United States: Personal Property Tax Reform

Personal Property Tax Reform Background

Grand Rapids city leaders in cooperation with leaders from Ottawa and Kent Counties, Wyoming, and the Grand Valley Metropolitan Council worked with the Lieutenant Governor's office early in 2012 to help address personal property tax reform. They offered suggestions for replacement revenues, reviewed draft bills and offered suggestions for improvements. Simultaneously, Dearborn's Mayor, in collaboration with Ford Motor Company, was also working with the Lieutenant Governor's office to address personal property tax reform.

When the initial personal property tax reform bills were enacted near the end of the 2012 lame duck session, follow-up legislation was required because those statutes did not provide many of the procedures needed for claiming, denying, and appealing the exemptions; did not provide consequences for improper exemption claims; did not provide many of the needed details for replacement revenues; and did not address tax increment revenue issues at all. In January 2013, the Lieutenant Governor assembled a group of stakeholders representing local governments, assessors, business groups, the Department of Treasury and the Legislative Service Bureau to draft the needed follow-up bills. Led by the Lieutenant Governor's chief of staff, a smaller drafting group began meeting almost weekly. The result is the significantly modified and improved bills that have now been enacted. As the legal adviser to the West Michigan group, Scott Smith was privileged to serve on the drafting group.

Personal Property Tax Reform Explained

With last fall's enactment of 2013 PA 153 and 154, and this spring's enactment of Public Acts 80, 81, and 86 – 93, the Legislature has put the final touches on personal property tax reform. The final bills were signed by Lt. Governor Calley on Monday, March 31, 2104 (while Governor Snyder was out of the country on a trade mission). All of the statutes are tie-barred to approval of the related ballot proposal at the August 2014 state primary election.

Beginning this year, the owners of personal property with a total true cash value of $80,000 or less could file an affidavit claiming the exemption. To be eligible for the exemption, all of the commercial or industrial personal property within a city or township that is owned by, leased to, or controlled by the claimant has to have an accumulated true cash value of $80,000 or less. Eligibility for the exemption looks beyond ownership and to also focus on possession or use. However, personal property taxes remain the responsibility of the owner of the personal property. While the affidavits for the small taxpayer exemption are due February 10 of each year, for 2014, a claimant who failed to meet the deadline can remedy that failure with an appeal to the local board of review.

Beginning in 2016, owners of eligible manufacturing personal property that was acquired after December 31, 2012, or that is at least 10 years old, may claim an exemption. The affidavit claiming the exemption for any particular item of eligible manufacturing personal property only needs to be filed once. However, anyone who has manufacturing personal property that will become eligible for the exemption must indicate on the personal property tax statement filed in February 2015 when that personal property will become eligible for exemption. Very generally (the involved definitions are lengthy and detailed), "eligible manufacturing personal property" is personal property predominately used in "industrial processing" as defined in the sales and use tax statutes (but not for the generation of electricity for sale) or "direct integrated support" defined to include research and development, testing and quality control, engineering related to industrial processing, receiving and storing materials, storing of finished goods, functions related to just-in-time inventory management and materials handling.

The 2013 statutes also address record keeping requirements for those claiming the exemptions and for assessors. They provide for denying claims of exemption and related appeal procedures. Finally, they provide consequences for wrongly claiming exemptions, including interest and criminal penalties.

The 2014 legislation addresses replacement revenues. Critically, beginning in 2016, all local governments will be eligible for 100% reimbursement for personal property tax losses which are very generally determined to be the difference between what a local government would have collected if its lowest millage rate was applied to its 2013 personal property taxable value and what it actually would collect in the then current year if it applied its lowest millage rate to the then taxable value of non-exempt personal property. The formula makes a variety of adjustments to address tax exemptions and abatements and other factors. The 2014 legislation also addresses tax increment capturing entities, providing for reimbursements for their personal property tax losses.

The source of the replacement revenues is a "local community stabilization share" of the use tax, which will, if the ballot proposal passes, be automatically turned over to the "local community stabilization authority" for distribution according to a statutory formula. Those funds will therefore be wholly outside the annual appropriations process. The amounts of those funds is fixed in the legislation in increased amounts for each year through 2028 and will increase after that at the rate of 1% per year.

Distributions will be made on a priority basis with replacement of debt loss, essential services operating funds, the small taxpayer loss and tax increment capturing entity losses being paid as a first priority. From 2016 to 2019, remaining funds will be distributed to reimburse non-essential service losses. Beginning in 2020, 5% of the remaining pool will be paid to local governments based on the portion of the acquisition values of exempt eligible manufacturing personal property in their jurisdiction of the total acquisition values of exempt eligible manufacturing personal property in the entire state. That amount will increase by 5% each year for 19 years until all of the funds to be distributed after the priority payments are distributed based on the acquisition values of exempt manufacturing personal property. Generally, local stabilization share distributions to replace summer tax levies will be made by October 20 and distributions to replace winter taxes will be made by February 20.

Because some of the state's portion of use taxes will now comprise the local community stabilization share, the state will need replacement revenues. Those will come from two sources. One source will be the expiration of various tax credits. The second source will be a state essential services assessment to be levied on the acquisition value of exempt eligible manufacturing personal property. Differing millage rates will be applied depending on the number of years since it was acquired by the tax payer. Property acquired 5 or fewer years earlier will be assessed 2.4 mills, that between 5 and 10 years of its acquisition date at 1.25 mills, and after 10 years since its acquisition date at 0.9 mills. This should result in at least an 80% tax reduction for affected businesses. To address special situations, the Michigan Strategic Fund will be able to grant abatements or exemptions from the state essential services assessment. The legislation will require a single return and a single payment for all exempted eligible manufacturing personal property a business owns in the state.

Importantly, this legislation eliminates the local essential services assessments that were part of the original package of personal property tax reform bills enacted in December 2012. Those local assessments were to be levied by each local government or authority providing police, fire, ambulance or jail services so a business with exempt eligible manufacturing personal property could be faced with essential services assessments at any location levied by a village, a township, an ambulance authority and a county. Businesses with multiple locations could have dozens of local assessments. Those local assessments would be subject to individual business and communitywide caps. That system promised to be very complicated for local governments and businesses.

The revised legislation provides a simplified exemption process while minimizing creative tax avoidance and ensuring better accountability. It eliminates personal property taxes for very small businesses. It provides an 80% or more decrease in manufacturing personal property taxes while ensuring 100% replacement revenues for local governments. It is therefore an improvement over the bills enacted in late 2012.

The bills were and the ballot proposal is enthusiastically supported by business groups such as chambers of commerce and the Michigan Manufacturing Association, by local government groups such as the Michigan Municipal League, the Michigan Township Association and the Michigan Association of Counties, and by law enforcement and fire fighting associations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions