The Michigan State Tax Commission (“STC”) is authorized to provide advise to municipal assessors. Each year the STC provides guidance through bulletins. In 2019, the STC released several bulletins that highlight procedural changes for assessors and county equalization directors (Bulletin 14) and the inflation rate modifier used in the assessing processing (Bulletin 15).
The STC recently addressed new procedural requirements for assessing officers and county equalization directors and established a new inflation rate modifier for 2020. The new information was released through multiple bulletins:
2019-1: 4th Quarter Qualified Certified Interest Rates
2019-2: 2019 Boards of Review
2019-3: Millage Requests and Rollbacks
2019-4: 1st Quarter Certified Interest Rates
2019-5: Interest Rates on Michigan Tax Tribunal Judgments
2019-6: County Multipliers for 2014 Assessor’s Manuel
2019-7: Assessor Certification
2019-8: Assessor Certification Level Requirements
2019-9: 2nd Quarter Certified Interest Rates
2019-10: Random Week for “Qualified Business”
2019-11: 3rd Quarter Certified Interest Rates
2019-12: Property Tax and Equalization Calendar for 2020
2019-13: Property Tax Appeal Procedures for 2020
2019-14: Procedural Changes for the 2020 Assessment Year
2019-15: Inflation Rate Multiplier
Bulletin No. 14: Procedural Changes for Assessing Officers and County Equalization Directors
STC Bulletin 14 provides a host of information impacting township assessors including: (1) setting the inflation rate used in the 2020 capped value formula; (2) federal poverty guidelines used in the determination of poverty exemptions for 2020; (3) Sales Studies; (4) Property Classification; (5) Public Act 660 of 2018, Property Assessing Reform; (6) Village Waiver; (7) Consolidating Boards of Review; (8)Tax Tribunal Small Claims Division Hearings; (9) Changes to Personal Property Tax; (10) Principal Residence Exemption; (11) Omitted or Incorrectly Reported Property (MCL 211.154); (12) Authority of July and December Boards of Review. The following identifies those specific items of importance to local assessors. The other areas addressed in Bulletin 14 can be viewed here: STC Bulletin 14 of 2019.
In April 2019, the STC announced their approval of Form 5689 Application for State Tax Commission Approval of Village Assessment. MCL 211.10d(7) states that when a village is located in more than 1 assessing district, the village may request approval from the STC for combining the assessment of village property with the assessment of property in 1 of those assessing districts. The ability to have village property assessed along with township property, means potential savings for both villages and townships. By collaborating, townships and villages could reduce administrative costs associated with tax assessments.
Consolidating Boards of Review
In December 2018, the State Legislature was concerned about the costs associated with township tax assessments as well as townships’ access to quality assessors. The Legislature’s desire to reevaluate how townships conduct property tax assessments resulted in amendments to the General Property Tax Act through Public Act 660 of 2018. Public Act 660 of 2018 allows governing bodies of local units to enter into agreements to consolidate boards of review. This is significant for townships because townships can now consolidate boards of review with contiguous municipalities. This reduces the need to recruit and train individuals to serve on the board of review. Now, able to draw on a larger pool of individuals to serve on the board of review, two townships could collaborate to create a single board of review.
Additional requirements for consolidation include:
- 2/3 of the members must be property taxpayers of the township.
- Members appointed to the board shall serve for terms of 2 years, beginning at noon on January 1 of each odd-numbered year.
- A member of the township board is not eligible to serve on the board or to fill any vacancy. A spouse, mother, father, sister, brother, son, or daughter, including an adopted child of the assessor is not eligible to serve on the board or to fill any vacancy.
- At least 2 members of a 3-member board of review shall be present to conduct any business or hearings of the board of review.
- The township board may appoint 3, 6, or 9 electors of the township, who will constitute a board of review for the township. If 6 or 9 members are appointed as provided in this subsection, the membership of the board of review must be divided into board of review committees consisting of 3 members each.
A township board may appoint not more than 2 alternate members for the same term as regular members of the board of review.
Bulletin No. 15 Inflation Rate Multiplier
New Inflation Rate Used in the 2020 Capped Value Formula
The STC announced that the new taxable value inflation rate for 2020 is 1.019. The 2020 Capped value formula is as follows: 2020 Capped Value = (2019 Taxable Value – Losses) X 1.019 + Additions
The STC announced that the inflation rate multiplier for 2020 was 1.019. The inflation rate multiplier is part of the formula tax assessors use to calculate annual increases in property taxes for current property owners. Under Michigan law, the inflation rate multiplier is capped at 1.05. This means that when inflation is below 1.05, the STC will use the actual rate of inflation (such as 1.019 for 2020). When the inflation rate is above 1.05, the STC must use an inflation rate multiplier of 1.05 based on the statutory maximum.
An inflation rate multiplier of 1.019 in 2020 means that Michigan townships will be limited in their ability to increase property taxes for individual properties. If a township was anticipating revenue would increase based on an inflation rate of 1.05, then the township should reevaluate its budgeting for the upcoming year.
How The Multiplier Was Created
Every year the Inflation Rate Multiplier the State Tax Commission calculates a standard Inflation Rate Multiplier to be used by assessors throughout the state of Michigan. The inflation rate multiplier is a compilation of multiple factors, and the multiplier is created using a formula established by statute, MCL 211.34(d). The formula is as follows:
(l) “Inflation rate” means the ratio of the general price level for the state fiscal year ending in the calendar year immediately preceding the current year divided by the general price level for the state fiscal year ending in the calendar year before the year immediately preceding the current year.
(f) “General price level” means the annual average of the 12 monthly values for the United States consumer price index for all urban consumers as defined and officially reported by the United States department of labor, bureau of labor statistics.
As shown in the STC’s Bulletin 15 of 2019 the calculation for 2020 is as follows:
1. The 12 monthly values for October 2017 through September 2018 are averaged.
2. The 12 monthly values for October 2018 through September 2019 are averaged.
3. The ratio is calculated by dividing the average of column 2 by the average of column 1
It is important to note, that local units are prohibited from developing or using their own inflation rate multiplier. All units must use an inflation rate multiplier of 1.019 in 2020. Using a state-wide inflation rate multiplier has both its advantages and disadvantages. The state-wide inflation rate multiplier provides positive attributes include reducing costs to local tax assessing offices as they do not have to create their own metrics and creating predictability. On the other hand, a state-wide inflation rate multiplier does not capture the actual inflation rate in any one community.
The 2020 inflation rate multiplier is also used in calculating the 2020 “Headlee” Millage Reduction Fraction required by MCL 211.34(d). For 2020 the formula is:
2020 MRF = (2019 Taxable Value – Losses) x 1.019 2020 Taxable Value – Additions
The STC Bulletins are an excellent resource for township officials looking to stay up to date on the changes to Michigan property taxes. The most recent bulletins had good news for tax assessors and township officials, as legislative and administrative changes open up the possibility of collaboration between local tax collecting units. By removing regulations that prohibited collaboration between different local tax collecting units, the STC and Legislature now allow for collaboration, in limited circumstances, to help reduce townships’ costs in tax assessing activities. An inflation rate multiplier of 1.019 means that townships may not see the increase in revenue from property taxes that they were anticipating.
– Jacob P. Fox & Ross K. Bower II
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.
Copyright © 2019 Fahey Schultz Burzych Rhodes PLC