HB-5189, As Passed House, June 9, 2016HB-5189, As Passed Senate, June 8, 2016

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5189

     A bill to amend 1994 PA 451, entitled

"Natural resources and environmental protection act,"

by amending sections 36101, 36104, 36109, 36110, 36111, and 36202

(MCL 324.36101, 324.36104, 324.36109, 324.36110, 324.36111, and

324.36202), section 36101 as amended by 2008 PA 336, sections 36104

and 36110 as amended by 1996 PA 233, section 36109 as amended by

2007 PA 174, section 36111 as amended by 2011 PA 79, and section

36202 as amended by 2013 PA 86; and to repeal acts and parts of

acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 36101. As used in this part:

     (a) "Agricultural conservation easement" means a conveyance,

by a written instrument, in which, subject to permitted uses, the

owner relinquishes to the public in perpetuity his or her

development rights and makes a covenant running with the land not

to undertake development.

     (b) "Agricultural use" means the production of plants and

animals useful to humans, including forages and sod crops; grains,

feed crops, and field crops; dairy and dairy products; poultry and

poultry products; livestock, including breeding and grazing of

cattle, swine, captive cervidae, and similar animals; berries;

herbs; flowers; seeds; grasses; nursery stock; fruits; vegetables;

maple syrup production; Christmas trees; and other similar uses and

activities. Agricultural use includes use in a federal acreage set-

aside program or a federal conservation reserve program.

Agricultural use does not include the management and harvesting of

a woodlot.

     (c) "Conservation district board" means that term as defined

in section 9301.

     (d) "Development" means an activity that materially alters or

affects the existing conditions or use of any land.

     (e) "Development rights" means an interest in land that

includes the right to construct a building or structure, to improve

land for development, to divide a parcel for development, or to

extract minerals incidental to a permitted use or as set forth in

an instrument recorded under this part.

     (f) "Development rights agreement" or "agreement" means a

restrictive covenant, evidenced by an instrument in which the owner

and the state, for a term of years, agree to jointly hold the right

to undertake development of the land, and that contains a covenant

running with the land, for a term of years, not to undertake

development, subject to permitted uses.

     (g) "Development rights easement" or "easement" means a grant,

by an instrument, in which the owner relinquishes to the public in

perpetuity or for a term of years the right to undertake

development of the land, and that contains a covenant running with

the land, not to undertake development, subject to permitted uses.

     (h) "Farmland" means 1 or more of the following:

     (i) A farm of 40 or more acres in 1 ownership, with 51% or

more of the land area devoted to an agricultural use.

     (ii) A farm of 5 acres or more in 1 ownership, but less than

40 acres, with 51% or more of the land area devoted to an

agricultural use, that has produced a gross annual income from

agriculture of $200.00 per year or more per acre of cleared and

tillable land. A farm described in this subparagraph enrolled in a

federal acreage set aside program or a federal conservation reserve

program is considered to have produced a gross annual income from

agriculture of $200.00 per year or more per acre of cleared and

tillable land.

     (iii) A farm designated by the department of agriculture and

rural development as a specialty farm in 1 ownership that has

produced a gross annual income from an agricultural use of

$2,000.00 or more. Specialty farms include, but are not limited to,

greenhouses; equine breeding and grazing; the breeding and grazing

of cervidae, pheasants, and other game animals; bees and bee

products; mushrooms; aquaculture; and other similar uses and

activities.

     (iv) Parcels of land in 1 ownership that are not contiguous

but that constitute an integral part of a farming operation being

conducted on land otherwise qualifying as farmland may be included

in an application under this part.

     (i) "Fund" means the agricultural preservation fund created in

section 36202.

(j) (i) "Local governing body" means 1 of the following:

     (i) With respect to farmland or open space land that is

located in a city or village, the legislative body of the city or

village.

     (ii) With respect to farmland or open space land that is not

located in a city or village but that is located in a township

having a zoning ordinance in effect as provided by law, the

township board of the township.

     (iii) With respect to farmland or open space land that is not

described in subparagraph (i) or (ii), the county board of

commissioners.

(k) (j) "Open space land" means 1 of the following:

     (i) Lands defined as 1 or more of the following:

     (A) Any undeveloped site included in a national registry of

historic places or designated as a historic site pursuant to state

or federal law.

     (B) Riverfront ownership subject to designation under part

305, to the extent that full legal descriptions may be declared

open space under the meaning of this part, if the undeveloped

parcel or government lot parcel or portions of the undeveloped

parcel or government lot parcel as assessed and owned is affected

by that part and lies within 1/4 mile of the river.

     (C) Undeveloped lands designated as environmental areas under

part 323, including unregulated portions of those lands.

     (ii) Any other area approved by the local governing body, the

preservation of which area in its present condition would conserve

natural or scenic resources, including the promotion of the

conservation of soils, wetlands, and beaches; the enhancement of

recreation opportunities; the preservation of historic sites; and

idle potential farmland of not less than 40 acres that is

substantially undeveloped and because of its soil, terrain, and

location is capable of being devoted to agricultural uses as

identified by the department of agriculture and rural development.

(l) (k) "Owner" means a person having a freehold estate in

land coupled with possession and enjoyment. If land is subject to a

land contract, owner means the vendee in agreement with the vendor

and rural development.

(m) (l) "Permitted use" means any use expressly authorized

within a development rights agreement, development rights easement,

or agriculture conservation easement that is consistent with the

farming operation or that does not alter the open space character

of the land. Storage, retail or wholesale marketing, or processing

of agricultural products is a permitted use in a farming operation

if more than 50% of the stored, processed, or merchandised products

are produced by the farm operator for at least 3 of the immediately

preceding 5 years. The state land use agency shall determine

whether a use is a permitted use pursuant to section 36104a.

(n) (m) "Person" includes an individual, corporation, limited

liability company, business trust, estate, trust, partnership, or

association, or 2 or more persons having a joint or common interest

in land.

(o) (n) "Planning commission" means a planning commission

created by the local governing body under 1945 PA 282, MCL 125.101

to 125.115, 1959 PA 168, MCL 125.321 to 125.333, or 1931 PA 285,

MCL 125.31 to 125.45, as applicable.under the Michigan planning

enabling act, 2008 PA 33, MCL 125.3801 to 125.3885.

(p) (o) "Prohibited use" means a use that is not consistent

with an agricultural use for farmland subject to a development

rights agreement or is not consistent with the open space character

of the land for lands subject to a development rights easement.

(q) (p) "Property taxes" means general ad valorem taxes levied

after January 1, 1974, on lands and structures in this state,

including collection fees, but not including special assessments,

penalties, or interest.

(r) (q) "Regional planning commission" means a regional

planning commission created pursuant to 1945 PA 281, MCL 125.11 to

125.25.

(s) (r) "Regional planning district" means the planning and

development regions as established by executive directive 1968-1,

as amended, whose organizational structure is approved by the

regional council.

(t) (s) "State income tax act" means the income tax act of

1967, 1967 PA 281, MCL 206.1 to 206.532, 206.713, and in effect

during the particular year of the reference to the act.

(u) (t) "State land use agency" means the department of

agriculture and rural development.

(v) (u) "Substantially undeveloped" means any parcel or area

of land essentially unimproved except for a dwelling, building,

structure, road, or other improvement that is incidental to

agricultural and open space uses.

(w) (v) "Unique or critical land area" means agricultural or

open space lands identified by the land use agency as an area that

should be preserved.

     Sec. 36104. (1) An owner of land desiring a farmland

development rights agreement may apply by filing an application

with the local governing body having jurisdiction under this part.

The owner shall apply on a form prescribed by the state land use

agency. The application shall contain information reasonably

necessary to properly classify the land as farmland. This

information shall include a land survey or a legal description of

the land and a map showing the significant natural features and all

structures and physical improvements located on the land.

     (2) Upon receipt of the application, the local governing body

shall notify the county planning commission or the regional

planning commission and the soil conservation district agency. If

the county has jurisdiction, it shall also notify the township

board of the township in which the land is situated. If the land is

within 3 miles of the boundary of a city or within 1 mile of the

boundary of a village, the county or township governing body having

jurisdiction shall notify the governing body of the city or

village.

     (3) An agency or local governing body receiving notice has 30

days to review, comment, and make recommendations to the local

governing body with which the application is filed. These reviewing

agencies do not have an approval or rejection power over the

application.

     (4) After considering the comments and recommendations of the

reviewing agencies and local governing bodies, the local governing

body holding the application shall approve or reject the

application within 45 days after the application is received,

unless that period is extended by agreement of the parties

involved. The local governing body's approval or rejection of the

application shall be based upon, and consistent with, rules

promulgated by the state land use agency under section 36116.

     (5) If an application for a farmland development rights

agreement is approved by the local governing body having

jurisdiction, the local governing body shall forward a copy, along

with the comments and recommendations of the reviewing bodies, to

the state land use agency. The application shall contain a

statement from the assessing officer where the property is located

specifying the current fair market value of the land and structures

in compliance with the agricultural section of the Michigan state

tax commission assessor manual. If action is not taken by the local

governing body within the time prescribed or agreed upon, the

applicant may proceed as provided in subsection (6) as if the

application was rejected.

     (6) If the application for a farmland development rights

agreement is rejected by the local governing body, the local

governing body shall return the application to the applicant with a

written statement regarding the reasons for rejection. Within 30

days after receipt of the rejected application, the applicant may

appeal the rejection by submitting the application to the state

land use agency.

     (7) The state land use agency, within 60 days after a farmland

development rights agreement application is received under

subsection (5) or (6), shall approve or reject the application. A

rejection of The state land use agency may reject an application

for a farmland development rights agreement that has been approved

by a local governing body by the state land use agency shall be for

nonconformance only if the proposed agreement would be inconsistent

with section 36101(f). only. If the application is approved by the

state land use agency, the state land use agency shall prepare a

farmland development rights agreement that includes all of the

following provisions:

     (a) A structure shall not be built on the land except for use

consistent with farm operations, which includes a residence for an

individual essential to the operation of the farm under section

36111(2)(b), or lines for utility transmission or distribution

purposes or with the approval of the local governing body and the

state land use agency.

     (b) Land improvements shall not be made except for use

consistent with farm operations or with the approval of the local

governing body and the state land use agency.

     (c) Any interest in the land shall not be sold except a

scenic, access, or utility easement that does not substantially

hinder farm operations.

     (d) Public access is not permitted on the land unless agreed

to by the owner.

     (e) Any other condition and restriction on the land as agreed

to by the parties that is considered necessary to preserve the land

or appropriate portions of it as farmland.

     (8) A copy of the approved application and Upon approval of an

application by the state, the state land use agency shall execute

the farmland development rights agreement on behalf of the state

and shall be forwarded forward the agreement to the applicant for

execution. An application that is approved by the local governing

body by November 1 shall take effect for the current tax year.After

the applicant executes the farmland development rights agreement,

the applicant shall have the executed farmland development rights

agreement recorded by the register of deeds in the county in which

the property is located. The applicant shall provide a copy of the

recorded farmland development rights agreement to the state land

use agency.

     (9) If the owner executes the farmland development rights

agreement, the owner shall return it to the state land use agency

for execution on behalf of the state. The state land use agency

shall record the executed development rights agreement with the

register of deeds of the county in which the land is situated and

shall notify the applicant, the local governing body and its

assessing office, all reviewing agencies, and the department of

treasury.annually provide a listing of current farmland development

rights agreements to county equalization offices where the land is

located and to the approving local governing body.

     (10) An application that is approved by the local governing

body by November 1 shall take effect for the current tax year.

(11) (10) If an application for a farmland development rights

agreement is rejected by the state land use agency, the state land

use agency shall notify the affected local governing body, all

reviewing agencies concerned, and the applicant with a written

statement containing the reasons for rejection. An applicant

receiving a rejection from the state land use agency may appeal the

rejection pursuant to the administrative procedures act of 1969,

Act No. 306 of the Public Acts of 1969, being sections 24.201 to

24.328 of the Michigan Compiled Laws.1969 PA 306, MCL 24.201 to

24.328.

(12) (11) An applicant may reapply for a farmland development

rights agreement following a 1-year waiting period.

(13) (12) The value of the jointly owned development rights as

expressed in a farmland development rights agreement is not exempt

from ad valorem taxation and shall be assessed to the owner of the

land as part of the value of that land.

     Sec. 36109. (1) An owner of farmland and related buildings

subject to 1 or more development rights agreements under section

36104 or agricultural conservation easements or purchases of

development rights under section 36111b or 36206 who is required or

eligible to file a return as an individual or a claimant under the

state income tax act may claim a credit against the state income

tax liability for the amount by which the property taxes on the

land and structures used in the farming operation, including the

homestead, restricted by the development rights agreements,

agricultural conservation easements, or purchases of development

rights exceed 3.5% of the household income as defined in section

508 of the income tax act of 1967, 1967 PA 281, MCL 206.508,

excluding a deduction if taken under section 613 of the internal

revenue code of 1986, 26 USC 613. For the purposes of this section,

all of the following apply:

     (a) A partner in a partnership is considered an owner of

farmland and related buildings owned by the partnership and covered

by a development rights agreement, agricultural conservation

easement, or purchase of development rights. A partner is

considered to pay a proportion of the property taxes on that

property equal to the partner's share of ownership of capital or

distributive share of ordinary income as reported by the

partnership to the internal revenue service Internal Revenue

Service or, if the partnership is not required to report that

information to the internal revenue service, Internal Revenue

Service, as provided in the partnership agreement or, if there is

no written partnership agreement, a statement signed by all the

partners. A partner claiming a credit under this section based upon

the partnership agreement or a statement shall file a copy of the

agreement or statement with his or her income tax return. If the

agreement or statement is not filed, the department of treasury

shall deny the credit. All partners in a partnership claiming the

credit allowed under this section shall compute the credit using

the same basis for the apportionment of the property taxes.

     (b) A shareholder of a corporation that has filed a proper

election under subchapter S of chapter 1 of subtitle A of the

internal revenue code of 1986, 26 USC 1361 to 1379, is considered

an owner of farmland and related buildings covered by a development

rights agreement that are owned by the corporation. A shareholder

is considered to pay a proportion of the property taxes on that

property equal to the shareholder's percentage of stock ownership

for the tax year as reported by the corporation to the internal

revenue service. Except as provided in subsection (8), this

subdivision applies to tax years beginning after 1987.

     (c) Except as otherwise provided in this subdivision, an

individual in possession of property for life under a life estate

with remainder to another person or holding property under a life

lease is considered the owner of that property if it is farmland

and related buildings covered by a development rights agreement.

Beginning January 1, 1986, if an individual in possession of

property for life under a life estate with remainder to another

person or holding property under a life lease enters into a written

agreement with the person holding the remainder interest in that

land and the written agreement apportions the property taxes in the

same manner as revenue and expenses, the life lease or life estate

holder and the person holding the remainder interest may claim the

credit under this act as it is apportioned to them under the

written agreement upon filing a copy of the written agreement with

the return.

     (d) If a trust holds farmland and related buildings covered by

a development rights agreement and an individual is treated under

subpart E of subchapter J of subchapter A of chapter 1 of the

internal revenue code of 1986, 26 USC 671 to 679, as the owner of

that portion of the trust that includes the farmland and related

buildings, that individual is considered the owner of that

property.

     (e) An individual who is the sole beneficiary of a trust that

is the result of the death of that individual's spouse is

considered the owner of farmland and related buildings covered by a

development rights agreement and held by the trust if the trust

conforms to all of the following:

     (i) One hundred percent of the trust income is distributed to

the beneficiary in the tax year in which the trust receives the

income.

     (ii) The trust terms do not provide that any portion of the

trust is to be paid, set aside, or otherwise used in a manner that

would qualify for the deduction allowed by section 642(c) of the

internal revenue code of 1986, 26 USC 642.

     (f) A member in a limited liability company is considered an

owner of farmland and related buildings covered by a development

rights agreement that are owned by the limited liability company. A

member is considered to pay a proportion of the property taxes on

that property equal to the member's share of ownership or

distributive share of ordinary income as reported by the limited

liability company to the internal revenue service.Internal Revenue

Service.

     (2) An owner of farmland and related buildings subject to 1 or

more development rights agreements under section 36104 or

agricultural conservation easements or purchases of development

rights under section 36111b or 36206 to whom subsection (1) does

not apply may claim a credit under the former single business tax

act, 1975 PA 228, or the Michigan business tax act, 2007 PA 36, MCL

208.1101 to 208.1601, for the amount by which the property taxes on

the land and structures used in farming operations restricted by

the development rights agreements, agricultural conservation

easements, or purchases of development rights exceed 3.5% of the

adjusted business income of the owner as defined in section 36 of

the former single business tax act, 1975 PA 228, or the business

income tax base of the owner as defined in section 201 of the

Michigan business tax act, 2007 PA 36, MCL 208.1201, plus

compensation to shareholders not included in adjusted business

income or the business income tax base, excluding any deductions if

taken under section 613 of the internal revenue code of 1986, 26

USC 613. When calculating adjusted business income for tax years

beginning before 1987, federal taxable income shall not be less

than zero for the purposes of this subsection only. A participant

is not eligible to claim a credit and refund against the former

single business tax act, 1975 PA 228, or the Michigan business tax

act, 2007 PA 36, MCL 208.1101 to 208.1601, unless the participant

demonstrates that the participant's agricultural gross receipts of

the farming operation exceed 5 times the property taxes on the land

for each of 3 out of the 5 tax years immediately preceding the year

in which the credit is claimed. This eligibility requirement does

not apply to those participants who executed farmland development

rights agreements under this part before January 1, 1978. A

participant may compare, during the contract period, the average of

the most recent 3 years of agricultural gross receipts to property

taxes in the first year that the participant entered the program

under the present contract in calculating the gross receipts

qualification. Once an election is made by the participant to

compute the benefit in this manner, all future calculations shall

be made in the same manner.

     (3) If the farmland and related buildings covered by a

development rights agreement under section 36104 or an agricultural

conservation easement or purchase of development rights under

section 36111b or 36206 are owned by more than 1 owner, each owner

is allowed to claim a credit under this section based upon that

owner's share of the property tax payable on the farmland and

related buildings. The department of treasury shall consider the

property tax equally apportioned among the owners unless a written

agreement signed by all the owners is filed with the return, which

agreement apportions the property taxes in the same manner as all

other items of revenue and expense. If the property taxes are

considered equally apportioned, a husband and wife shall be

considered 1 owner, and a person with respect to whom a deduction

under section 151 of the internal revenue code of 1986, 26 USC 151,

is allowable to another owner of the property shall not be

considered an owner.

     (4) A beneficiary of an estate or trust to which subsection

(1) does not apply is entitled to the same percentage of the credit

provided in this section as that person's percentage of all other

distributions by the estate or trust.

     (5) If the allowable amount of the credit claimed exceeds the

state income tax or the state business tax otherwise due for the

tax year or if there is no state income tax or the state business

tax due for the tax year, the amount of the claim not used as an

offset against the state income tax or the state business tax,

after examination and review, shall be approved for payment to the

claimant pursuant to 1941 PA 122, MCL 205.1 to 205.31. The total

credit allowable under this part and chapter 9 of the income tax

act of 1967, 1967 PA 281, MCL 206.501 to 206.532, or the former

single business tax act, 1975 PA 228, or the Michigan business tax

act, 2007 PA 36, MCL 208.1101 to 208.1601, shall not exceed the

total property tax due and payable by the claimant in that year.

The amount the credit exceeds the property tax due and payable

shall be deducted from the credit claimed under this part.

     (6) For purposes of audit, review, determination, appeals,

hearings, notices, assessments, and administration relating to the

credit program provided by this section, the state income tax act,

1967 PA 281, MCL 206.1 to 206.36, the former single business tax

act, 1975 PA 228, or the Michigan business tax act, 2007 PA 36, MCL

208.1101 to 208.1601, applies according to which tax the credit is

claimed against. If an individual is allowed to claim a credit

under subsection (1) based upon property owned or held by a

partnership, S corporation, or trust, the department of treasury

may require that the individual furnish to the department it with a

copy of a tax return, or portion of a tax return, and supporting

schedules that the partnership, S corporation, or trust files under

the internal revenue code.

     (7) The department of treasury shall account separately for

payments under this part and not combine them with other credit

programs. A payment made to a claimant for a credit claimed under

this part shall be issued by 1 or more warrants made out to the

county treasurer in each county in which the claimant's property is

located and the claimant, unless the claimant specifies on the

return that a copy of the receipt showing payment of the property

taxes that became a lien in the year for which the credit is

claimed, or that became a lien in the year before the year for

which the credit is claimed, is attached to the income tax or

business tax return filed by the claimant. If the claimant

specifies that a copy of the receipt is attached to the return, the

payment shall be made directly to the claimant. A warrant made out

to a claimant and a county treasurer shall be used first to pay

delinquent property taxes, interest, penalties, and fees on

property restricted by the development rights agreement. If the

warrant exceeds the amount of delinquent taxes, interest,

penalties, and fees, the county treasurer shall remit the excess to

the claimant. If a claimant falsely specifies that the receipt

showing payment of the property taxes is attached to the return and

if the property taxes on the land subject to that development

rights agreement were not paid before the return was filed, all

future payments to that claimant of credits claimed under this act

attributable to that development rights agreement may be made

payable to the county treasurer of the county in which the property

subject to the development rights agreement is located and to that

claimant.

     (8) For property taxes levied after 1987, a person that was an

S corporation and had entered into a development rights agreement

before January 1, 1989, and paid property taxes on that property,

may claim the credit allowed by this section as an owner eligible

under subsection (2). A subchapter S corporation claiming a credit

as permitted by this subsection for taxes levied in 1988 through

1990 shall claim the credit by filing an amended return under the

former single business tax act, 1975 PA 228. , MCL 208.1 to

208.145. If a subchapter S corporation files an amended return as

permitted by this subsection and if a shareholder of the subchapter

S corporation claimed a credit under subsection (1)(b) for the same

property taxes, the shareholder shall file an amended return under

the state income tax act. A subchapter S corporation is not

entitled to a credit under this subsection until all of its

shareholders file the amended returns required by this subsection.

The department of treasury shall first apply a credit due to a

subchapter S corporation under this subsection to repay credits

claimed under this section by the subchapter S corporation's

shareholders for property taxes levied in 1988 through 1990 and

shall refund any remaining credit to the S corporation. Interest or

penalty is not due or payable on an income tax liability resulting

from an amended return required by this subsection. A subchapter S

corporation electing to claim a credit as an owner eligible under

subsection (2) shall not claim a credit under subsection (1) for

property taxes levied after 1987.

     Sec. 36110. (1) Land subject to a development rights agreement

or easement may be sold without penalty under sections 36111,

36112, and 36113, if the use of the land by the successor in title

complies with the provisions contained in the development rights

agreement or easement. The seller shall notify the governmental

authority having jurisdiction over the development rights of the

change in ownership.

     (2) If the owner of land subject to a development rights

agreement or easement dies or becomes totally and permanently

disabled or when an individual essential to the operation of the

farm dies or becomes totally and permanently disabled, the land may

be relinquished from the program under this part and is subject to

a lien pursuant to sections 36111(11), 36112(7), and 36113(7). A

request for relinquishment under this section shall be made within

3 years from the date of death or disability. A request for

relinquishment under this subsection shall be made only by the

owner in case of a disability or, in case of death, the person who

becomes the owner through survivorship or inheritance.

     (3) If an owner of land subject to a development rights

agreement becomes totally and permanently disabled or dies, land

containing structures that were present before the recording of the

development rights agreement may be relinquished from the

agreement, upon request of the disabled agreement holder or upon

request of the person who becomes an owner through survivorship or

inheritance, and upon approval of the local governing body and the

state land use agency. Not more than 2 acres may be relinquished

under this subsection unless additional land area is needed to

encompass all of the buildings located on the parcel, in which case

not more than 5 acres may be relinquished. If the parcel proposed

to be relinquished is less in area than the minimum parcel size

required by local zoning, the parcel may not be relinquished unless

a variance is obtained from the local zoning board of appeals to

allow for the smaller parcel size. The portion of the farmland

relinquished from the development rights agreement under this

subsection is subject to a lien pursuant to section 36111(11).

     (4) The land described in a development rights agreement may

be divided into smaller parcels of land , each of which shall be

covered by a separate development rights agreement and each of

which shall be eligible for subsequent renewal. The separate

development rights agreements shall contain and continued under the

same terms and conditions as the original development rights

agreement. The smaller parcels created by the division must meet

the minimum requirements for being enrolled under this act or be 40

acres or more in size. Farmland may be divided once under this

subsection without fee by the state land use agency. The state land

use agency may charge a reasonable fee not greater than the state

land use agency's actual cost of dividing the agreement for all

subsequent divisions of that farmland. When a division of a

development rights agreement is made under this subsection and is

executed and recorded, the state land use agency shall notify the

applicant, the local governing body and its assessing office, all

reviewing agencies, and the department of treasury.

     (5) As used in this section, "individual essential to the

operation of the farm" means a co-owner, partner, shareholder, farm

manager, or family member, who, to a material extent, cultivates,

operates, or manages farmland under this act. part. An individual

is considered involved to a material extent if that individual does

1 or more of the following:

     (a) Has a financial interest equal to or greater than 1/2 the

cost of producing the crops, livestock, or products and inspects

and advises and consults with the owner on production activities.

     (b) Works 1,040 hours or more annually in activities connected

with production of the farming operation.

     (6) The state land use agency may shall not charge and collect

a fee of $25.00 to process each a change of ownership under

subsection (1) or each a division under subsection (4). The fee

collected under this subsection shall be used by the state land use

agency to administer this act.

     Sec. 36111. (1) A development rights agreement expires at the

expiration of the term of the agreement unless renewed with the

consent of the owner of the land. If the owner of the land has

complied with the requirements of this part regarding development

rights agreements, the owner is entitled to automatic renewal of

the agreement upon written request of the owner. A development

rights agreement may be renewed for a term of not less than 7

years. If a development rights agreement is renewed, the state land

use agency shall send a copy of the renewal contract to the local

governing body.

     (2) A development rights agreement or a portion of the

farmland covered by a development rights agreement may be

relinquished as provided in this section and section 36111a.

Farmland may be relinquished by this state before a termination

date contained in the instrument under either of the following

circumstances:

     (a) If approved by the local governing body and the state land

use agency, land containing structures that were present before the

recording of the development rights agreement may be relinquished

from the agreement. Not more than 2 acres may be relinquished under

this subdivision unless additional land area is needed to encompass

all of the buildings located on the parcel, in which case not more

than 5 acres may be relinquished. If the size of the parcel

proposed to be relinquished is less than that required by local

zoning, the parcel shall not be relinquished unless a variance is

obtained from the local zoning board of appeals to allow for the

smaller parcel size.

     (b) If approved by the local governing body and the state land

use agency, land may be relinquished from the agreement for the

construction of a residence by an individual essential to the

operation of the farm as defined in section 36110(5). Not more than

2 acres may be relinquished under this subdivision. If the size of

the parcel proposed to be relinquished is less than that required

by local zoning, the parcel shall not be relinquished unless a

variance is obtained from the local zoning board of appeals to

allow for the smaller parcel size.

     (3) Until April 1, 1997, if an owner who entered into or

renewed a development rights agreement before April 15, 1994 makes

a request, in writing, to the state land use agency, to terminate

that development rights agreement with respect to all or a portion

of the farmland covered by the agreement, the state land use agency

shall approve the request and relinquish that farmland from the

development rights agreement. If farmland is relinquished under

this subsection, the state land use agency shall notify the local

governing body of the local unit of government in which the land is

located of the relinquishment.

     (4) If the request for relinquishment of the development

rights agreement is approved, the state land use agency shall

prepare an instrument, subject to subsections (5) to (8), and

record it with the register of deeds of the county in which the

land is situated.shall forward the original relinquishment

instrument to the applicant. The applicant shall have the

relinquishment instrument recorded by the register of deeds in the

county in which the property is located. The applicant shall

provide a copy of the recorded relinquishment instrument to the

department.

     (5) If a development rights agreement or a portion of a

development rights agreement is to be relinquished pursuant to

subsection (2) or section 36111a, the state land use agency shall

record a lien against the property formerly subject to the

development rights agreement for the total amount of the allocated

tax credit of the last 7 years, including the year of termination,

received by an owner under section 36109 and attributable to the

property formerly subject to the development rights agreement, plus

interest at the rate of 6% per annum simple interest from the time

the credit was received until the lien is placed on the property.

     (6) If the property being relinquished from the development

rights agreement is less than all of the property subject to that

development rights agreement, the allocated tax credit for the

development rights agreement shall be multiplied by the property's

share of the taxable value of the agreement. As used in this

subsection:

     (a) "The allocated tax credit" means the amount obtained by

multiplying the owner's total farmland preservation credit claimed

in that year on all agreements by the quotient of the ad valorem

property tax levied in that year on property subject to the

development rights agreement that included the property being

relinquished from the agreement divided by the total property taxes

levied on property subject to any development rights agreement and

used in determining the farmland preservation credit in that year.

     (b) "The property's share of the taxable value of the

agreement" means the quotient of the taxable value of the property

being relinquished from the agreement divided by the total taxable

value of property subject to the development rights agreement that

included the property being relinquished from the agreement. For

years before 1995, taxable value means assessed value.

     (7) Thirty days before the recording of a lien under this

section, the state land use agency shall notify the owner of the

farmland subject to the development rights agreement of the amount

of the lien, including interest, if any. If the lien amount is paid

before 30 days after the owner is notified, the lien shall not be

recorded. The lien may be paid and discharged at any time and is

payable to the state by the owner of record when the land or any

portion of it is sold by the owner of record, or if the land is

converted to a use prohibited by the former development rights

agreement. The lien shall be discharged upon renewal or reentry in

a development rights agreement, except that a subsequent lien shall

not be less than the lien discharged. Notwithstanding any other

provision of this section, from July 1, 2011 through September 30,

2011, a lien under this section recorded before January 1, 2011 may

be paid at 85% of the face value of the lien. From October 1, 2011

through March 31, 2012, a lien under this section recorded before

January 1, 2011 may be paid at 90% of the face value of the lien.

     (8) Upon the termination of all or a portion of the

development rights agreement under subsection (3) or, subject to

subsection (14), the termination of a development rights agreement

under subsection (1), the state land use agency shall prepare and

record a lien, if any, against the property formerly subject to the

development rights agreement for the total amount of the allocated

tax credit of the last 7 years, including the year of termination,

received by the owner under section 36109, attributable to the

property formerly subject to the development rights agreement. The

lien shall be without interest or penalty and is payable as

provided in subsection (7). However, if the development rights

agreement was approved or rejected by the local governing body

under section 36104 on or after July 1, 2012 and is terminated

under subsection (1), the amount of the lien shall include interest

at the current monthly interest rate of 1 percentage point above

the adjusted prime rate per annum from the time the lien is

recorded until it is paid. The adjusted prime rate shall be

determined as provided in section 23 of 1941 PA 122, MCL 205.23.

     (9) The state land use agency shall notify the department of

treasury of the termination of a development rights agreement.

     (10) The unappropriated proceeds from lien payments made under

this part shall be forwarded to the state treasurer for deposit in

the agricultural preservation fund created in section 36202.

     (11) Upon the relinquishment of all of the farmland under

section 36110(2) or a portion of the farmland under section

36110(3), the state land use agency shall prepare and record a lien

against the property formerly subject to a development rights

agreement in an amount calculated as follows:

     (a) Establishing a term of years by multiplying 7 by a

fraction, the numerator of which is the number of years the

farmland was under the development rights agreement, including any

extensions, and the denominator of which is the number representing

the term of years of that agreement, including any extensions.

     (b) The lien amount equals the total amount of the allocated

tax credit claimed attributable to that development rights

agreement in the immediately preceding term of years as determined

in subdivision (a).

     (12) When a lien is paid under this section, the state land

use agency shall prepare and record a discharge of lien with the

register of deeds in the county in which the land is located. The

discharge of lien shall specifically state that the lien has been

paid in full, that the lien is discharged, that the development

rights agreement and accompanying contract are terminated, and that

the state has no further interest in the land under that agreement.

     (13) A farmland development rights agreement is automatically

relinquished when the farmland becomes subject to an agricultural

conservation easement or purchase of development rights under

section 36111b or 36206.

     (14) If, upon expiration of the term of a farmland development

rights agreement, the farmland becomes subject to an agricultural

conservation easement or purchase of development rights under

section 36111b or 36206 or if a farmland development rights

agreement is automatically relinquished under subsection (13), the

farmland is not subject to a lien under this section.

     Sec. 36202. (1) The agricultural preservation fund is created

within the state treasury.

     (2) The state treasurer may receive money or other assets from

any source for deposit into the fund, including federal funds,

other state revenues, gifts, bequests, and other donations. The

state treasurer shall direct the investment of the fund and shall

credit to the fund interest and earnings from fund investments.

     (3) Money in the fund at the close of the fiscal year shall

remain in the fund and shall not lapse to the general fund.

     (4) The department shall be the administrator of the fund for

auditing purposes.

     (5) Money in the fund may be expended, upon appropriation,

following approval of the board and the commission, as follows:

     (a) Not more than $1,400,000.00 annually for the

administrative costs of the department and the board in

implementing this part and part 361.

     (b) After expenditures for the administrative costs under

subdivision (a), money in the fund may be used, upon approval of

the board, to provide grants to local units of government pursuant

to section 36203.

     (c) After expenditures under subdivisions (a) and (b) have

been made, if the amount of money remaining in the fund exceeds

$5,000,000.00, money in the fund may be used, upon approval of the

board, pursuant to part 361 for the purchase of development rights

to farmland or the acquisition of agricultural conservation

easements.

     (6) Expenditures of money in the fund as provided in this part

are consistent with the state's interest in preserving farmland and

are for an important public purpose.

     Enacting section 1. Section 36117 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.36117, is

repealed.

     Enacting section 2. This amendatory act takes effect 90 days

after the date it is enacted into law.

     Enacting section 3. This amendatory act does not take effect

unless House Bill No. 5190 of the 98th Legislature is enacted into

law.