SB-0811, As Passed Senate, December 11, 2003                                












                              SUBSTITUTE FOR                                    


                           SENATE BILL NO. 811                                  










                                                                                 A bill to amend 1893 PA 206, entitled                                             


    "The general property tax act,"                                             


    by amending section 9b and 27 (MCL 211.9b and 211.27), section 9b           


    as amended by 1994 PA 189 and section 27 as amended by 2002 PA              




                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      


1       Sec. 9b.  (1)  All special tools are  A special tool is                     


2   exempt from  taxation  the collection of taxes under this act.              


3       (2) As used in this section, "special tools" means those                    


4   manufacturing requisites, such as dies, jigs, fixtures, molds,              


5   patterns, gauges, or other tools, as defined by the state tax               


6   commission, that are held for use and not for sale in the                   


7   ordinary course of business.                                                


8       (3) Special tools are not exempt from taxation if the value                 


9   of the special tools is included in the valuation of inventory              



1   produced for sale.                                                          


2       (2) A person claiming an exemption under this section shall                 


3   include in the statement required under section 19 any special              


4   tool for which an exemption is claimed, indicating that the                 


5   special tool is exempt under this section.                                  


6       (3) As used in this section:                                                


7       (a) "Product" means an item of tangible property that is                    


8   directly created or produced through the manufacturing process.             


9   A product may be any of the following items:                                


10                                                                               (i) A part.                                                                         


11      (ii) A special tool.                                                         


12      (iii) A component.                                                           


13      (iv) A sub-assembly.                                                         


14      (v) Completed goods that are available for sale or lease in                 


15  wholesale or retail trade.                                                  


16      (b) "Special tool" means a finished or unfinished device such               


17  as a die, jig, fixture, mold, pattern, special gauge, or similar            


18  device, that is used, or is being prepared for use, to                      


19  manufacture a product and that cannot be used to manufacture                


20  another product without substantial modification of the device.             


21  The length of the economic life of the product manufactured shall           


22  not be considered in making a determination whether a device used           


23  to manufacture that product is a special tool.  Special tools do            


24  not include the following:                                                  


25                                                                               (i) A device that differs in character from dies, jigs,                             


26  fixtures, molds, patterns, or special gauges.                               


27      (ii) Standard tools.                                                         


1       (iii) Machinery or equipment, even if customized, and even if                


2   used in conjunction with special tools.                                     


3       (c) "Standard tool" means a die, jig, fixture, mold, pattern,               


4   gauge, or other tool that is not a special tool.  Standard tool             


5   does not include machinery or equipment, even if customized, and            


6   even if used in conjunction with special tools or standard tools.           


7       Sec. 27.  (1) As used in this act, "true cash value" means                  


8   the usual selling price at the place where the property to which            


9   the term is applied is at the time of assessment, being the price           


10  that could be obtained for the property at private sale, and not            


11  at auction sale except as otherwise provided in this section, or            


12  at forced sale.  The usual selling price may include sales at               


13  public auction held by a nongovernmental agency or person if                


14  those sales have become a common method of acquisition in the               


15  jurisdiction for the class of property being valued.  The usual             


16  selling price does not include sales at public auction if the               


17  sale is part of a liquidation of the seller's assets in a                   


18  bankruptcy proceeding or if the seller is unable to use common              


19  marketing techniques to obtain the usual selling price for the              


20  property.  A sale or other disposition by this state or an agency           


21  or political subdivision of this state of land acquired for                 


22  delinquent taxes or an appraisal made in connection with the sale           


23  or other disposition or the value attributed to the property of             


24  regulated public utilities by a governmental regulatory agency              


25  for rate-making purposes is not controlling evidence of true cash           


26  value for assessment purposes.  In determining the true cash                


27  value, the assessor shall also consider the advantages and                  


1   disadvantages of location; quality of soil; zoning; existing use;           


2   present economic income of structures, including farm structures;           


3   present economic income of land if the land is being farmed or              


4   otherwise put to income producing use; quantity and value of                


5   standing timber; water power and privileges; and mines, minerals,           


6   quarries, or other valuable deposits known to be available in the           


7   land and their value.  In determining the true cash value of                


8   personal property owned by an electric utility cooperative, the             


9   assessor shall consider the number of kilowatt hours of                     


10  electricity sold per mile of distribution line compared to the              


11  average number of kilowatt hours of electricity sold per mile of            


12  distribution line for all electric utilities.                               


13      (2) The assessor shall not consider the increase in true cash               


14  value that is a result of expenditures for normal repairs,                  


15  replacement, and maintenance in determining the true cash value             


16  of property for assessment purposes until the property is sold.             


17  For the purpose of implementing this subsection, the assessor               


18  shall not increase the construction quality classification or               


19  reduce the effective age for depreciation purposes, except if the           


20  appraisal of the property was erroneous before nonconsideration             


21  of the normal repair, replacement, or maintenance, and shall not            


22  assign an economic condition factor to the property that differs            


23  from the economic condition factor assigned to similar properties           


24  as defined by appraisal procedures applied in the jurisdiction.             


25  The increase in value attributable to the items included in                 


26  subdivisions (a) to (o) that is known to the assessor and                   


27  excluded from true cash value shall be indicated on the                     


1   assessment roll.  This subsection applies only to residential               


2   property.  The following repairs are considered normal                      


3   maintenance if they are not part of a structural addition or                


4   completion:                                                                 


5       (a) Outside painting.                                                       


6       (b) Repairing or replacing siding, roof, porches, steps,                    


7   sidewalks, or drives.                                                       


8       (c) Repainting, repairing, or replacing existing masonry.                   


9       (d) Replacing awnings.                                                      


10      (e) Adding or replacing gutters and downspouts.                             


11      (f) Replacing storm windows or doors.                                       


12      (g) Insulating or weatherstripping.                                         


13      (h) Complete rewiring.                                                      


14      (i) Replacing plumbing and light fixtures.                                  


15      (j) Replacing a furnace with a new furnace of the same type                 


16  or replacing an oil or gas burner.                                          


17      (k) Repairing plaster, inside painting, or other                            


18  redecorating.                                                               


19                                                                               (l) New ceiling, wall, or floor surfacing.                                          


20      (m) Removing partitions to enlarge rooms.                                   


21      (n) Replacing an automatic hot water heater.                                


22      (o) Replacing dated interior woodwork.                                      


23      (3) A city or township assessor, a county equalization                      


24  department, or the state tax commission before utilizing real               


25  estate sales data on real property purchases, including purchases           


26  by land contract, to determine assessments or in making sales               


27  ratio studies to assess property or equalize assessments shall              


1   exclude from the sales data the following amounts allowed by                


2   subdivisions (a), (b), and (c) to the extent that the amounts are           


3   included in the real property purchase price and are so                     


4   identified in the real estate sales data or certified to the                


5   assessor as provided in subdivision (d):                                    


6       (a) Amounts paid for obtaining financing of the purchase                    


7   price of the property or the last conveyance of the property.               


8       (b) Amounts attributable to personal property that were                     


9   included in the purchase price of the property in the last                  


10  conveyance of the property.                                                 


11      (c) Amounts paid for surveying the property pursuant to the                 


12  last conveyance of the property.  The legislature may require               


13  local units of government, including school districts, to submit            


14  reports of revenue lost under subdivisions (a) and (b) and this             


15  subdivision so that the state may reimburse those units for that            


16  lost revenue.                                                               


17      (d) The purchaser of real property, including a purchaser by                


18  land contract, may file with the assessor of the city or township           


19  in which the property is located 2 copies of the purchase                   


20  agreement or of an affidavit that identifies the amount, if any,            


21  for each item listed in subdivisions (a) to (c).  One copy shall            


22  be forwarded by the assessor to the county equalization                     


23  department.  The affidavit shall be prescribed by the state tax             


24  commission.                                                                 


25      (4) As used in subsection (1), "present economic income"                    


26  means for leased or rented property the ordinary, general, and              


27  usual economic return realized from the lease or rental of                  


1   property negotiated under current, contemporary conditions                  


2   between parties equally knowledgeable and familiar with real                


3   estate values.  The actual income generated by the lease or                 


4   rental of property is not the controlling indicator of its true             


5   cash value in all cases.  This subsection does not apply to                 


6   property subject to a lease entered into before January 1, 1984             


7   for which the terms of the lease governing the rental rate or tax           


8   liability have not been renegotiated after December 31, 1983.               


9   This subsection does not apply to a nonprofit housing cooperative           


10  subject to regulatory agreements between the state or federal               


11  government entered into before January 1, 1984.  As used in this            


12  subsection, "nonprofit cooperative housing corporation" means a             


13  nonprofit cooperative housing corporation that is engaged in                


14  providing housing services to its stockholders and members and              


15  that does not pay dividends or interest upon stock or membership            


16  investment but that does distribute all earnings to its                     


17  stockholders or members.                                                    


18      (5) Beginning December 31, 1994, the purchase price paid in a               


19  transfer of property is not the presumptive true cash value of              


20  the property transferred.  In determining the true cash value of            


21  transferred property, an assessing officer shall assess that                


22  property using the same valuation method used to value all other            


23  property of that same classification in the assessing                       


24  jurisdiction.  As used in this subsection, "purchase price" means           


25  the total consideration agreed to in an arms-length transaction             


26  and not at a forced sale paid by the purchaser of the property,             


27  stated in dollars, whether or not paid in dollars.                          


1       (6) For purposes of a statement submitted under section 19,                 


2   the true cash value of a standard tool is the net book value of             


3   that standard tool as of December 31 in each tax year as                    


4   determined using generally accepted accounting principles in a              


5   manner consistent with the established depreciation method used             


6   by the person submitting that statement.  The net book value of a           


7   standard tool for federal income tax purposes is not the                    


8   presumptive true cash value of that standard tool.  As used in              


9   this subsection, "standard tool" means that term as defined in              


10  section 9b.