This is our starting text

HB-5097, As Passed House, August 31, 2005

SUBSTITUTE FOR

HOUSE BILL NO. 5097

A bill to amend 1893 PA 206, entitled

"The general property tax act,"

by amending section 34d (MCL 211.34d), as amended by 2005 PA 12,

and by adding section 7jj.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 7jj. (1) Beginning December 31, 2005, commercial rental

property is exempt from the collection of taxes under this act if

an owner of that commercial rental property claims an exemption as

provided in this section. Commercial rental property exempt under

this section is subject to the specific tax levied under the

commercial rental property specific tax act.

(2) An owner of commercial rental property may claim an

exemption under this section by filing an affidavit on or before

December 31 with the local tax collecting unit in which the

commercial rental property is located. The affidavit shall state

that the property is owned and occupied as commercial rental

property on the date that the affidavit is signed. The affidavit

shall be on a form prescribed by the department of treasury. One

copy of the affidavit shall be retained by the owner, 1 copy shall

be retained by the local tax collecting unit until any appeal or

audit period under this act has expired, and 1 copy shall be

forwarded to the department of treasury.

(3) Upon receipt of an affidavit filed under subsection (2)

and unless the claim is denied under this section, the assessor

shall exempt the property from the collection of taxes under this

act until December 31 of the year in which the property is

transferred or is no longer commercial rental property.

(4) Not more than 90 days after exempted property is no longer

commercial rental property, an owner shall rescind the claim of

exemption by filing with the local tax collecting unit a rescission

form prescribed by the department of treasury. An owner who fails

to file a rescission as required by this subsection is subject to a

penalty of $5.00 per day for each separate failure beginning after

the 90 days have elapsed, up to a maximum of $200.00. This penalty

shall be collected under 1941 PA 122, MCL 205.1 to 205.31, and

shall be deposited in the state school aid fund established in

section 11 of article IX of the state constitution of 1963. This

penalty may be waived by the department of treasury.

(5) If the assessor of the local tax collecting unit believes

that the property for which an exemption is claimed is not

commercial rental property, the assessor may deny a new or existing

claim by notifying the owner and the department of treasury in

writing of the reason for the denial and advising the owner that

the denial may be appealed to the state tax commission within 35

days after the date of the notice. The assessor may deny a claim

for exemption for the current year and for the 3 immediately

preceding calendar years. If the assessor denies an existing claim

for exemption, the assessor shall remove the exemption of the

property and, if the tax roll is in the local tax collecting unit's

possession, amend the tax roll to reflect the denial and the local

treasurer shall within 30 days of the date of the denial issue a

corrected tax bill for any additional taxes with interest and

penalties computed from the date the taxes were last payable

without interest or penalty. If the tax roll is in the county

treasurer's possession, the tax roll shall be amended to reflect

the denial and the county treasurer shall within 30 days of the

date of the denial prepare and submit a supplemental tax bill for

any additional taxes, together with interest and penalties computed

from the date the taxes were last payable without interest or

penalty. Taxes levied in a corrected or supplemental tax bill shall

be returned as delinquent on the March 1 in the year immediately

succeeding the year in which the corrected or supplemental tax bill

is issued. However, if the property has been transferred to a bona

fide purchaser before additional taxes were billed to the seller as

a result of the denial of a claim for exemption, the taxes,

interest, and penalties shall not be a lien on the property and

shall not be billed to the bona fide purchaser, and the local tax

collecting unit if the local tax collecting unit has possession of

the tax roll or the county treasurer if the county has possession

of the tax roll shall notify the department of treasury of the

amount of tax due, interest, and penalties through the date of that

notification. The department of treasury shall then assess the

owner who claimed the exemption under this section for the tax,

interest, and penalties accruing as a result of the denial of the

claim for exemption, if any, as for unpaid taxes provided under

1941 PA 122, MCL 205.1 to 205.31, and shall deposit any tax,

penalty, and interest collected into the state school aid fund. The

denial shall be made on a form prescribed by the department of

treasury.

(6) When a county register of deeds records a transfer of

ownership of commercial rental property, he or she shall notify the

local tax collecting unit in which the commercial rental property

is located of the transfer.

(7) The department of treasury shall make available the

affidavit forms and the forms to rescind an exemption, which may be

on the same form, to all city and township assessors, county

equalization officers, county registers of deeds, and closing

agents.

(8) As used in this section, "commercial rental property"

means real property that meets all of the following conditions:

(a) Is classified as commercial real property or industrial

real property under section 34c.

(b) All or a portion is subject to a lease or is offered for

lease.

Sec. 34d. (1) As used in this section or section 27a, or

section 3 or 31 of article IX of the state constitution of 1963:

(a) For taxes levied before 1995, "additions" means all

increases in value caused by new construction or a physical

addition of equipment or furnishings, and the value of property

that was exempt from taxes or not included on the assessment unit's

immediately preceding year's assessment roll.

(b) For taxes levied after 1994, "additions" means, except as

provided in subdivision (c), all of the following:

(i) Omitted real property. As used in this subparagraph,

"omitted real property" means previously existing tangible real

property not included in the assessment. Omitted real property

shall not increase taxable value as an addition unless the

assessing jurisdiction has a property record card or other

documentation showing that the omitted real property was not

previously included in the assessment. The assessing jurisdiction

has the burden of proof in establishing whether the omitted real

property is included in the assessment. Omitted real property for

the current and the 2 immediately preceding years, discovered after

the assessment roll has been completed, shall be added to the tax

roll pursuant to the procedures established in section 154. For

purposes of determining the taxable value of real property under

section 27a, the value of omitted real property is based on the

value and the ratio of taxable value to true cash value the omitted

real property would have had if the property had not been omitted.

(ii) Omitted personal property. As used in this subparagraph,

"omitted personal property" means previously existing tangible

personal property not included in the assessment. Omitted personal

property shall be added to the tax roll pursuant to section 154.

(iii) New construction. As used in this subparagraph, "new

construction" means property not in existence on the immediately

preceding tax day and not replacement construction. New

construction includes the physical addition of equipment or

furnishings, subject to the provisions set forth in section

27(2)(a) to (o). For purposes of determining the taxable value of

property under section 27a, the value of new construction is the

true cash value of the new construction multiplied by 0.50.

(iv) Previously exempt property. As used in this subparagraph,

"previously exempt property" means property that was exempt from ad

valorem taxation under this act on the immediately preceding tax

day but is subject to ad valorem taxation on the current tax day

under this act. For purposes of determining the taxable value of

real property under section 27a:

(A) The value of property previously exempt under section 7u

is the taxable value the entire parcel of property would have had

if that property had not been exempt, minus the product of the

entire parcel's taxable value in the immediately preceding year and

the lesser of 1.05 or the inflation rate.

(B) The taxable value of property that is a facility as that

term is defined in section 2 of 1974 PA 198, MCL 207.552, that was

previously exempt under section 7k is the taxable value that

property would have had under this act if it had not been exempt.

property that was previously exempt under section 7jj is that

property's adjusted taxable value under the commercial rental

property specific tax act in the immediately preceding year.

(D) ~~(C)~~ The value of property previously exempt under any

other section of law is the true cash value of the previously

exempt property multiplied by 0.50.

(v) Replacement construction. As used in this subparagraph,

"replacement construction" means construction that replaced

property damaged or destroyed by accident or act of God and that

occurred after the immediately preceding tax day to the extent the

construction's true cash value does not exceed the true cash value

of property that was damaged or destroyed by accident or act of God

in the immediately preceding 3 years. For purposes of determining

the taxable value of property under section 27a, the value of the

replacement construction is the true cash value of the replacement

construction multiplied by a fraction the numerator of which is the

taxable value of the property to which the construction was added

in the immediately preceding year and the denominator of which is

the true cash value of the property to which the construction was

added in the immediately preceding year, and then multiplied by the

lesser of 1.05 or the inflation rate.

(vi) An increase in taxable value attributable to the complete

or partial remediation of environmental contamination existing on

the immediately preceding tax day. The department of environmental

quality shall determine the degree of remediation based on

information available in existing department of environmental

quality records or information made available to the department of

environmental quality if the appropriate assessing officer for a

local tax collecting unit requests that determination. The increase

in taxable value attributable to the remediation is the increase in

true cash value attributable to the remediation multiplied by a

fraction the numerator of which is the taxable value of the

property had it not been contaminated and the denominator of which

is the true cash value of the property had it not been

contaminated.

(vii) An Prior to December 31, 2005, an increase in the value

attributable to the property's occupancy rate if either a loss, as

that term is defined in this section, had been previously allowed

because of a decrease in the property's occupancy rate or if the

value of new construction was reduced because of a below-market

occupancy rate. For purposes of determining the taxable value of

property under section 27a, the value of an addition for the

increased occupancy rate is the product of the increase in the true

cash value of the property attributable to the increased occupancy

rate multiplied by a fraction the numerator of which is the taxable

value of the property in the immediately preceding year and the

denominator of which is the true cash value of the property in the

immediately preceding year, and then multiplied by the lesser of

1.05 or the inflation rate.

(viii) Public services. As used in this subparagraph, "public

services" means water service, sewer service, a primary access

road, natural gas service, electrical service, telephone service,

sidewalks, or street lighting. For purposes of determining the

taxable value of real property under section 27a, the value of

public services is the amount of increase in true cash value of the

property attributable to the available public services multiplied

by 0.50 and shall be added in the calendar year following the

calendar year when those public services are initially available.

increased value attributable to any of the following:

(i) Platting, splits, or combinations of property.

(ii) A change in the zoning of property.

(iii) For the purposes of the calculation of the millage

reduction fraction under subsection (7) only, ~~increased~~ both of

the following:

(A) Increased taxable value under section 27a(3) after a

transfer of ownership of property.

(B) Increased adjustable taxable value under the commercial

rental property specific tax act after a transfer of ownership of

commercial rental property.

(d) "Assessed valuation of property as finally equalized"

means taxable value under section 27a.

(e) "Financial officer" means the officer responsible for

preparing the budget of a unit of local government.

(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.

(g) For taxes levied before 1995, "losses" means a decrease in

value caused by the removal or destruction of real or personal

property and the value of property taxed in the immediately

preceding year that has been exempted or removed from the

assessment unit's assessment roll.

(h) For taxes levied after 1994, "losses" means, except as

provided in subdivision (i), all of the following:

(i) Property that has been destroyed or removed. For purposes

of determining the taxable value of property under section 27a, the

value of property destroyed or removed is the product of the true

cash value of that property multiplied by a fraction the numerator

of which is the taxable value of that property in the immediately

preceding year and the denominator of which is the true cash value

of that property in the immediately preceding year.

(ii) Property that was subject to ad valorem taxation under

this act in the immediately preceding year that is now exempt from

ad valorem taxation under this act. For purposes of determining the

taxable value of property under section 27a, the value of property

exempted from ad valorem taxation under this act is the amount

exempted.

(iii) An Prior to December 31, 2005, an adjustment in value,

if any, because of a decrease in the property's occupancy rate, to

the extent provided by law. For purposes of determining the taxable

value of real property under section 27a, the value of a loss for a

decrease in the property's occupancy rate is the product of the

decrease in the true cash value of the property attributable to the

decreased occupancy rate multiplied by a fraction the numerator of

which is the taxable value of the property in the immediately

preceding year and the denominator of which is the true cash value

of the property in the immediately preceding year.

(iv) A decrease in taxable value attributable to environmental

contamination existing on the immediately preceding tax day. The

department of environmental quality shall determine the degree to

which environmental contamination limits the use of property based

on information available in existing department of environmental

quality records or information made available to the department of

environmental quality if the appropriate assessing officer for a

local tax collecting unit requests that determination. The

department of environmental quality's determination of the degree

to which environmental contamination limits the use of property

shall be based on the criteria established for the categories set

forth in section 20120a(1) of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.20120a. The

decrease in taxable value attributable to the contamination is the

decrease in true cash value attributable to the contamination

multiplied by a fraction the numerator of which is the taxable

value of the property had it not been contaminated and the

denominator of which is the true cash value of the property had it

not been contaminated.

(i) For taxes levied after 1994, losses do not include

decreased value attributable to either of the following:

(i) Platting, splits, or combinations of property.

(ii) A change in the zoning of property.

(iii) For the purposes of calculating the millage reduction

fraction under subsection (7) only, decreased taxable value as a

result of the exemption of commercial rental property under section

7jj.

(j) "New construction and improvements" means additions less

losses.

(k) "Current year" means the year for which the millage

limitation is being calculated.

(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.

(2) On or before the first Monday in May of each year, the

assessing officer of each township or city shall tabulate the

tentative taxable value as approved by the local board of review

and as modified by county equalization for each classification of

property that is separately equalized for each unit of local

government and provide the tabulated tentative taxable values to

the county equalization director. The tabulation by the assessing

officer shall contain additions and losses for each classification

of property that is separately equalized for each unit of local

government or part of a unit of local government in the township or

city. If as a result of state equalization the taxable value of

property changes, the assessing officer of each township or city

shall revise the calculations required by this subsection on or

before the Friday following the fourth Monday in May. The county

equalization director shall compute these amounts and the current

and immediately preceding year's taxable values for each

classification of property that is separately equalized for each

unit of local government that levies taxes under this act within

the boundary of the county. The county equalization director shall

cooperate with equalization directors of neighboring counties, as

necessary, to make the computation for units of local government

located in more than 1 county. The county equalization director

shall calculate the millage reduction fraction for each unit of

local government in the county for the current year. The financial

officer for each taxing jurisdiction shall calculate the compounded

millage reduction fractions beginning in 1980 resulting from the

multiplication of successive millage reduction fractions and shall

recognize a local voter action to increase the compounded millage

reduction fraction to a maximum of 1 as a new beginning fraction.

Upon request of the superintendent of the intermediate school

district, the county equalization director shall transmit the

complete computations of the taxable values to the superintendent

of the intermediate school district within that county. At the

request of the presidents of community colleges, the county

equalization director shall transmit the complete computations of

the taxable values to the presidents of community colleges within

the county.

(3) On or before the first Monday in June of each year, the

county equalization director shall deliver the statement of the

computations signed by the county equalization director to the

county treasurer.

(4) On or before the second Monday in June of each year, the

treasurer of each county shall certify the immediately preceding

year's taxable values, the current year's taxable values, the

amount of additions and losses for the current year, and the

current year's millage reduction fraction for each unit of local

government that levies a property tax in the county.

(5) The financial officer of each unit of local government

shall make the computation of the tax rate using the data certified

by the county treasurer and the state tax commission. At the annual

session in October, the county board of commissioners shall not

authorize the levy of a tax unless the governing body of the taxing

jurisdiction has certified that the requested millage has been

reduced, if necessary, in compliance with section 31 of article IX

of the state constitution of 1963.

(6) The number of mills permitted to be levied in a tax year

is limited as provided in this section pursuant to section 31 of

article IX of the state constitution of 1963. A unit of local

government shall not levy a tax rate greater than the rate

determined by reducing its maximum rate or rates authorized by law

or charter by a millage reduction fraction as provided in this

section without voter approval.

(7) A millage reduction fraction shall be determined for each

year for each local unit of government. For ad valorem property

taxes that became a lien before January 1, 1983, the numerator of

the fraction shall be the total state equalized valuation for the

immediately preceding year multiplied by the inflation rate and the

denominator of the fraction shall be the total state equalized

valuation for the current year minus new construction and

improvements. For ad valorem property taxes that become a lien

after December 31, 1982 and through December 31, 1994, the

numerator of the fraction shall be the product of the difference

between the total state equalized valuation for the immediately

preceding year minus losses multiplied by the inflation rate and

the denominator of the fraction shall be the total state equalized

valuation for the current year minus additions. For ad valorem

property taxes that are levied after December 31, 1994, the

numerator of the fraction shall be the product of the difference

between the total taxable value for the immediately preceding year

minus losses multiplied by the inflation rate and the denominator

of the fraction shall be the total taxable value for the current

year minus additions. For each year after 1993, a millage reduction

fraction shall not exceed 1.

(8) The compounded millage reduction fraction for each year

after 1980 shall be calculated by multiplying the local unit's

previous year's compounded millage reduction fraction by the

current year's millage reduction fraction. Beginning with 1980 tax

levies, the compounded millage reduction fraction for the year

shall be multiplied by the maximum millage rate authorized by law

or charter for the unit of local government for the year, except as

provided by subsection (9). A compounded millage reduction fraction

shall not exceed 1.

(9) The millage reduction shall be determined separately for

authorized millage approved by the voters. The limitation on

millage authorized by the voters on or before April 30 of a year

shall be calculated beginning with the millage reduction fraction

for that year. Millage authorized by the voters after April 30

shall not be subject to a millage reduction until the year

following the voter authorization which shall be calculated

beginning with the millage reduction fraction for the year

following the authorization. The first millage reduction fraction

used in calculating the limitation on millage approved by the

voters after January 1, 1979 shall not exceed 1.

(10) A millage reduction fraction shall be applied separately

to the aggregate maximum millage rate authorized by a charter and

to each maximum millage rate authorized by state law for a specific

purpose.

(11) A unit of local government may submit to the voters for

their approval the levy in that year of a tax rate in excess of the

limit set by this section. The ballot question shall ask the voters

to approve the levy of a specific number of mills in excess of the

limit. The provisions of this section do not allow the levy of a

millage rate in excess of the maximum rate authorized by law or

charter. If the authorization to levy millage expires after 1993

and a local governmental unit is asking voters to renew the

authorization to levy the millage, the ballot question shall ask

for renewed authorization for the number of expiring mills as

reduced by the millage reduction required by this section. If the

election occurs before June 1 of a year, the millage reduction is

based on the immediately preceding year's millage reduction

applicable to that millage. If the election occurs after May 31 of

a year, the millage reduction shall be based on that year's millage

reduction applicable to that millage had it not expired.

(12) A reduction or limitation under this section shall not be

applied to taxes imposed for the payment of principal and interest

on bonds or other evidence of indebtedness or for the payment of

assessments or contract obligations in anticipation of which bonds

are issued that were authorized before December 23, 1978, as

provided by section 4 of chapter I of former 1943 PA 202, or to

taxes imposed for the payment of principal and interest on bonds or

other evidence of indebtedness or for the payment of assessments or

contract obligations in anticipation of which bonds are issued that

are approved by the voters after December 22, 1978.

(13) If it is determined subsequent to the levy of a tax that

an incorrect millage reduction fraction has been applied, the

amount of additional tax revenue or the shortage of tax revenue

shall be deducted from or added to the next regular tax levy for

that unit of local government after the determination of the

authorized rate pursuant to this section.

(14) If as a result of an appeal of county equalization or

state equalization the taxable value of a unit of local government

changes, the millage reduction fraction for the year shall be

recalculated. The financial officer shall effectuate an addition or

reduction of tax revenue in the same manner as prescribed in

subsection (13).

(15) The fractions calculated pursuant to this section shall

be rounded to 4 decimal places, except that the inflation rate

shall be computed by the state tax commission and shall be rounded

to 3 decimal places. The state tax commission shall publish the

inflation rate before March 1 of each year.

(16) Beginning with taxes levied in 1994, the millage

reduction required by section 31 of article IX of the state

constitution of 1963 shall permanently reduce the maximum rate or

rates authorized by law or charter. The reduced maximum authorized

House Bill No. 5097 (H-2) as amended August 31, 2005

rate or rates for 1994 shall equal the product of the maximum rate

or rates authorized by law or charter before application of this

section multiplied by the compounded millage reduction applicable

to that millage in 1994 pursuant to subsections (8) to (12). The

reduced maximum authorized rate or rates for 1995 and each year

after 1995 shall equal the product of the immediately preceding

year's reduced maximum authorized rate or rates multiplied by the

current year's millage reduction fraction and shall be adjusted for

millage for which authorization has expired and new authorized

millage approved by the voters pursuant to subsections (8) to (12).

[Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 93rd Legislature are

enacted into law:

(a) House Bill No. 4972.

(b) House Bill No. 4973.

(d) House Bill No. 5095.

(e) House Bill No. 5096.

(f) House Bill No. 5098.

(g) House Bill No. 5106.

(h) House Bill No. 5107.

(i) House Bill No. 5108.]