PERSONAL PROPERTY TAX EXEMPTION - S.B. 102 (S-4): FIRST ANALYSIS
Senate Bill 102 (Substitute S-4 as passed by the Senate)
Sponsor: Senator Bill Bullard, Jr.
Committee: Finance
Date Completed: 3-1-99
RATIONALE
The General Property Tax Act (as amended by Public Act 328 of 1998) allows the governing body of a city, village, or township that contains an "eligible distressed area" to exempt from personal property taxes all new personal property of an "eligible business" located in an "eligible district". In general, an "eligible distressed area" is an area in a city that has been designated as blighted; a municipality that shows a negative population change from 1970, and a poverty rate and unemployment rate greater than the statewide average; or an area certified as a neighborhood enterprise zone. An "eligible district", in general, includes such areas as industrial development districts, downtown development areas, renaissance zones, enterprise zones, empowerment zones, and brownfield redevelopment zones. "Eligible business" means that term as defined in the Michigan Economic Growth Authority Act, that is, a business that proposes to create qualified jobs in Michigan in manufacturing, mining, research and development, wholesale and trade, or office operations; it does not include retail establishments, professional sports stadiums, or that portion of a business used exclusively for retail sales.
The City of Lansing, which qualifies for a neighborhood enterprise zone and therefore contains an eligible distressed area, is in the process of using Public Act 328 to grant the personal property tax exemption to Jackson National Life, which may locate its headquarters in the area. Further, it has been widely reported that General Motors is considering Lansing or the Lansing area as a site for a new facility. Evidently, however, the city cannot offer General Motors a tax exemption for new personal property unless the definition of "eligible business" is revised.
CONTENT
The bill would amend the General Property Tax Act to redefine "eligible business" in regard to the tax exemption for new personal property; and to specify that new personal property would include property owned or leased by an eligible business. Under the bill, "eligible business", effective August 7, 1998, would mean a business engaged in manufacturing, mining, research and development, wholesale trade, or office operations. (The new definition would delete reference to the creation of qualified jobs.) "Eligible business" would not include retail establishments, professional sports stadiums, that portion of eligible businesses used exclusively for retail sales, or casinos, including all property associated or affiliated with the operation of a casino.
ARGUMENTS
(Please note: The arguments contained in this analysis originate from sources outside the Senate Fiscal Agency. The Senate Fiscal Agency neither supports nor opposes legislation.)
Supporting Argument
The bill apparently is needed for the specific purpose of allowing the City of Lansing to offer General Motors an exemption from taxation for new personal property. The bill would give the city the ability to offer General Motors a substantial incentive to locate a new facility in Lansing.
Opposing Argument
At this time it is not known what the granting of special tax breaks to one company would mean in lost revenue to the city, or to the State for reimbursement to city schools. The bill is an example of how the State abuses taxpayers in its pursuit of granting corporate welfare. The bill includes no provisions to link the proposed tax break for General Motors to the number of employees who General Motors might retain or add. The bill would do taxpayers little good if the tax revenue lost exceeded the taxes generated by the (possible) jobs created.
Response: Granting the exemption is entirely at the discretion of the governing body of a local unit. If a local unit studies the issue and determines that it would be a bad deal to forgo the taxes generated from personal property, then the local unit need not grant an exemption.
Further, if General Motors were to locate a new facility in the area, it could have a tremendous positive effect in terms of spin-off employment and other economic activity. If the city wants to compete for a General Motors facility, it must do so with other states, local governments in other states, and other nations. Any additional tool that it has at its disposal would be welcome, and a personal property tax exemption would be a powerful tool.
- Legislative Analyst: G. Towne
FISCAL IMPACT
This bill would allow eligible local units to exempt new personal property owned or leased by all eligible businesses located in eligible districts. Information is not available to accurately determine the fiscal impact. However, this bill would reduce local government personal property tax revenue and local school personal property tax revenue. State government revenue from the State education property tax would decline; however, due to the State's guaranteed school foundation allowance, the State would have to reimburse the schools for their loss in personal property taxes.
- Fiscal Analyst: R. RossA9900\s102a
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.