SENATE BILL No. 1182

March 29, 2000, Introduced by Senators JAYE, GOSCHKA, MC COTTER, BENNETT, SCHWARZ, STEIL, DINGELL, DE BEAUSSAERT, SHUGARS, KOIVISTO and DUNASKISS and referred to the Committee on Finance.

A bill to amend 1893 PA 206, entitled

"The general property tax act,"

by amending section 27a (MCL 211.27a), as amended by 1996 PA

476.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 27a. (1) Except as otherwise provided in this section,

2 property shall be assessed at 50% of its true cash value under

3 section 3 of article IX of the state constitution of 1963.

4 (2) Except as otherwise provided in subsection (3), for

5 taxes levied in 1995 and for each year after 1995, the taxable

6 value of each parcel of property is the lesser of the following:

7 (a) The property's taxable value in the immediately preced-

8 ing year minus any losses, multiplied by the lesser of 1.05 or

9 the inflation rate, plus all additions. For taxes levied in

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1 1995, the property's taxable value in the immediately preceding

2 year is the property's state equalized valuation in 1994.

3 (b) The property's current state equalized valuation.

4 (3) Upon a transfer of ownership of property after 1994, the

5 property's taxable value for the calendar year following the year

6 of the transfer is the property's state equalized valuation for

7 the calendar year following the transfer.

8 (4) If the taxable value of property is adjusted under sub-

9 section (3), a subsequent increase in the property's taxable

10 value is subject to the limitation set forth in subsection (2)

11 until a subsequent transfer of ownership occurs.

12 (5) Assessment of property, as required in this section and

13 section 27, is inapplicable to the assessment of property subject

14 to the levy of ad valorem taxes within voted tax limitation

15 increases to pay principal and interest on limited tax bonds

16 issued by any governmental unit, including a county, township,

17 community college district, or school district, before January 1,

18 1964, if the assessment required to be made under this act would

19 be less than the assessment as state equalized prevailing on the

20 property at the time of the issuance of the bonds. This inappli-

21 cability shall continue until levy of taxes to pay principal and

22 interest on the bonds is no longer required. The assessment of

23 property required by this act shall be applicable for all other

24 purposes.

25 (6) As used in this act, "transfer of ownership" means the

26 conveyance of title to or a present interest in property,

27 including the beneficial use of the property, the value of which

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1 is substantially equal to the value of the fee interest.

2 Transfer of ownership of property includes, but is not limited

3 to, the following:

4 (a) A conveyance by deed.

5 (b) A conveyance by land contract. The taxable value of

6 property conveyed by a land contract executed after December 31,

7 1994 shall be adjusted under subsection (3) for the calendar year

8 following the year in which the contract is entered into and

9 shall not be subsequently adjusted under subsection (3) when the

10 deed conveying title to the property is recorded in the office of

11 the register of deeds in the county in which the property is

12 located.

13 (c) A conveyance to a trust after December 31, 1994, except

14 if the settlor or the settlor's spouse, or both, conveys the

15 property to the trust and the sole present beneficiary or benefi-

16 ciaries are the settlor or the settlor's spouse, or both.

17 (d) A conveyance by distribution from a trust, except if the

18 distributee is the sole present beneficiary or the spouse of the

19 sole present beneficiary, or both.

20 (e) A change in the sole present beneficiary or beneficia-

21 ries of a trust, except a change that adds or substitutes the

22 spouse of the sole present beneficiary.

23 (f) A conveyance by distribution under a will or by intes-

24 tate succession, except if the distributee is the decedent's

25 spouse.

26 (g) A conveyance by lease if the total duration of the

27 lease, including the initial term and all options for renewal, is

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1 more than 35 years or the lease grants the leasee LESSEE a

2 bargain purchase option. As used in this subdivision, "bargain

3 purchase option" means the right to purchase the property at the

4 termination of the lease for not more than 80% of the property's

5 projected true cash value at the termination of the lease. After

6 December 31, 1994, the taxable value of property conveyed by a

7 lease with a total duration of more than 35 years or with a bar-

8 gain purchase option shall be adjusted under subsection (3) for

9 the calendar year following the year in which the lease is

10 entered into. This subdivision does not apply to personal prop-

11 erty except buildings described in section 14(6) and personal

12 property described in section 8(h), (i), and (j). This subdivi-

13 sion does not apply to that portion of the property not subject

14 to the leasehold interest conveyed.

15 (h) A conveyance of an ownership interest in a corporation,

16 partnership, sole proprietorship, limited liability company,

17 limited liability partnership, or other legal entity if the

18 ownership interest conveyed is more than 50% of the corporation,

19 partnership, sole proprietorship, limited liability company,

20 limited liability partnership, or other legal entity. Unless

21 notification is provided under subsection (8), the corporation,

22 partnership, sole proprietorship, limited liability company,

23 limited liability partnership, or other legal entity shall notify

24 the assessing officer on a form provided by the state tax commis-

25 sion not more than 45 days after a conveyance of an ownership

26 interest that constitutes a transfer of ownership under this

27 subdivision.

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1 (i) A transfer of property held as a tenancy in common,

2 except that portion of the property not subject to the ownership

3 interest conveyed.

4 (j) A conveyance of an ownership interest in a cooperative

5 housing corporation, except that portion of the property not

6 subject to the ownership interest conveyed.

7 (7) Transfer of ownership does not include the following:

8 (a) The transfer of property from 1 spouse to the other

9 spouse or from a decedent to a surviving spouse.

10 (b) A transfer from a husband, a wife, or a husband and wife

11 creating or disjoining a tenancy by the entireties in the grant-

12 ors or the grantor and his or her spouse.

13 (c) A transfer of that portion of property subject to a life

14 estate or life lease retained by the transferor, until expiration

15 or termination of the life estate or life lease. That portion of

16 property transferred that is not subject to a life lease shall be

17 adjusted under subsection (3).

18 (d) A transfer through foreclosure or forfeiture of a

19 recorded instrument under chapter 31, 32, or 57 of the revised

20 judicature act of 1961, Act No. 236 of the Public Acts of 1961,

21 being sections 600.3101 to 600.3280 and 600.5701 to 600.5785 of

22 the Michigan Compiled Laws 1961 PA 236, MCL 600.3101 TO 600.3280

23 AND MCL 600.5701 TO 600.5785, or through deed or conveyance in

24 lieu of a foreclosure or forfeiture, until the mortgagee or land

25 contract vendor subsequently transfers the property. If a mort-

26 gagee does not transfer the property within 1 year of the

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1 expiration of any applicable redemption period, the property

2 shall be adjusted under subsection (3).

3 (e) A transfer by redemption by the person to whom taxes are

4 assessed of property previously sold for delinquent taxes.

5 (f) A conveyance to a trust if the settlor or the settlor's

6 spouse, or both, conveys the property to the trust and the sole

7 present beneficiary of the trust is the settlor or the settlor's

8 spouse, or both.

9 (g) A transfer pursuant to a judgment or order of a court of

10 record making or ordering a transfer, unless a specific monetary

11 consideration is specified or ordered by the court for the

12 transfer.

13 (h) A transfer creating or terminating a joint tenancy

14 between 2 or more persons if at least 1 of the persons was an

15 original owner of the property before the joint tenancy was ini-

16 tially created and, if the property is held as a joint tenancy at

17 the time of conveyance, at least 1 of the persons was a joint

18 tenant when the joint tenancy was initially created and that

19 person has remained a joint tenant since the joint tenancy was

20 initially created. A joint owner at the time of the last trans-

21 fer of ownership of the property is an original owner of the

22 property. For purposes of this subdivision, a person is an orig-

23 inal owner of property owned by that person's spouse.

24 (i) A transfer for security or an assignment or discharge of

25 a security interest.

26 (j) A transfer of real property or other ownership interests

27 among members of an affiliated group. As used in this

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1 subsection, "affiliated group" means 1 or more corporations

2 connected by stock ownership to a common parent corporation.

3 Upon request by the state tax commission, a corporation shall

4 furnish proof within 45 days that a transfer meets the require-

5 ments of this subdivision. A corporation that fails to comply

6 with a request by the state tax commission under this subdivision

7 is subject to a fine of $200.00.

8 (k) Normal public trading of shares of stock or other owner-

9 ship interests that, over any period of time, cumulatively repre-

10 sent more than 50% of the total ownership interest in a corpora-

11 tion or other legal entity and are traded in multiple transac-

12 tions involving unrelated individuals, institutions, or other

13 legal entities.

14 (l) A transfer of real property or other ownership interests

15 among corporations, partnerships, limited liability companies,

16 limited liability partnerships, or other legal entities if the

17 entities involved are commonly controlled. Upon request by the

18 state tax commission, a corporation, partnership, limited liabil-

19 ity company, limited liability partnership, or other legal entity

20 shall furnish proof within 45 days that a transfer meets the

21 requirements of this subdivision. A corporation, partnership,

22 limited liability company, limited liability partnership, or

23 other legal entity that fails to comply with a request by the

24 state tax commission under this subdivision is subject to a fine

25 of $200.00.

26 (m) A direct or indirect transfer of real property or other

27 ownership interests resulting from a transaction that qualifies

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1 as a tax-free reorganization under section 368 of the internal

2 revenue code of 1986, 26 U.S.C. 368. Upon request by the state

3 tax commission, a property owner shall furnish proof within 45

4 days that a transfer meets the requirements of this subdivision.

5 A property owner who fails to comply with a request by the state

6 tax commission under this subdivision is subject to a fine of

7 $200.00.

8 (N) THE TRANSFER OF BUSINESS PROPERTY WITH A TAXABLE VALUE

9 OF NOT MORE THAN $2,500,000.00 FROM A PERSON TO A FAMILY MEMBER

10 OF THAT PERSON. AS USED IN THIS SUBDIVISION:

11 (i) "BUSINESS PROPERTY" MEANS PROPERTY CLASSIFIED AS COMMER-

12 CIAL REAL PROPERTY OR INDUSTRIAL REAL PROPERTY UNDER

13 SECTION 34C.

14 (ii) "FAMILY MEMBER" MEANS ALL OF THE FOLLOWING:

15 (A) SPOUSE.

16 (B) CHILD, STEPCHILD, OR ADOPTED CHILD.

17 (C) GRANDCHILD, STEP-GRANDCHILD, OR ADOPTED GRANDCHILD.

18 (D) PARENT, STEPPARENT, OR ADOPTIVE PARENT.

19 (E) GRANDPARENT, STEP-GRANDPARENT, OR ADOPTIVE GRANDPARENT.

20 (F) BROTHER, STEPBROTHER, OR ADOPTIVE BROTHER.

21 (G) SISTER, STEPSISTER, OR ADOPTIVE SISTER.

22 (O) A TRANSFER OF RESIDENTIAL PROPERTY WITH A TAXABLE VALUE

23 OF NOT MORE THAN $2,500,000.00 FROM A PERSON TO A FAMILY MEMBER

24 OF THAT PERSON. AS USED IN THIS SUBDIVISION:

25 (i) "FAMILY MEMBER" MEANS ALL OF THE FOLLOWING:

26 (A) SPOUSE.

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1 (B) CHILD, STEPCHILD, OR ADOPTED CHILD.

2 (C) GRANDCHILD, STEP-GRANDCHILD, OR ADOPTED GRANDCHILD.

3 (D) PARENT, STEPPARENT, OR ADOPTIVE PARENT.

4 (E) GRANDPARENT, STEP-GRANDPARENT, OR ADOPTIVE GRANDPARENT.

5 (F) BROTHER, STEPBROTHER, OR ADOPTIVE BROTHER.

6 (G) SISTER, STEPSISTER, OR ADOPTIVE SISTER.

7 (ii) "RESIDENTIAL PROPERTY" MEANS PROPERTY CLASSIFIED AS

8 RESIDENTIAL REAL PROPERTY UNDER SECTION 34C.

9 (8) The register of deeds of the county where deeds or other

10 title documents are recorded shall notify the assessing officer

11 of the appropriate local taxing unit not less than once each

12 month of any recorded transaction involving the ownership of

13 property and shall make any recorded deeds or other title docu-

14 ments available to that county's tax or equalization department.

15 Unless notification is provided under subsection (6), the buyer,

16 grantee, or other transferee of the property shall notify the

17 appropriate assessing office in the local unit of government in

18 which the property is located of the transfer of ownership of the

19 property within 45 days of the transfer of ownership, on a form

20 prescribed by the state tax commission that states the parties to

21 the transfer, the date of the transfer, the actual consideration

22 for the transfer, and the property's parcel identification number

23 or legal description. Forms filed in the assessing office of a

24 local unit of government under this subsection shall be made

25 available to the county tax or equalization department for the

26 county in which that local unit of government is located. This

27 subsection does not apply to personal property except buildings

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1 described in section 14(6) and personal property described in

2 section 8(h), (i), and (j).

3 (9) As used in this section:

4 (a) "Additions" means that term as defined in section 34d.

5 (b) "Beneficial use" means the right to possession, use, and

6 enjoyment of property, limited only by encumbrances, easements,

7 and restrictions of record.

8 (c) "Inflation rate" means that term as defined in section

9 34d.

10 (d) "Losses" means that term as defined in section 34d.

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