definition of Property Taxes includes personal property taxes on industrial personal property that are imposed under any of the following:

1. General Property Tax,
2. Industrial Facility Tax, and
3. Obsolete Properties Tax.

Also eligible for the credit are payments made to the Michigan Strategic Fund that are used to reimburse local taxing units for forgone general property taxes due to the creation of a renaissance zone, and payments made under contract with local assessing districts that contain a distressed area for the purpose of reimbursing taxing units for forgone general property taxes.

The definition of Industrial Personal Property includes:

1. All machinery and equipment on industrial parcels,
2. Furniture and fixtures on industrial parcels,
3. Dies on industrial parcels,
4. Inventories not exempt by law, namely:
   • Personal property, other than heavy earth moving equipment, under lease or principally intended for lease rather than sale,
   • Heavy earth moving equipment, as defined in the general property tax act, subject to 1 or more lease agreements with the same person totaling more than 1 year or principally intended for lease rather than sale, and
   • Personal property for which a deduction or allowance for depreciation, depletion, or amortization is allowed or has been taken under the Internal Revenue Code, ~
5. State geologist valued personal property of mining companies.

An industrial parcel is real property classified as industrial property. You can determine if real property is classified as industrial by reviewing the real property tax assessment record, which in some instances can be found on-line using the municipality's website. The property class will generally be indicated as either 301 or 302.