HOUSE BILL No. 4844 September 22, 1999, Introduced by Reps. Faunce, Price, Gosselin, Rick Johnson, Wojno, Woronchak, Thomas, Garcia and Middaugh and referred to the Committee on Tax Policy. A bill to amend 1974 PA 198, entitled "An act to provide for the establishment of plant rehabilitation districts and industrial development districts in local govern- mental units; to provide for the exemption from certain taxes; to levy and collect a specific tax upon the owners of certain facil- ities; to provide for the disposition of the tax; to provide for the obtaining and transferring of an exemption certificate and to prescribe the contents of those certificates; to prescribe the powers and duties of the state tax commission and certain offi- cers of local governmental units; and to provide penalties," by amending sections 2, 4, and 9 (MCL 207.552, 207.554, and 207.559), section 2 as amended by 1986 PA 66, section 4 as amended by 1995 PA 218, and section 9 as amended by 1996 PA 513. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 2. (1) "Commission" means the state tax commission 2 created byAct No. 360 of the Public Acts of 1927, as amended,3being sections 209.101 to 209.107 of the Michigan Compiled Laws4 1927 PA 360, MCL 209.101 TO 209.107. 04347'99 * JLB 2 1 (2) "Facility" means either a replacement facility, a new 2 facility, or, if applicable by its usage, a speculative 3 building. 4 (3) "Replacement facility" means 1 OF THE FOLLOWING: 5 (a) In the case of a replacement or restorationwhichTHAT 6 occurs on the same or contiguous land as that which is replaced 7 or restored, industrial propertywhichTHAT is or is to be 8 acquired, constructed, altered, or installed for the purpose of 9 replacement or restoration of obsolete industrial property 10 together with any part of the old altered propertywhichTHAT 11 remains for use as industrial property after the replacement, 12 restoration, or alteration. 13 (b) In the case of construction on vacant noncontiguous 14 land, propertywhichTHAT is or will be used as industrial 15 propertywhichTHAT is or is to be acquired, constructed, 16 transferred, or installed for the purpose of being substituted 17 for obsolete industrial property if the obsolete industrial prop- 18 erty is situated in a plant rehabilitation district in the same 19 city, village, or township as the land on which the facility is 20 or is to be constructed and includes the obsolete industrial 21 property itself untilsuchTHE time as the substituted facility 22 is completed. 23 (4) "New facility" means new industrial property other than 24 a replacement facility to be built in a plant rehabilitation dis- 25 trict or industrial development district. 26 (5) "Local governmental unit" means a city, village, or 27 township. 04347'99 * 3 1 (6) "Industrial property" means land improvements, 2 buildings, structures, and other real property, and machinery, 3 equipment, furniture, and fixtures or any part or accessory 4thereofwhether completed or in the process of construction 5 comprising an integrated whole, the primary purpose and use of 6 which is the manufacture of goods or materials or the processing 7 of goods and materials by physical or chemical change;the oper-8ation of a theme and recreation park located in an industrial9park district;property acquired, constructed, altered, or 10 installed due to the passage of proposal A in 1976; the operation 11 of a hydro-electric dam by a private company other than a public 12 utility; or agricultural processing facilities.For certifi-13cates granted between April 1, 1986 and September 30, 1986,14industrial property shall include the real and personal property15of a nonprofit cooperative power corporation that is used as an16office, warehouse, or similar facility, and that is located on17land owned by the nonprofit cooperative corporation.Industrial 18 propertyshall includeINCLUDES facilities related to a manu- 19 facturing operation under the same ownership, including but not 20 limited to office, engineering, research and development, ware- 21 housing, or parts distribution facilities. Industrial property 22shallalsoincludeINCLUDES research and development labora- 23 tories of companies other than those companieswhichTHAT manu- 24 facture the products developed from their research activities and 25 research development laboratories of a manufacturing company that 26 are unrelated to the products of the company. INDUSTRIAL 27 PROPERTY ALSO INCLUDES AN ELECTRIC GENERATING PLANT THAT IS NOT 04347'99 * 4 1 OWNED BY A LOCAL UNIT OF GOVERNMENT. INDUSTRIAL PROPERTY ALSO 2 INCLUDES CONVENTION AND TRADE CENTERS OVER 250,000 SQUARE FEET IN 3 SIZE. INDUSTRIAL PROPERTY MAY BE OWNED OR LEASED. HOWEVER, IN 4 THE CASE OF LEASED PROPERTY, THE LESSEE IS LIABLE FOR PAYMENT OF 5 AD VALOREM PROPERTY TAXES AND SHALL FURNISH PROOF OF THAT 6 LIABILITY. Industrial propertyshallDOES not include any of 7 the following: 8 (a) Land. 9 (b) Property of a public utility other than a nonprofit 10 cooperative power corporation as described in this section. 11 (c) Inventory. 12Industrial property may be owned or leased if, in the case13of leased property, the lessee is liable for payment of ad14valorem property taxes and furnishes proof of that liability.15 (7) "Obsolete industrial property" means industrial property 16 the condition of which is substantially less than an economically 17 efficient functional condition. 18 (8) "Economically efficient functional condition" means a 19 state or condition of property the desirability and usefulness of 20 which is not impaired due to changes in design, construction, 21 technology, or improved production processes, or from external 22 influencing factors which make the property less desirable and 23 valuable for continued use. 24 (9) "Research and development laboratories" means building 25 and structures, including the machinery, equipment, furniture, 26 and fixtures locatedthereinIN THE BUILDING OR STRUCTURE, used 27 or to be used for research or experimental purposes that would be 04347'99 * 5 1 considered qualified research as that term is used in section 30 2 of the internal revenue code, except that qualified research 3shall includeALSO INCLUDES qualified research funded by grant, 4 contract, or otherwise by another person or governmental entity. 5 (10) "Manufacture of goods or materials" or "processing of 6 goods or materials" means THE OPERATION OF AN ELECTRIC GENERATING 7 PLANT THAT IS NOT OWNED BY A LOCAL UNIT OF GOVERNMENT OR any type 8 of operation that would be conducted by an entity included in the 9 classifications provided bydivision D, manufacturing, of the10standard classification manual of 1972, published by the United11StatesSECTOR 31-33 -- MANUFACTURING, OF THE NORTH AMERICAN 12 INDUSTRY CLASSIFICATION SYSTEM -- UNITED STATES, 1997, PUBLISHED 13 BY THE office of management and budget, regardless of whether the 14 entity conductingsuch anTHAT operation is includedtherein15 IN THAT MANUAL. 16 (11) For purposes of this act, "nonprofit power corporation" 17 means a nonprofit power corporation as described in section 18 261(4) ofAct No. 162 of the Public Acts of 1982, being section19450.2261 of the Michigan Compiled LawsTHE NONPROFIT CORPORATION 20 ACT, 1982 PA 162, MCL 450.2261, whose primary business is the 21 sale of electric power to other nonprofit electric corporations 22 in this state. 23 Sec. 4. (1) A local governmental unit, by resolution of its 24 legislative body, may establish plant rehabilitation districts 25 and industrial development districts that consist of 1 or more 26 parcels or tracts of land or a portion of a parcel or tract of 27 land. 04347'99 * 6 1 (2) The legislative body of a local governmental unit may 2 establish a plant rehabilitation district or an industrial devel- 3 opment district on its own initiative or upon a written request 4 filed by the owner or owners of 75% of the state equalized value 5 of the industrial property located within a proposed plant reha- 6 bilitation district or industrial development district. This 7 request shall be filed with the clerk of the local governmental 8 unit. 9 (3) Except as provided in section9(2)(i)9(2)(H), after 10 December 31, 1983, a request for the establishment of a proposed 11 plant rehabilitation district or industrial development district 12 shall be filed only in connection with a proposed replacement 13 facility or new facility, the construction, acquisition, alter- 14 ation, or installation of or for which has not commenced at the 15 time of the filing of the request. The legislative body of a 16 local governmental unit shall not establish a plant rehabilita- 17 tion district or an industrial development district pursuant to 18 subsection (2) if it finds that the request for the district was 19 filed after the commencement of construction, alteration, or 20 installation of, or of an acquisition related to, the proposed 21 replacement facility or new facility. This subsection shall not 22 apply to a speculative building. 23 (4) Before adopting a resolution establishing a plant reha- 24 bilitation district or industrial development district, the leg- 25 islative body shall give written notice by certified mail to the 26 owners of all real property within the proposed plant 27 rehabilitation district or industrial development district and 04347'99 * 7 1 shall hold a public hearing on the establishment of the plant 2 rehabilitation district or industrial development district at 3 which those owners and other residents or taxpayers of the local 4 governmental unit shall have a right to appear and be heard. 5 (5) The legislative body of the local governmental unit, in 6 its resolution establishing a plant rehabilitation district, 7 shall set forth a finding and determination that property com- 8 prising not less than 50% of the state equalized valuation of the 9 industrial property within the district is obsolete. 10 (6) A plant rehabilitation district or industrial develop- 11 ment district established by a township shall be only within the 12 unincorporated territory of the township and shall not be within 13 a village. 14 (7) Industrial property that is part of an industrial devel- 15 opment district or a plant rehabilitation district may also be 16 part of a tax increment district established under the tax incre- 17 ment finance authority act,Act No. 450 of the Public Acts of181980, being sections 125.1801 to 125.1830 of the Michigan19Compiled Laws1980 PA 450, MCL 125.1801 TO 125.1830. 20 Sec. 9. (1) The legislative body of the local governmental 21 unit, in its resolution approving an application, shall set forth 22 a finding and determination that the granting of the industrial 23 facilities exemption certificate, considered together with the 24 aggregate amount of industrial facilities exemption certificates 25 previously granted and currently in force, shall not have the 26 effect of substantially impeding the operation of the local 27 governmental unit or impairing the financial soundness of a 04347'99 * 8 1 taxing unit that levies an ad valorem property tax in the local 2 governmental unit in which the facility is located or to be 3 located. If the state equalized valuation of property proposed 4 to be exempt pursuant to an application under consideration, con- 5 sidered together with the aggregate state equalized valuation of 6 property exempt under certificates previously granted and cur- 7 rently in force, exceeds 5% of the state equalized valuation of 8 the local governmental unit, the commission, with the approval of 9 the state treasurer, shall make a separate finding and shall 10 include a statement in the order approving the industrial facili- 11 ties exemption certificate that exceeding that amount shall not 12 have the effect of substantially impeding the operation of the 13 local governmental unit or impairing the financial soundness of 14 an affected taxing unit. 15 (2) Except for an application for a speculative building, 16 which is governed by subsection (4), the legislative body of the 17 local governmental unit shall not approve an application and the 18 commission shall not grant an industrial facilities exemption 19 certificate unless the applicant complies with all of the follow- 20 ing requirements: 21 (a) The commencement of the restoration, replacement, or 22 construction of the facility occurred not earlier than 12 months 23 before the filing of the application for the industrial facili- 24 ties exemption certificate. If the application is not filed 25 within the 12-month period, the application may be filed within 26 the succeeding 12-month period and the industrial facilities 27 exemption certificate shall in this case expire 1 year earlier 04347'99 * 9 1 than it would have expired if the application had been timely 2 filed. This subdivision does not apply for applications filed 3 with the local governmental unit after December 31, 1983. 4 (b) For applications made after December 31, 1983, the pro- 5 posed facility shall be located within a plant rehabilitation 6 district or industrial development district that was duly estab- 7 lished in a local governmental unit eligible under this act to 8 establish a district and that was established upon a request 9 filed or by the local governmental unit's own initiative taken 10 before the commencement of the restoration, replacement, or con- 11 struction of the facility. 12 (c) For applications made after December 31, 1983, the com- 13 mencement of the restoration, replacement, or construction of the 14 facility occurred not earlier than 6 months before the filing of 15 the application for the industrial facilities exemption 16 certificate. 17 (d) The application relates to a construction, restoration, 18 or replacement program that when completed constitutes a new or 19 replacement facility within the meaning of this act and that 20 shall be situated within a plant rehabilitation district or 21 industrial development district duly established in a local gov- 22 ernmental unit eligible under this act to establish the 23 district. 24 (e) Completion of the facility is calculated to, and will at 25 the time of issuance of the certificate have the reasonable like- 26 lihood to create employment, retain employment, prevent a loss of 04347'99 * 10 1 employment, or produce energy in the community in which the 2 facility is situated. 3(f) Completion of the facility shall not have the effect of4transferring employment from 1 or more local governmental units5of this state to the local governmental unit in which the facil-6ity is to be located, except that this restriction does not pre-7vent the granting of a certificate if the legislative body of8each local governmental unit from which employment is to be9transferred consents by resolution to the granting of the10certificate. If the local governmental unit does not give its11consent, a copy of the resolution of denial showing reasons for12the denial shall be filed within 20 days after adoption with the13department of consumer and industry services.14 (F)(g)Completion of the facility does not constitute 15 merely the addition of machinery and equipment for the purpose of 16 increasing productive capacity but rather is primarily for the 17 purpose and will primarily have the effect of restoration, 18 replacement, or updating the technology of obsolete industrial 19 property. An increase in productive capacity, even though sig- 20 nificant, is not an impediment to the issuance of an industrial 21 facilities exemption certificate if other criteria in this sec- 22 tion and act are met. This subdivision does not apply to a new 23 facility. 24 (G)(h)The provisions of subdivision (c) do not apply to 25 a new facility located in an existing industrial development dis- 26 trict owned by a person who filed an application for an 27 industrial facilities exemption certificate in April of 1992 if 04347'99 * 11 1 the application was approved by the local governing body and was 2 denied by the state tax commission in April of 1993. 3 (H)(i)The provisions of subdivisions (b) and (c) and 4 section 4(3) do not apply to 1 or more of the following: 5 (i) A facility located in an industrial development district 6 owned by a person who filed an application for an industrial 7 facilities exemption certificate in October 1995 for construction 8 that was commenced in July 1992 in a district that was estab- 9 lished by the legislative body of the local governmental unit in 10 July 1994. An industrial facilities exemption certificate 11 described in this subparagraph shall expire as provided in sec- 12 tion 16(3). 13 (ii) A facility located in an industrial development dis- 14 trict that was established in January 1994 and was owned by a 15 person who filed an application for an industrial facilities 16 exemption certificate in February 1994 if the personal property 17 and real property portions of the application were approved by 18 the legislative body of the local governmental unit and the per- 19 sonal property portion of the application was approved by the 20 state tax commission in December 1994 and the real property por- 21 tion of the application was denied by the state tax commission in 22 December 1994. An industrial facilities exemption certificate 23 described in this subparagraph shall expire as provided in sec- 24 tion 16(3). 25 (iii) A facility located in an industrial development dis- 26 trict that was established in December 1995 and was owned by a 27 person who filed an application for an industrial facilities 04347'99 * 12 1 exemptions certificate in November or December 1995 for 2 construction that was commenced in September 1995. 3 (I)(j)The provisions of subdivision (c) do not apply to 4 any of the following: 5 (i) A new facility located in an existing industrial devel- 6 opment district owned by a person who filed an application for an 7 industrial facilities exemption certificate in October 1993 if 8 the application was approved by the legislative body of the local 9 governmental unit and the real property portion of the applica- 10 tion was denied by the state tax commission in December 1993. 11 (ii) A new facility located in an existing industrial devel- 12 opment district owned by a person who filed an application for an 13 industrial facilities exemption certificate in September 1993 if 14 the personal property portion of the application was approved by 15 the legislative body of the local governmental unit and the real 16 property portion of the application was denied by the legislative 17 body of the local governmental unit in October 1993 and subse- 18 quently approved by the legislative body of the local governmen- 19 tal unit in September 1994. 20 (iii) A facility located in an existing industrial develop- 21 ment district owned by a person who filed an application for an 22 industrial facilities exemption certificate in August 1993 if the 23 application was approved by the local governmental unit in 24 September 1993 and the application was denied by the state tax 25 commission in December 1993. 26 (iv) A facility located in an existing industrial 27 development district occupied by a person who filed an 04347'99 * 13 1 application for an industrial facilities exemption certificate in 2 June of 1995 if the application was approved by the legislative 3 body of the local governmental unit in October of 1995 for con- 4 struction that was commenced in November or December of 1994. 5 (v) A facility located in an existing industrial development 6 district owned by a person who filed an application for an indus- 7 trial facilities exemption certificate in June of 1995 if the 8 application was approved by the legislative body of the local 9 governmental unit in July of 1995 and the personal property por- 10 tion of the application was approved by the state tax commission 11 in November of 1995. 12 (3) If the replacement facility when completed will not be 13 located on the same premises or contiguous premises as the obso- 14 lete industrial property, then the applicant shall make provision 15 for the obsolete industrial property by demolition, sale, or 16 transfer to another person with the effect that the obsolete 17 industrial property shall within a reasonable time again be 18 subject to assessment and taxation under the general property tax 19 act,Act No. 206 of the Public Acts of 1893, being sections20211.1 to 211.157 of the Michigan Compiled Laws1893 PA 206, MCL 21 211.1 TO 211.157, or be used in a manner consistent with the gen- 22 eral purposes of this act, subject to approval of the 23 commission. 24 (4) The legislative body of the local governmental unit 25 shall not approve an application and the commission shall not 26 grant an industrial facilities exemption certificate that applies 27 to a speculative building unless the speculative building is or 04347'99 * 14 1 is to be located in a plant rehabilitation district or industrial 2 development district duly established by a local governmental 3 unit eligible under this act to establish a district; the specu- 4 lative building was constructed less than 9 years before the 5 filing of the application for the industrial facilities exemption 6 certificate; the speculative building has not been occupied since 7 completion of construction; and the speculative building other- 8 wise qualifies under subsection (2)(e)and (f)for an indus- 9 trial facilities exemption certificate. An industrial facilities 10 exemption certificate granted under this subsection shall expire 11 as provided in section 16(3). 12 (5) Not later than September 1, 1989, the commission shall 13 provide to all local assessing units the name, address, and tele- 14 phone number of the person on the commission staff responsible 15 for providing procedural information concerning this act. After 16 October 1, 1989, a local unit of government shall notify each 17 prospective applicant of this information in writing. 18 (6) Notwithstanding any other provision of this act, if on 19 December 29, 1986 a local governmental unit passed a resolution 20 approving an exemption certificate for 10 years for real and per- 21 sonal property but the commission did not receive the application 22 until 1992 and the application was not made complete until 1995, 23 then the commission shall issue, for that property, an industrial 24 facilities exemption certificate that begins December 30, 1987 25 and ends December 30, 1997. The facility described in this sub- 26 section shall be taxed under this act as if it was granted an 04347'99 * 15 1 industrial facilities exemption certificate on December 30, 2 1987. 3 (7) Notwithstanding any other provision of this act, if a 4 local governmental unit passed a resolution approving an indus- 5 trial facilities exemption certificate for a new facility on July 6 8, 1991 but rescinded that resolution and passed a resolution 7 approving an industrial facilities exemption certificate for that 8 same facility as a replacement facility on October 21, 1996, the 9 commission shall issue for that property an industrial facilities 10 exemption certificate that begins December 30, 1991 and ends 11 December 2003. The replacement facility described in this sub- 12 section shall be taxed under this act as if it was granted an 13 industrial facilities exemption certificate on December 30, 14 1991. 04347'99 * Final page. JLB