PERSONAL PROPERTY TAX PHASE-OUT                 S.B. 1065-1071 & H.B. 6022 & 6024-6026:

                                                                                              SUMMARY AS ENACTED

 

 

 

 

 

 

 

 

 

 

 

 

Senate Bills 1065 through 1071 (as enacted)                     PUBLIC ACTS 397-403 of 2012

House Bill 6022 (as enacted)                                                    PUBLIC ACT 404 of 2012

House Bills 6024, 6025, and 6026 (as enacted)                   PUBLIC ACTS 406-408 of 2012

Sponsor:  Senator Jack Brandenburg (S.B. 1065)

               Senator Dave Robertson (S.B. 1066 & 1068)

               Senator Bruce Caswell (S.B. 1067)

               Senator Dave Hildenbrand (S.B. 1069)

               Senator Mike Nofs (S.B. 1070 & 1071)

               Representative Jud Gilbert, II (H.B. 6022 & 6024-6026)

Senate Committee:  Finance

House Committee:  Tax Policy

 

Date Completed:  2-19-13

 

CONTENT

 


This package of bills amends and creates various statutes to reduce property taxes levied on industrial and commercial personal property, and provide mechanisms to potentially replace a portion of the revenue lost by local units of government.

 

Table 1 lists the bills that provide for personal property tax exemptions, and Table 2 lists the bills that provide for reimbursement of lost revenue.  Following the tables is a very brief description of each bill.  For a discussion of the background of the legislation, more detail about the amendments, and an analysis of the bills' fiscal impact, please see the attached Senate Fiscal Agency State Notes article, "Personal Property Tax Reform Legislation", by David Zin, Chief Economist (Winter 2013).


 

Table 1

Personal Property Tax Exemptions

Bill

Public
Act

Statute Amended

Subject

 

1069

401

General Property Tax Act

Exemption of qualified new personal property

1070

402

General Property Tax Act

Exemption for owners of property worth
<$40,000 in a local unit

1071

403

General Property Tax Act

Exemption of property subject to taxation for 10 years or more

1065

397

P.A. 198 of 1974

 

Continuation of current exemptions until new exemption applies

1066

398

Technology Park Development Act

1067

399

General Property Tax Act

1068

400

Enterprise Zone Act

 


 

 


Table 2

Revenue Loss Reimbursement

Bill

Public
Act

Statute Amended or Created

Subject

 

6024

406

Local Unit of Government Essential Services Special Assessment Act

Allow special assessment by local unit for essential services

6025

407

Michigan Metropolitan Areas Metropolitan Authority Act

Create the MAMA to levy & distribute local use tax authorized by P.A. 408

6026

408

Use Tax Act

Authorize local use tax & reduce State use tax; place question on August 2014 statewide ballot

6022

404

Metropolitan Extension Telecommunications Rights-of-Way Oversight Act

Transfer duties of METRO Authority to the MAMA


 


Please note:  The results of the vote on the August 2014 ballot question (required by House Bill 6026) will determine whether most of the amendments or the new acts will take effect or remain in effect.  Although the Senate bills will take effect on March 28, 2013, the bills' amendments will be repealed or will no longer be effective if the ballot question is defeated.  Except for an appropriation required by House Bill 6025, none of the House bills will take effect if the ballot question is defeated.

 

Tax Exemptions

 

Senate Bill 1069 adds Section 9m to the General Property Tax Act to exempt qualified new personal property from taxation beginning December 31, 2015.  The exemption applies to eligible manufacturing personal property acquired after December 31, 2012.

 

("Eligible manufacturing personal property" essentially is personal property that is used at least 50% of the time in industrial processing or direct integrated support of industrial processing, as defined by the bill.)

 

Senate Bill 1070 adds Section 9o to the General Property Tax Act to provide an exemption, beginning December 31, 2013, for industrial personal property or commercial personal property owned by a person in a local unit, if the combined taxable value of all such property owned by or under the control of the person is less than $40,000 in that local unit.

 

Senate Bill 1071 adds Section 9n to the General Property Tax Act to exempt eligible manufacturing personal property from the tax, beginning December 31, 2015, if it has been subject to taxation for at least 10 years.  (That is, property acquired before 2006 will be exempt, and the 2006 date will advance each year after 2016.)

 

Senate Bills 1065, 1066, and 1068 amend the plant rehabilitation and industrial development Act (also known as P.A. 198), the Technology Park Development Act, and the Enterprise Zone Act, respectively, to provide that if a facility was subject to an industrial facilities exemption certificate, a technology park facilities exemption certificate, or the specific tax levied under the Enterprise Zone Act, as applicable, on December 31, 2012, the portion of the facility that is eligible manufacturing personal property will remain subject to the tax levied under the respective Act and exempt from the property tax until it would otherwise be exempt under Section 9m, 9n, or 9o of the General Property Tax Act.

 

Senate Bill 1067 amends the General Property Tax Act to provide that new personal property that was exempt under Section 9f on December 31, 2012, and that is eligible manufacturing personal property, will remain exempt until it otherwise would be exempt under Section 9m, 9n, or 9o (or until it is no longer exempt under the resolution providing for the current exemption).  (Section 9f applies to new personal property owned or leased by an eligible business in an eligible local assessing district.)

 

Revenue Loss Reimbursement

 

House Bill 6024 creates the "Local Unit of Government Essential Services Special


Assessment Act" to authorize a local unit of government (a county, city, village, or township, or an authority created to provide essential services), beginning January 1, 2016, to levy a special assessment on each parcel of industrial real property and commercial real property in the local unit, to defray the cost of essential services equipment, maintenance of such equipment, and the provision of essential services.  Essential services include ambulance services, fire services, police services, and jail operations.  The amount of the levy must be calculated as prescribed in the Act.

 

House Bill 6025 creates the "Michigan Metropolitan Areas Metropolitan Authority Act" to establish the Metropolitan Areas Metropolitan Authority (MAMA); give it exclusive authority to levy the metropolitan areas component tax (the local use tax authorized by House Bill 6026); and require the MAMA, beginning in fiscal year (FY) 2013-14, to distribute the tax revenue to municipalities according to reimbursement formulas prescribed in the Act.  (Municipalities include counties, cities, villages, townships, authorities, local school districts, intermediate school districts, community college districts, libraries, and other local and intergovernmental taxing units.)

 

The bill also requires the Legislature to appropriate, in FY 2013-14 and FY 2014-15, an amount equal to all debt loss for municipalities that are not school districts or intermediate school districts (ISDs), and an amount equal to school debt loss for municipalities that are school districts and ISDs.  (These appropriations will be required even if the ballot question under House Bill 6026 is defeated.)

 

House Bill 6026 amends the Use Tax Act to provide that, beginning on October 1, 2015, the use tax will include a "state component tax" levied by the State and a "metropolitan areas component tax" (local use tax) levied by the Metropolitan Areas Metropolitan Authority.  The bill establishes the amount of revenue that the local use tax is to generate; that amount ranges from $41.7 million in FY 2015-16 to $362.4 million in FY 2022-23, and then it will be subject to a growth factor calculated by the Department of Treasury.  The State's current 6% use tax will be reduced by amount of revenue that the local use tax may generate.

The bill must be submitted to the voters at an election held on the August regular election date in 2014.  If approved by a majority of the electors voting on the question, the bill will take effect on January 1, 2015.

 

House Bill 6022 amends the Metropolitan Extension Telecommunications Rights-of-Way Oversight (METRO) Act to transfer responsibilities of the METRO Authority to the Metropolitan Areas Metropolitan Authority on October 1, 2014, and abolish the METRO Authority on that date.

 

MCL 207.561a (S.B. 1065)                                                                                               

       207.712a (S.B. 1066)

       211.9f (S.B. 1067)

       125.2121d (S.B. 1068)

       211.9m (S.B. 1069)

       211.9o (S.B. 1070)

       211.9n (S.B. 1071)

       484.3102 & 484.3103 (H.B. 6022)

       123.1241-123.1247 (H.B. 6024)

       123.1311-123.1330 (H.B. 6025)

       205.2c et al. (H.B. 6026)

 

Legislative Analyst:  Suzanne Lowe

 

FISCAL IMPACT

 

Please see the attached State Notes article, "Personal Property Tax Reform Legislation".

 

Fiscal Analyst:  David Zin

 

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.