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David Helisek Kari Shea
August 1, 2018 Article 5 min read
Michigan Local Community Stabilization Authority Act amendments were signed into law in June 2018. We summarize the key changes and what governments and local municipalities need to do moving forward.

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Public Acts 247 and 248 of 2018 were signed into law on June 27, 2018, by Michigan Governor Snyder. These acts significantly impact the Local Community Stabilization Authority (LCSA) Act including how personal property tax reimbursements are calculated. The State Department of Treasury issued a summary of the amendments in July of 2018.

These acts significantly impact the LCSA Act including how personal property tax reimbursements are calculated.

This summary document lists the following changes that resulted from these Acts:

  1. Accelerate some reporting deadlines and add two new reporting requirements.
  2. Change the calculation of the millage rate to be used in the calculation of the personal property tax (PPT) reimbursements.
  3. Change the calculation of the personal property exemption loss and eliminate the requirements to recalculate prior year taxable values.
  4. Change the millage rate to be used in the calculation of a Tax Increment Finance Authority’s (TIFA’s) PPT reimbursement.
  5. Make the Local Community Stabilization Authority responsible for distributing the fire protection services payments.
  6. Create a process for correcting PPT reimbursements.
  7. Allow for a one-time PPT advance for prior year underpayments of $500,000 or more.
  8. Change the payment dates of the PPT reimbursements to allow for corrections to current year reimbursements, and delay the payment of qualified loss in excess of 100% until May 20.
  9. Change how municipalities are required to record and allocate the revenue.

The key provisions are noted below, but we recommend reviewing the Treasury’s summary for an in-depth look at the nine changes noted above.

Changes to the PPT reimbursement calculations

  • The requirements for recalculation of prior year taxable value have changed. Going forward, prior year property tax values for commercial and industrial personal property will only be modified for municipality boundary changes as well as to exclude any that were classified in the municipality where it is currently located as utility personal property or real property after 2012.
  • The calculation of PPT reimbursements that are based on the acquisition cost of eligible personal property for two years has been delayed until 2021. - Reimbursement for 100 percent of the calculated qualified loss going forward will be received in either October or February.
  • Each year any remaining balance of the local community stabilization share fund revenue for the calendar year will be distributed to counties, cities, townships, villages and community colleges. The allocation will be based on each municipality’s share of the total reimbursement, which is based on the acquisition cost of all eligible personal property and qualified loss. These reimbursement payments will be a separate payment which will be reimbursed in May. This allows time for any errors in that year’s PPT reimbursement calculation to be identified and corrected.

Changes to the tax increment finance authority (TIFA) PPT reimbursement calculation

  • Fire protection service payments will be distributed by LCSA to municipalities in 2018. The payment distributions will occur by November 30 each year. Each municipality is to continue to complete and submit the required questionnaire to LARA in order to qualify.
  • One-time advance for a 2017 PPT reimbursement underpayment of $500,000 or more: Certain municipalities were underpaid through the 2016 PPT adjustment payment or the 2017 PPT reimbursements. Those that were underpaid by $500,000 or more are eligible for a one-time advance. In order to receive the advance, however, municipalities must have notified the Department of Treasury by August 1, 2018 by submitting Form 5614 – Request for a 2018 Advance Personal Property Tax Reimbursement. Municipalities must also submit the supporting documentation for the adjustment to the calculated reimbursement. This documentation will be reviewed and recalculated by the Department of Treasury to determine the under/over payment amount. LCSA will distribute any underpayment amounts by October 20, 2018. Note: If this deadline is not met, the general PPT reimbursement correction process can still be followed—for details on this process refer to the table in item seven in the Treasury’s summary.

Beginning in 2018, PPT reimbursement payment dates are different from prior years. 

Impact on the timing of PPT reimbursements

Beginning in 2018, PPT reimbursement payment dates are different from prior years.

  • Tax Increment Finance Authorities (TIFAs)
    For a TIFA that previously received payments in November, reimbursements will be issued October 20 of each year. Corrections for the underpayment of a 2017 PPT reimbursement or a current year reimbursement will be issued May 20 of each year.
  • Municipalities, excluding School Districts, ISDs, and TIFAs
    For a municipality that previously received payments in November, reimbursements for essential services, small taxpayer exemption loss, and qualified loss up to 100 percent will be issued October 20 of each year. For municipalities that previously received payments in February, reimbursements for essential services, small taxpayer exemption loss, and qualified loss up to 100 percent will continue to be issued February 20 of each year. Corrections for the underpayment of a 2017 PPT reimbursement or a current year reimbursement will be issued May 20 of each year, as will the portion of qualified loss exceeding 100 percent reimbursement.

The table below provides a schedule of payment dates for all municipalities.

Description of PPT Reimbursement

Date of Reimbursement

Advance for 2017 underpayment of $500,000 or more

October 20, 2018

Payment of calculated current year PPT reimbursements up to 100% of the calculated losses for County allocated millage, to municipalities that do not levy millage 100 percent in December, and TIFAs

October 20

(each year)

Payment of calculated current year PPT reimbursements up to 100 percent of the calculated losses for Townships, County extra-voted millage, and to municipalities that levy millage 100 percent in December

February 20

(each following year)

Payment of 2017 underpayment that was not advanced, current year underpayment, and prorated qualified loss in excess of percent

May 20

(each following year)

 

Changes to the requirement to restrict revenues

To date, the previous LCSA Act has only required a municipality to use the reimbursement amount received for debt millage to pay for debt, and the essential service reimbursement to pay for the cost of essential services.  The newly signed amendment now also requires that each municipality allocate and record the payments received in the same manner as the millage levied, up to 100 percent reimbursement. In addition, for county road millages levied under Section 20b of 1909 PA 283, MCL 224.20b a formula to allocate a portion of the PPT reimbursement to each city and village must be decided on by March 31 by the cities, villages, and road commission.  If this does not occur, a formula for allocating payments will be determined by the Department of Treasury.