The long awaited Michigan personal property tax exemption for eligible manufacturing personal property (EMPP) is now in effect for the 2016 property tax year. Qualified new personal property and qualified previously existing personal property located on occupied real property as of the December 31, 2015, assessment date is exempt from ad valorem taxation and is instead subject to the State Essential Services Assessment (ESA). In addition, certain industrial facilities tax (P.A. 198) personal property and personal property receiving a New Personal Property (P.A. 328) exemption are subject to the ESA.
To claim the EMPP exemption, a fully completed and signed Form 5278, Affidavit and Statement for Eligible Manufacturing Personal Property and Essential Services Assessment, must be received by the assessor of the local unit of government where the qualified personal property is located no later than February 22, 2016 (the statutory filing date of February 20 is extended to February 22 since the 20th is a Saturday). The State Tax Commission has mandated strict enforcement of exemption claims and has instructed assessors to not accept late filed affidavits. A best practice is to hand deliver Form 5278 to the local assessor and have the assessor date stamp a duplicate copy for the property owner’s records. If hand delivery is not an option, U.S. Certified Mail with return receipt is recommended to establish proof of timely filing. Again, since timely filing is based on the date received by the assessor, allow additional time for a mailed Form 5278 to reach the assessor on or before February 22.
EMPP that was ﬁrst placed in service in 2006 through 2012 will be reported in Part 2 on Form 5278 as personal property still subject to ad valorem tax. Property meeting the deﬁnitions of qualiﬁed new personal property and qualiﬁed previously existing personal property ﬁrst placed in service after 2012 and prior to 2006 will be exempt from ad valorem tax and the industrial facilities tax and will instead pay the ESA. Personal property subject to the ESA is reported in Part 3 of Form 5278.
When determining the amount due under the ESA, the tax will be computed based on multiplying the acquisition cost of the EMPP by a millage rate defined in the statute which decreases as the property ages. Acquisition cost means the fair market value of personal property at the time of acquisition by the first owner, including the cost of freight, sales tax, installation, and other capitalized costs, except capitalized interest.
The reporting of personal property subject to the ESA on Form 5278 does not complete the ESA filing requirements. Assessors will transmit the ESA information reported on Form 5278 to the Michigan Department of Treasury (Treasury). Starting May 1, property owners will need to confirm and, if necessary, correct the information on record with Treasury through Michigan Treasury Online (MTO). Once the information on record with Treasury is verified, finalization of the ESA filing may be completed through MTO or by using Treasury-approved electronic filing software. Payment of the ESA must be completed by August 15 by either electronic fund transfer debit on the MTO website or electronic fund transfer credit through the property owner’s financial institution.