SB-0823, As Passed Senate, March 27, 2014

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 823

A bill to amend 1893 PA 206, entitled

"The general property tax act,"

by amending sections 9f, 9m, and 19 (MCL 211.9f, 211.9m, and

211.19), section 9f as amended by 2012 PA 399, section 9m as

amended by 2013 PA 154, and section 19 as amended by 2013 PA 153,

and by adding section 27e.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 9f. (1) The governing body of an eligible local assessing

district or, subject to subsection (4), the board of a next

Michigan development corporation in which an eligible local

assessing district is a constituent member may adopt a resolution

to exempt from the collection of taxes under this act all new

personal property owned or leased by an eligible business located

in 1 or more eligible districts or distressed parcels designated in

the resolution or an eligible next Michigan business as provided in

this section. The clerk of the eligible local assessing district or

the recording officer of a next Michigan development corporation

shall notify in writing the assessor of the local tax collecting

unit in which the eligible district or distressed parcel is located

and the legislative body of each taxing unit that levies ad valorem

property taxes in the eligible local assessing district in which

the eligible district or distressed parcel is located. Before

acting on the resolution, the governing body of the eligible local

assessing district or a next Michigan development corporation shall

afford the assessor and a representative of the affected taxing

units an opportunity for a hearing.

(2) The exemption under this section is effective on the

December 31 immediately succeeding the adoption of the resolution

by the governing body of the eligible local assessing district or a

next Michigan development corporation and, except as otherwise

provided in subsection (8), shall continue in effect for a period

specified in the resolution. However, an exemption shall not be

granted under this section after December 31, 2012 for an eligible

business located in an eligible district identified in subsection

~~(9)(f)(~~ix) (10)(f)(ix) or in an eligible local assessing district

identified in subsection ~~(9)(h)(~~ii). (10)(h)(ii). A copy of the

resolution shall be filed with the state tax commission, the state

treasurer, and the president of the Michigan strategic fund. A

resolution is not effective unless approved as provided in

subsection (3).

(3) Not more than 60 days after receipt of a copy of the

resolution adopted by the governing body of an eligible local

assessing district under subsection (1), the state tax commission

shall determine if the new personal property subject to the

exemption is owned or leased by an eligible business and if the

eligible business is located in 1 or more eligible districts. If

the state tax commission determines that the new personal property

subject to the exemption is owned or leased by an eligible business

and that the eligible business is located in 1 or more eligible

districts, the state treasurer, with the written concurrence of the

president of the Michigan strategic fund, shall approve the

resolution adopted under subsection (1) if the state treasurer and

the president of the Michigan strategic fund determine that

exempting new personal property of the eligible business is

necessary to reduce unemployment, promote economic growth, and

increase capital investment in this state. In addition, for an

eligible business located in an eligible local assessing district

described in subsection ~~(9)(h)(~~ii), (10)(h)(ii), the resolution

adopted under subsection (1) shall be approved if the state

treasurer and the president of the Michigan strategic fund

determine that granting the exemption is a net benefit to this

state, that expansion, retention, or location of an eligible

business will not occur in this state without this exemption, and

that there is no significant negative effect on employment in other

parts of this state as a result of the exemption.

(4) A next Michigan development corporation may only adopt a

resolution under subsection (1) exempting new personal property

from the collection of taxes under this act for new personal

property located in a next Michigan development district. A next

Michigan development corporation shall not adopt a resolution under

subsection (1) exempting new personal property from the collection

of taxes under this act without a written agreement entered into

with the eligible next Michigan business subject to the exemption,

which written agreement contains a remedy provision that includes,

but is not limited to, all of the following:

(a) A requirement that the exemption under this section is

revoked if the eligible next Michigan business is determined to be

in violation of the provisions of the written agreement.

(b) A requirement that the eligible next Michigan business may

be required to repay all or part of the personal property taxes

exempted under this section if the eligible next Michigan business

is determined to be in violation of the provisions of the written

agreement.

(5) Subject to subsections (6) and (8), if an existing

eligible business sells or leases new personal property exempt

under this section to an acquiring eligible business, the exemption

granted to the existing eligible business shall continue in effect

for the period specified in the resolution adopted under subsection

(1) for the new personal property purchased or leased from the

existing eligible business by the acquiring eligible business and

for any new personal property purchased or leased by the acquiring

eligible business.

(6) After December 31, 2007, an exemption for an existing

eligible business shall continue in effect for an acquiring

eligible business under subsection (5) only if the continuation of

the exemption is approved in a resolution adopted by the governing

body of an eligible local assessing district or the board of a next

Michigan development corporation in which the eligible local

assessing district is a constituent member.

(7) Notwithstanding the amendatory act that added section

2(1)(c), all of the following shall apply to an exemption under

this section that was approved by the state tax commission on or

before April 30, 1999, regardless of the effective date of the

exemption:

(a) The exemption shall be continued for the term authorized

by the resolution adopted by the governing body of the eligible

local assessing district and approved by the state tax commission

with respect to buildings and improvements constructed on leased

real property during the term of the exemption if the value of the

real property is not assessed to the owner of the buildings and

improvements.

(b) The exemption shall not be impaired or restricted with

respect to buildings and improvements constructed on leased real

property during the term of the exemption if the value of the real

property is not assessed to the owner of the buildings and

improvements.

(8) Notwithstanding any other provision of this section to the

contrary and subject to subsection (9), if new personal property

exempt under this section on December 31, 2012 is eligible

manufacturing personal property, that eligible manufacturing

personal property shall remain exempt under this section until the

later of the following:

(a) The date that eligible manufacturing personal property

would otherwise be exempt from the collection of taxes under this

act under section 9m, 9n, or 9o.

(b) The date that eligible manufacturing personal property is

no longer exempt under the resolution adopted under subsection (1).

(9) If either House Bill No. 6026 of the 96th Legislature,

2012 PA 408, or Senate Bill No. 822 of the 97th Legislature is ~~not~~

~~approved by a majority of~~ presented to the qualified electors of

this state ~~voting on the question~~ at an election to be held on the

August regular election date in 2014 and the bill presented is not

approved by a majority of the qualified electors of this state

voting on the question, subsection (8) shall not apply after the

date of that election.

(10) As used in this section:

(a) "Acquiring eligible business" means an eligible business

that purchases or leases assets of an existing eligible business,

including the purchase or lease of new personal property exempt

under this section, and that will conduct business operations

similar to those of the existing eligible business at the location

of the existing eligible business within the eligible district.

(b) "Authorized business" means that term as defined in

section 3 of the Michigan economic growth authority act, 1995 PA

24, MCL 207.803.

as defined in section 9m.

(d) "Distressed parcel" means a parcel of real property

located in a city or village that meets all of the following

conditions:

(i) Is located in a qualified downtown revitalization district.

As used in this subparagraph, "qualified downtown revitalization

district" means an area located within 1 or more of the following:

(A) The boundaries of a downtown district as defined in

section 1 of 1975 PA 197, MCL 125.1651.

(B) The boundaries of a principal shopping district or a

business improvement district as defined in section 1 of 1961 PA

120, MCL 125.981.

that is zoned and primarily used for business as determined by the

local governmental unit.

(ii) Meets 1 of the following conditions:

(A) Has a blighted or functionally obsolete building located

on the parcel. As used in this sub-subparagraph, "blighted" and

"functionally obsolete" mean those terms as defined in section 2 of

the brownfield redevelopment financing act, 1996 PA 381, MCL

125.2652.

(B) Is a vacant parcel that had been previously occupied.

(iii) Is zoned to allow for mixed use.

(e) "Eligible business" means, effective August 7, 1998, a

business engaged primarily in manufacturing, mining, research and

development, wholesale trade, office operations, or the operation

of a facility for which the business that owns or operates the

facility is an eligible taxpayer. For purposes of a next Michigan

development corporation, eligible business means only an eligible

next Michigan business. Eligible business does not include a

casino, retail establishment, professional sports stadium, or that

portion of an eligible business used exclusively for retail sales.

Professional sports stadium does not include a sports stadium in

existence on June 6, 2000 that is not used by a professional sports

team on the date of the resolution adopted pursuant to subsection

(1). As used in this subdivision, "casino" means a casino regulated

by this state pursuant to the Michigan gaming control and revenue

act, 1996 IL 1, MCL 432.201 to 432.226, and all property associated

or affiliated with the operation of a casino, including, but not

limited to, a parking lot, hotel, motel, or retail store.

(f) "Eligible district" means 1 or more of the following:

(i) An industrial development district as that term is defined

in 1974 PA 198, MCL 207.551 to 207.572.

(ii) A renaissance zone as that term is defined in the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2681 to 125.2696.

(iii) An enterprise zone as that term is defined in the

enterprise zone act, 1985 PA 224, MCL 125.2101 to 125.2123.

(iv) A brownfield redevelopment zone as that term is designated

under the brownfield redevelopment financing act, 1996 PA 381, MCL

125.2651 to 125.2672.

(v) An empowerment zone designated under subchapter U of

chapter 1 of the internal revenue code of 1986, 26 USC 1391 to

1397F.

(vi) An authority district or a development area as those terms

are defined in the tax increment finance authority act, 1980 PA

450, MCL 125.1801 to 125.1830.

(vii) An authority district as that term is defined in the

local development financing act, 1986 PA 281, MCL 125.2151 to

125.2174.

(viii) A downtown district or a development area as those terms

are defined in 1975 PA 197, MCL 125.1651 to 125.1681.

(ix) An area that contains an eligible taxpayer.

(x) A next Michigan development district.

(g) "Eligible distressed area" means 1 of the following:

(i) That term as defined in section 11 of the state housing

development authority act of 1966, 1966 PA 346, MCL 125.1411.

(ii) An area that contains an eligible taxpayer.

(h) "Eligible local assessing district" means a city, village,

or township that contains an eligible distressed area or that is a

party to an intergovernmental agreement creating a next Michigan

development corporation, or a city, village, or township that meets

1 or more of the following conditions and is located in a county

all or a portion of which borders another state or Canada:

(i) Is currently served by not fewer than 4 of the following

existing services:

(A) Water.

(B) Sewer.

(D) Fire.

(E) Trash.

(F) Recycling.

(ii) Is party to an agreement under 1984 PA 425, MCL 124.21 to

124.30, with a city, village, or township that provides not fewer

than 4 of the following existing services:

(A) Water.

(B) Sewer.

(D) Fire.

(E) Trash.

(F) Recycling.

(i) "Eligible next Michigan business" means that term as

defined in section 3 of the Michigan economic growth authority act,

1995 PA 24, MCL 207.803.

(j) "Eligible taxpayer" means a taxpayer that meets both of

the following conditions:

(i) Is an authorized business.

(ii) Is eligible for tax credits described in section 9 of the

Michigan economic growth authority act, 1995 PA 24, MCL 207.809.

(k) "Existing eligible business" means an eligible business

identified in a resolution adopted under subsection (1) for which

an exemption has been granted under this section.

(l) "New personal property" means personal property that was

not previously subject to tax under this act or was not previously

placed in service in this state and that is placed in an eligible

district after a resolution under subsection (1) is approved. As

used in this subdivision, for exemptions approved by the state

treasurer under subsection (3) after April 30, 1999, new personal

property does not include buildings described in section 14(6) and

personal property described in section 8(h), (i), and (j).

(m) "Next Michigan development corporation" and "next Michigan

development district" mean those terms as defined under the next

Michigan development act, 2010 PA 275, MCL 125.2951 to 125.2959.

Sec. 9m. (1) Beginning December 31, 2015 and each year

thereafter, qualified new personal property for which an exemption

has been properly claimed under subsection (2) is exempt from the

collection of taxes under this act.

(2) A person shall claim the exemption under this section by

filing an affidavit with the local tax collecting unit in which the

qualified new personal property is located as provided in

subsection (3). The affidavit shall be in a form prescribed by the

state tax commission. An affidavit claiming an exemption under this

section applies to all existing and subsequently acquired qualified

new personal property. The local tax collecting unit shall transmit

the affidavits filed, or the information contained in the

affidavits filed, under this section and under section 9n to the

department of treasury in the form and in the manner prescribed by

the department of treasury.

(3) If a person claiming an exemption under this section has

not filed an affidavit under this section in any prior year with

the local tax collecting unit in which the qualified new personal

property is located, that person shall file the affidavit described

under subsection (2) with that local tax collecting unit not later

than February 10 of the first year for which the person is claiming

the exemption for qualified new personal property in the local tax

collecting unit.

(4) Except for a person claiming an exemption under this

section for personal property that was subject to section 9f or

1974 PA 198, MCL 207.551 to 207.572, in 2015, if an affidavit

claiming the exemption under this section is filed as provided in

subsection (3) by February 10, 2016, and the person claiming the

exemption under this section complied with section 19(9) in 2015,

or if the filing requirement under section 19(9) was not applicable

because the qualified new personal property was acquired in 2015,

the person claiming the exemption under this section is not

required to file a statement under section 19 for that qualified

new personal property in 2016. Except for a person claiming an

exemption under this section for personal property that was subject

to section 9f or 1974 PA 198, MCL 207.551 to 207.572, in 2015, if

an affidavit claiming the exemption under this section is filed as

provided in subsection (3), beginning in 2017, the person claiming

the exemption under this section is not required to file a

statement under section 19 for qualified new personal property

exempt under this section. For a person claiming an exemption under

this section for personal property that was subject to section 9f

or 1974 PA 198, MCL 207.551 to 207.572, in 2015, if an affidavit

claiming the exemption under this section is filed as provided in

subsection (3) and the person claiming the exemption under this

section complied with section 19(9) in 2015, the person claiming

the exemption under this section is not required to file a

statement under section 19 for that qualified new personal property

in the first year for which that person is claiming an exemption

under this section or in any subsequent year. For a person claiming

an exemption under this section for personal property that was

subject to section 9f or 1974 PA 198, MCL 207.551 to 207.572, in

2015, if an affidavit claiming the exemption under this section is

filed as provided in subsection (3), but the person claiming the

exemption under this section did not comply with section 19(9) in

2015, the person claiming the exemption under this section shall

file a statement under section 19 for that person's qualified new

personal property in the first year for which that person is

claiming an exemption under this section for qualified new personal

property, but that person is not required to file a statement under

section 19 for that qualified new personal property in any

subsequent year. If the person claiming the exemption under this

section has not filed an affidavit as required under subsection

(2), the personal property for which the person is claiming an

exemption is subject to the collection of taxes under this act and

that person shall file a statement under section 19.

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

that personal property for which an affidavit claiming an exemption

is filed under subsection (2) is not qualified new personal

property, the assessor may deny that claim for exemption by

notifying the person that filed the affidavit in writing of the

reason for the denial and advising the person that the denial may

be appealed to the board of review under section 30 or 53b. The

assessor may deny a claim for exemption under this subsection for

the current year only. If the assessor denies a claim for

exemption, the assessor shall remove the exemption of that personal

property and 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.

(6) A person claiming an exemption for qualified new personal

property exempt under this section shall maintain books and records

and shall provide access to those books and records as provided in

section 22.

(7) If a person fraudulently claims an exemption for personal

property under this section, that person is subject to the

penalties provided for in section 21(2).

(8) As used in this section:

(a) "Affiliated person" means a sole proprietorship,

partnership, limited liability company, corporation, association,

flow-through entity, member of a unitary business group, or other

entity related to a person claiming an exemption under this

section.

(b) "Direct integrated support" means any of the following:

(i) Research and development related to goods produced in

industrial processing and conducted in furtherance of that

industrial processing.

(ii) Testing and quality control functions related to goods

produced in industrial processing and conducted in furtherance of

that industrial processing.

(iii) Engineering related to goods produced in industrial

processing and conducted in furtherance of that industrial

processing.

(iv) Receiving or storing equipment, materials, supplies,

parts, or components for industrial processing, or scrap materials

or waste resulting from industrial processing, at the industrial

processing site or at another site owned or leased by the owner or

lessee of the industrial processing site.

(v) Storing of finished goods inventory if the inventory was

produced by a business engaged primarily in industrial processing

and if the inventory is stored either at the site where it was

produced or at another site owned or leased by the business that

produced the inventory.

(vi) Sorting, distributing, or sequencing functions that

optimize transportation and just-in-time inventory management and

material handling for inputs to industrial processing.

personal property located on occupied real property if that

personal property is predominantly used in industrial processing or

direct integrated support. Personal property located on occupied

real property is predominantly used in industrial processing or

direct integrated support if the result of the following

calculation is more than 50%:

(i) Multiply the original cost of all personal property located

on that occupied real property by its percentage of use in

industrial processing or in direct integrated support. Personal

property is used in industrial processing if it is not used to

generate, transmit, or distribute electricity for sale, if it is

not utility personal property as described in section 34c(3)(e),

and if its purchase or use by the person claiming the exemption

would be eligible for exemption under section 4t of the general

sales tax act, 1933 PA 167, MCL 205.54t, or section 4o of the use

tax act, 1937 PA 94, MCL 205.94o. For an item of personal property

that is used in industrial processing, its percentage of use in

industrial processing shall equal the percentage of the exemption

the property would be eligible for under section 4t of the general

sales tax act, 1933 PA 167, MCL 205.54t, or section 4o of the use

tax act, 1937 PA 94, MCL 205.94o. Utility personal property as

described in section 34c(3)(e) is not used in direct integrated

support.

(ii) Divide the result of the calculation under subparagraph (i)

by the total original cost of all personal property located on that

occupied real property.

(d) "Industrial processing" means that term as defined in

section 4t of the general sales tax act, 1933 PA 167, MCL 205.54t,

or section 4o of the use tax act, 1937 PA 94, MCL 205.94o.

Industrial processing does not include the generation,

transmission, or distribution of electricity for sale.

(e) "New personal property" means property that was initially

placed in service in this state or outside of this state after

December 31, 2012.

(f) "Occupied real property" means all of the following:

(i) A parcel of real property that is entirely owned, leased,

or otherwise occupied by a person claiming an exemption under this

section.

(ii) Contiguous parcels of real property that are entirely

owned, leased, or otherwise occupied by a person claiming an

exemption under this section and that host a single, integrated

business operation engaged primarily in industrial processing,

direct integrated support, or both. A business operation is not

engaged primarily in industrial processing, direct integrated

support, or both if it engages in significant business activities

that are not directly related to industrial processing or direct

integrated support.

(iii) The portion of a parcel of real property that is owned,

leased, or otherwise occupied by a person claiming the exemption or

by an affiliated person.

(g) "Original cost" means the fair market value of eligible

manufacturing personal property at the time of acquisition by the

current owner. There is a rebuttable presumption that the

acquisition price paid by the current owner for eligible

manufacturing personal property reflects the fair market value of

that eligible manufacturing personal property. The department may

provide guidelines for circumstances in which the actual

acquisition cost of eligible manufacturing personal property is not

determinative of the fair market value of that eligible

manufacturing personal property and for the basis of determining

fair market value of eligible manufacturing personal property in

those circumstances.

(h) ~~(g)~~ "Qualified new personal property" means property that

meets all of the following conditions:

(i) Is eligible manufacturing personal property.

(ii) Is new personal property.

Sec. 19. (1) A supervisor or other assessing officer, as soon

as possible after entering upon the duties of his or her office or

as required under the provisions of any charter that makes special

provisions for the assessment of property, shall ascertain the

taxable property in his or her assessing district, the person to

whom it should be assessed, and that person's residence.

(2) Except as otherwise provided in section 9m, 9n, or 9o, the

supervisor or other assessing officer shall require any person whom

he or she believes has personal property in their possession to

make a statement of all the personal property of that person

whether owned by that person or held for the use of another to be

completed and delivered to the supervisor or assessor on or before

February 20 of each year. A notice the supervisor or other

assessing officer provides regarding that statement shall also do

all of the following:

(a) Notify the person to whom such notice is given of the

exemptions available under sections 9m, 9n, and 9o.

(b) Explain where information about those exemptions, the

forms and requirements for claiming those exemptions, and the forms

for the statement otherwise required under this section are

available.

year.

(3) If a supervisor, an assessing officer, a county tax or

equalization department provided for in section 34, or the state

tax commission considers it necessary to require from any person a

statement of real property assessable to that person, it shall

notify the person, and that person shall submit the statement.

(4) A local tax collecting unit may provide for the electronic

filing of the statement required under subsection (2) or (3).

(5) A statement under subsection (2) or (3) shall be in a form

prescribed by the state tax commission. If a local tax collecting

unit has provided for electronic filing of the statement under

subsection (4), the filing format shall be prescribed by the state

tax commission. The state tax commission shall not prescribe more

than 1 format for electronically filing a statement under

subsection (2) or more than 1 format for electronically filing a

statement under subsection (3).

(6) A statement under subsection (2) or (3) shall be signed

manually, by facsimile, or electronically. A supervisor or assessor

shall not require that a statement required under subsection (2) or

(3) be filed before February 20 of each year.

(7) A supervisor or assessor shall not accept a statement

under subsection (2) or (3) as final or sufficient if that

statement is not in the proper form or does not contain a manual,

facsimile, or electronic signature. A supervisor or assessor shall

preserve a statement that is not in the proper form or is not

signed as in other cases, and that statement may be used to make

the assessment and as evidence in any proceeding regarding the

assessment of the person furnishing that statement.

(8) An electronic or facsimile signature shall be accepted by

a local tax collecting unit using a procedure prescribed by the

state tax commission.

(9) A statement under subsection (2) for 2015 shall include a

schedule of when any personal property included in the statement

will become eligible for exemption under section 9m or 9n. For 2015

statements under subsection (2) that identify property eligible for

exemption under section 9m or 9n, a supervisor or assessor shall

provide to the department of treasury by June 1, 2015 a copy of the

statement, or the information on the statement, as prescribed by

the department of treasury. The department of treasury's use of a

statement, or information on a statement, provided under this

subsection is subject to section 28(1)(f) of 1941 PA 122, MCL

205.28.

Sec. 27e. (1) Not later than June 5, 2014, the assessor for

each city and township shall report to the county equalization

director all of the following:

(a) The 2013 taxable value of commercial personal property and

industrial personal property for each municipality in the city or

township.

(b) The 2014 taxable value of commercial personal property and

industrial personal property for each municipality in the city or

township.

the city or township.

(2) Not later than June 20, 2014, the equalization director

for each county shall report to the department the information

described in subsection (1) for each municipality in the county.

For each municipality levying a millage in more than 1 county, the

county equalization director responsible for compiling the

municipality's taxable value under section 34d shall compile the

municipality's information described in subsection (1).

(3) Not later than August 15, 2014, each municipality shall

report to the department the millage rate levied or to be levied

that year for a millage described in the definition of debt loss or

school debt loss. For 2014, the rate of that millage shall be

calculated using the sum of the municipality's taxable value and

the municipality's small taxpayer exemption loss. For 2014, the

department shall calculate each municipality's debt loss or school

debt loss by multiplying the municipality's millage rate reported

under this subsection by the municipality's small taxpayer

exemption loss.

(4) The assessor for each city and township shall transmit to

the department as prescribed by the department information from the

affidavits filed under sections 9m and 9n.

(5) As used in this section, "commercial personal property",

"debt loss", "industrial personal property", "municipality",

"school debt loss", "small taxpayer exemption loss", and "taxable

value" mean those terms as defined in the local community

stabilization authority act.

Enacting section 1. The exclusion of generation, transmission,

or distribution of electricity for sale from the definition of

"industrial processing" under this amendatory act is not intended

to affect any other provision of Michigan law or impact the

decision in Detroit Edison Company v Department of Treasury, court

of appeals docket no. 309732.