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State Tax Commission Update

A new tax year is upon us! Last December, the State Tax Commission (“STC”) released several new bulletins that provide guidance to assessors of local units of governments. In this E-Letter we discuss and highlight those bulletins. In addition to the new information regarding property taxes, we would be remiss to not highlight the recent legislation affecting the ability of local units of government to provide information about local ballot proposals.

The STC had a busy meeting in December 2015. It addressed everything from interest rates on tax tribunal judgments to property tax exemptions. The new information was released through multiple bulletins.  Although we highlight the information that is relevant to townships, the STC archives its bulletins on its website. You can view those here: http://www.michigan.gov/treasury/0,1607,7-121-1751_2228—,00.html#BULLETIN

Interest Rates on Tax Tribunal Judgments

State law requires that the Tax Tribunal interest rate be calculated twice per year for the periods of January 1 to June 30 and July 1 to December 31.  The interest rate is calculated by adding 1% to the “adjusted prime rate.”  The interest rate for January 1 to June 30, 2016, has been set at 4.25%, which remains unchanged since the Legislature adopted this method of establishing the interest rate in 2012.

Random Week for Qualified Business

Under PA 96 of 1994, there are certain instances when the qualified personal property of a qualified business may be assessed to the user of the personal property rather than the qualified business that owns the property.  This situation usually arises in the context of a leasing company.  One of the requirements for a qualified business is that it must have 30 or fewer employees during a week selected at random each year by the STC.  The week selected for 2015 assessment purposes is Monday, June 22, 2015, through Sunday, June 28, 2015.

Boards of Review

The STC made mention of the following areas for assessing officers and boards of review to take note for 2016:

Disabled Veterans Exemption

The STC wants boards of review to keep in mind that a determination of whether a veteran is 100% disabled or individually unemployable is made by the U.S. Department of Veteran Affairs.  Thus, boards of review do not have the authority to make an independent determination of whether a veteran is 100% disabled or individually unemployable.  This also means that boards of review do not have the authority to determine that a veteran is not 100% disabled or individually unemployable once the U.S. Department of Veterans Affairs has issued a determination that the individual is indeed one of those things.

Qualified Errors

The STC has noticed numerous July and December boards of review that make changes that are contrary to state law.  MCL 211.53b provides that the boards of review can correct “qualified errors” for the current year and one prior year, unless otherwise provided by state law.  Qualified errors are

  • A clerical error relative to the correct assessment figures, the rate of taxation, or the mathematical computation relating to the assessing of taxes.
  • A mutual mistake of fact.
  • An adjustment to taxable value or a qualified start-up business exemption.
  • An error of measurement or calculation of the physical dimensions or components of the real property being assessed.
  • An error of omission or inclusion of a part of the real property being assessed.
  • An error regarding the correct taxable status of the real property being assessed.
  • An error made by the taxpayer in preparing the statement of assessable personal property.
  • An error made in the denial of a claim of exemption for personal property.

The STC considers a “clerical error” to only include those of a typographical nature.  Boards of review are not allowed to revalue or reappraise property due to the fact that the assessor did not originally consider all relevant information. The STC considers a “mutual mistake of fact” to be an erroneous belief that is shared and relied upon by both the assessor and the taxpayer, about a fact that affects the assessment of the property.

New Personal Property Tax Exemption

A number of significant changes have been made recently to the personal property tax, and 2016 is the first year in which they take effect.  One that has significant impact on local units is that qualified new personal property and qualified previously existing personal property located on occupied real property (property occupied as a single site by the taxpayer) is exempt from ad valorem taxes and is instead subject to the State Essential Services Assessment (“SESA”).  To claim the exemption, property owners must fill out an Affidavit and Statement for Eligible Manufacturing Personal Property and Essential Services Assessment.  The SESA is a state-level assessment.  Local units will be reimbursed for the loss in revenue from the Michigan Use Tax.  Certain property eligible for the Industrial Facilities Exemption and new personal property are also subject to the SESA.

Proper Documentation for Board of Review Changes

The STC has noticed many instances in which boards of review are not maintaining the proper documentation of decisions.  This documentation must include

  • Minutes;
  • A copy of form 4035 (Petition) that provides a detailed reason for the determination;
  • A copy of form 4035a whenever changes are made that cause the taxable value to change; and
  • A board of review action report.

Board of review minutes must include:

  • Day, time, and place of meetings;
  • Members present, members absent, elected chairperson, and notation of any correspondence received;
  • A log that lists the hearing date, petition number, petitioner’s name, parcel number, type of appearance; type of appeal, and decision of the board of review;
  • A record of the actual hours the board of review was in session, the time of daily adjournments, and the closing date and time of the final annual session.

Capped Value Inflation Rate

The inflation rate multiplier is calculated for 2016 by averaging the 12 monthly values for the United States consumer price index for October 2014 through September 2015, and dividing it by the average of the 12 monthly values for the consumer price index for October 2013 through September 2014.  Based upon those calculations, the inflation rate multiplier for 2016 is 1.003.  No other multiplier may be adopted or used.  The STC is insistent on local units being able to explain to taxpayers how the multiplier is developed.

County Multipliers

The STC has had instances in which some boards of review have developed their own county multipliers.  However, a local unit or board of review does not have the authority to develop county multipliers.  Only the multipliers developed by the STC are permissible.

Alternate Start Dates for July or December Boards of Review

State law was amended to permit July or December boards of review to have an alternate start date.  To do this, a township board must adopt, by ordinance or resolution, alternate start dates that comply with the following:

  • For July, an alternate date during the week of the 3rd Monday in July.
  • For December, an alternate date during the week of the 2nd Monday in December.

Poverty Exemptions

A recent Michigan Court of Appeals Case, Ferrero v Township of Walton, found that money received pursuant to the homestead property tax credit is considered a rebate of property taxes and is not income for purposes of making a poverty exemption determination.  Statutory changes were also made that allow for an affidavit to be filed for all persons living in a residence who were not required to file federal or state tax returns in the current or immediately preceding year.

Computerized Tax Rolls

Of interest to assessors and treasurers, PA 140 of 2015 permits local units to prepare a tax roll and accounts receivable system that is maintained by a computer system and its software.  To do so, the computerized tax roll preparation and accounts receivable system must be approved for use by the STC.  The STC will evaluate any program based upon the following requirements of the law:

  • The treasurer and assessor must produce a final settlement roll to certify taxes collected to the county treasurer;
  • The assessor must certify that the values and spread of taxes are correctly recorded in the settlement roll;
  • The treasurer must certify delinquent taxes and that all tax collections are on the settlement roll;
  • The settlement roll and certifications must be sent to the county treasurer in a computer printed format or an electronic format compatible with the county treasurer’s computer system;
  • The affidavit included with the settlement roll must include documentation that authorizes and reports all changes in the pre-collection tax roll;
  • The treasurer must prepare and maintain a journal of collections totaled and reconciled to the amount of daily collections;
  • Tax payments must be posted to the computerized system with a transaction or receipt number and date of payment;
  • The computer system must have internal and external security to assure integrity of the system;
  • The computerized system must be compatible with the county treasurer’s system for collecting delinquent taxes.

To request approval of such a system, Form 2696 must be filed with the STC, which requires affirmation that all state law requirements will be met.  Once approved, there is a recertification process that occurs every three years, prior to May 1.

Assessor Educational Program Changes

Michigan Certified Assessing Technician (MCAT) Course:

The MCAT course will continue to be offered in a three-day format with a comprehensive exam offered at the completion of the course. Outside organizations may continue to request approval to offer the course using STC approved materials. The MCAT exam fee will be $50.

Michigan Certified Assessing Officer (MCAO):

The STC will offer two paths to certification at the MCAO level:

  • Path 1: Online/Lecture Hybrid Program
  1. Six month on-line/lecture hybrid, with classroom instruction every two to three weeks.
  2. The cost of the program is $1,000.
  3. Certification is achieved by successfully passing an STC comprehensive exam at the end of the program.
  4. Students must achieve 75% or higher on the comprehensive exam.
  5. Individuals who achieve below 75% on the MCAO comprehensive exam will have one opportunity to retake the exam.
  6. If a passing score is not obtained on the retake exam, options are exhausted and the student may apply to the MCAO Online/Lecture Program.
  7. According to STC Rule, comprehensive exam results will be provided as pass/fail.
  • Path 2: Self-Study Option (experience in assessment administration will be very helpful to students who choose the self-study option; therefore, a mentor is highly recommended).
  1. Individuals will apply to the STC to obtain the self-study material and schedule to take the comprehensive exam.
  2. The cost of the material and the exam fee will be $250 ($200 material cost, $50 exam fee).
  3. Comprehensive exams for the self-study programs will be offered quarterly by the STC in January, April, July and October in various locations throughout the state.
  4. Students must obtain a score of 75% or higher to pass the exam.
  5. Students who achieve below 75% on the exam will have one opportunity to retake the exam on the next scheduled STC exam date.
  6. If a passing score is not obtained on the retake exam, options are exhausted and the student may apply to the MCAO program.

Michigan Advanced Assessing Officer (3) (MAAO)

  • Path 1: Online/Lecture Hybrid Program
  1. Twelve month on-line/lecture hybrid, with classroom instruction every six weeks.
  2. The cost of the program is $1,000.
  3. Certification is achieved by successfully passing a multi-part STC comprehensive exam.
  4. Students must achieve 75% or higher on each part of the comprehensive exam.
  5. Individuals who achieve below 75% on any part of the comprehensive exam may retake the part(s) that are not passed for up to one year after the date they first complete the exam.
  6. According to STC Rule, comprehensive exam results will be provided as pass/fail.
  • Path 2: Self-Paced Option
  1. Students must complete seven classroom courses and a USPAP online course.
  2. Course credit is obtained by attending the seven classes through an outside organization and by passing an exam at the end of each course that is approved by the STC in accordance with MCL 211.10c.
  3. Students must achieve 75% or higher on each exam.
  4. Individuals who fail an exam must repeat the course in order to be eligible to re-challenge the exam.
  5. According to STC Rule, exam results will be provided as pass/fail.

Michigan Master Assessing Officer (4) MMAO (An assessor must hold the MAAO certification for a minimum of two years prior to applying to the MMAO Program or beginning any MMAO classes in the self-paced option):

  • Path 1: Online/Lecture Hybrid Program – Same steps as the MAAO process
  • Path 2: Self-Paced Option
  1. Students must complete five tested courses.
  2. Course credit is obtained by attending classes offered through an outside organization and by passing an exam at the end of each course that is approved by the STC in accordance with MCL 211.10c.
  3. Students must achieve 75% on each exam.
  4. Individuals who fail an exam must repeat the course in order to be eligible to re-challenge the exam.
  5. According to STC Rule, exam results will be provided as pass/fail.

Senate Bill 571 Update

At the tail-end of the Legislature’s 2015 agenda, Senate Bill 571 was passed (and subsequently signed into law by Governor Snyder) which has been referred to as a “gag order” for local officials by some critics.  The bill set forth various election-law-related changes and restrictions, but one that raised the awareness of local officials across the state was a 60-day period before elections that prohibits taxpayer resources from being used to communicate any information, even factual information, about a local ballot question by radio, television, mass mailing, or pre-recorded telephone message.  While the stated intent of this provision was to prohibit the use of taxpayer funds to advertise (thus advocating) for ballot questions (mainly millages), it has raised serious questions about the ability of local units to lawfully provide any information to the taxpayers about a ballot proposal, even if it is purely factual.  While the governor signed the legislation, he made it clear that he wanted a legislative fix to follow that would clarify the language and potentially alleviate some of the concerns of local officials.

Several bills have already been introduced in response to the concerns regarding SB 571.  Senate Bill 703, which was introduced by Senator Dale Zorn (R-Ida Twp.), and House Bill 5221, introduced by Representative Andy Schor (D-Lansing), would completely repeal the provision in question.  The Michigan Townships Association is encouraging its members to voice their support for these measurers.  Additionally, House Bill 5219 was introduced by Lisa Posthumus Lyons (R-Browne Twp.), and would allow local officials to communicate to local residents the language of the local ballot questions, the date of the election, and allow discussion at meetings that are televised.  The Michigan Townships Association opposes this bill as it believes that the bill does not sufficiently allow officials to communicate objectively and factually to inform voters.

A lawsuit has also been commenced by 18 municipalities across the state that claim that the new law not only infringes on free speech, but also is too confusing to be enforced fairly.  The local units filing suit allege that the law provides no clarity as to what they are and are not able to do in terms of conveying information about local ballot questions.  Thus, there is concern that the state could enforce the law arbitrarily, depending upon the subject matter of the issue presented.  Since there are potential criminal penalties, this concern could lead a chilling of free speech, as officials could be afraid to provide any information.  This is what has led opponents of the bill to refer to it as a “gag order.”

This is clearly an issue that is still developing, so please stay tuned! But please be advised that if you have a ballot question on the March 8, 2016, ballot, your township will likely be bound by the newly passed law as it stands.

By:      Steve Koski

Click here for a PDF version of this publication.

Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 150 years of experience in township law, and have represented more than 150 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law, and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

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