Personal Property Tax Proposed Changes

The Michigan Business and Professional Association (MBPA) and the Michigan Food and Beverage Association (MFBA) are supportive of the gradual elimination of our state’s personal property tax (PPT) liability.  The PPT is a double taxation on our already over-burdened business community.  By eventually eliminating this tax liability, Michigan will become more competitive with our neighboring states and most importantly, keep our existing businesses “open for business.”

Small Business
Proposed legislation that has recently passed the Senate does offer benefits and much relief for the small business community.  In summary, this package of 8 bills would amend various acts and create a new act to provide tax exemptions for commercial personal property, industrial personal property, and new and previously existing manufacturing personal property; retain specific taxes and existing property tax exemptions for manufacturing personal property until it became eligible for a new exemption; and require the reimbursement of local taxing units for revenue lost as a result of the personal property tax exemptions.

We are specifically very supportive of Senate Bill 1070 which states that beginning December 31, 2012, eligible personal property would be exempt from the collection of taxes under the Act. “Eligible personal property” would mean personal property that meets both of the following conditions:

— It is classified as industrial personal property or commercial personal property under the Act.

— The combined taxable value of all industrial personal property and commercial personal property owned by or under the control of the owner claiming the exemption is less than $40,000 in that local tax collecting unit.

An owner of eligible personal property would have to claim the exemption by filing an affidavit with the local tax collecting unit in which the property was located and with the Department of Treasury by May 1 each tax year. The affidavit would have to require the owner to attest that the combined taxable value of all industrial personal property and commercial personal property owned by or under the control of that owner was less than $40,000 in that local tax collecting unit.  If an affidavit claiming the exemption were filed, the owner would not have to file a statement of personal property otherwise required under the Act.

Loss of Revenue for Local Government
Personal Property Tax Reimbursement Fund – The Fund would be created in the State Treasury. The Department of Treasury could spend money from the Fund, upon appropriation, only to reimburse local taxing units and tax increment financing authorities for any reduction in revenue resulting from the exemption of certain personal property from the collection of taxes under the General Property Tax Act.

The State Treasurer could receive money or other assets from any source for deposit into the Fund. The Treasurer would have to direct the investment of the Fund and credit to it interest and earnings from investments. Money in the Fund at the close of the fiscal year would remain in the Fund and not lapse to the General Fund. The Department would be the administrator of the Fund for auditing purposes.

Issue of Contention
As previously mentioned MBPA/MFBA is 100 % supportive of a gradual elimination of the PPT, but we are not supportive of one particular new aspect of this package of bills. An amendment was proposed and adopted into the Senate’s version of the bills that states that the PPT repeal would be nullified if promised replacement revenues were not provided.  While we understand the rationale for proposing this safeguard, we also know it is difficult for a business to plan ahead and make investments if there is a chance their tax liability might be reinstated the following year.

We will continue to keep you updated as this legislation moves through the legislative process.  It currently has passed the Senate and has now moved onto the House Tax Policy Committee for its review.  As always, please contact our government relations team with any questions or concerns.