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Michigan personal property tax exemption for heavy equipment rentals

December 21, 2022 Article 3 min read
Authors:
Tony Israels Mike Merkel
On March 23, Michigan enacted House Bill No. 4833, providing an exemption to heavy equipment rentals from personal property tax. Our state and local tax experts discuss what this means for taxpayers.
Close-up view of arches of a government building.Beginning Dec. 31, 2022, qualified heavy equipment rental personal property (QHERPP) may be exempt from personal property tax. The exemption isn’t mandatory, and it can be claimed at the option of the qualified renter. If the exemption election is made, a 2% tax specific to heavy equipment rentals will be assessed on the rental price of the eligible personal property.

Claiming the personal property tax exemption

To claim the personal property tax exemption, the qualified renter must file Form 5819 Qualified Heavy Equipment Rental Personal Property Exemption Claim and a statement approved by the State Tax Commission of all QHERPP located at and/or rented from the qualified renter business location. The qualified renter should identify all QHERPP located at or rented from its qualified renter business location in a local assessing unit. Form 5819 and statement must be filed annually with the assessor by February 20 after the calendar year for which the exemption is being claimed. A postmark of February 20 is acceptable, and that due date would be adjusted to the next business day if February 20 falls on a Saturday, Sunday, or legal holiday.

Statements filed in 2023 (or 2024 if an exemption isn’t claimed in 2023) must include the amount of ad valorem property taxes levied in 2020, 2021, and 2022 on QHERPP owned by the qualified renter. The statement must also include the qualified renter’s liability under the specific 2% tax for 2020, 2021, and 2022 if the specific tax had been in effect for those years.

Michigan-specific details around QHERPP and qualified renters

Michigan defines QHERPP as any construction, earthmoving, or industrial equipment that’s mobile and rented to customers by a qualified renter, including attachments or other ancillary equipment for that equipment. Qualified heavy equipment rental personal property doesn’t include handheld tools or equipment solely designed for industry-specific uses in oil and gas exploration, mining, or forestry. Equipment is determined to be mobile if it’s not intended to be permanently affixed to real property for its intended use and can be moved among worksites.

Michigan defines a qualified renter as an individual, corporation, limited liability company, partnership, association, or any other legal entity that meets all the following:

  1. Is engaged in a line of business described in Code 532412 or 532310 of the North American Industry Classification System published by the United States Census Bureau, 2017 edition.
  2. Maintains a qualified renter business location in Michigan.
  3. Receives more than 50% of its annual gross receipts from the rental of QHERPP to the public or has an affiliate that receives more than 50% of the affiliate’s annual gross receipts from the rental of QHERPP to the public.

Exemptions from ad valorem property taxes

To be exempt from ad valorem property taxes, the QHERPP must be located in Michigan on Tax Day (December 31) and be permanently labeled. There are no statutory requirements as to what the required label should look like, but it must be easily visible (i.e., affixed with an adhesive, stenciled, painted, etc.). This requirement may create a significant “to-do” if it doesn’t already exist on QHERPP. The label must have either:

  1. The name of the qualified renter and qualified rental business location.
  2. The name and phone number of the qualified renter and the qualified renter’s annual claim of exemption identifying the physical location of the QHERPP on Tax Day.

State Tax Commission guidance states that forms received or postmarked after the due date shouldn’t be accepted, and the qualified renter should immediately be notified that they may file directly with the March Board of Review to claim the exemption.

How we can help

If you have questions about the impact or qualifications to the exemption or new tax discussed above, please contact your Plante Moran advisor or any of the authors to discuss the specific facts and circumstances of your situation.

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