HB-5525, As Passed House, April 20, 2016

SUBSTITUTE FOR

HOUSE BILL NO. 5525

A bill to amend 2014 PA 92, entitled

"State essential services assessment act,"

by amending sections 3, 7, 9, and 11 (MCL 211.1053, 211.1057,

211.1059, and 211.1061), sections 3 and 7 as amended by 2015 PA

120.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3. As used in this act:

(a) "Acquisition cost" means the fair market value of personal

property at the time of acquisition by the first owner, including

the cost of freight, sales tax, and installation, and other

capitalized costs, except capitalized interest. There is a

rebuttable presumption that the acquisition price paid by the first

owner for personal property, and any costs of freight, sales tax,

and installation, and other capitalized costs, except capitalized

interest, reflect the acquisition cost. For property described in

subdivision (e)(i) that ~~would otherwise be~~ prior to the current tax

year was exempt under section 7k of the general property tax act,

1893 PA 206, MCL 211.7k, under an industrial facilities exemption

certificate issued under 1974 PA 198, MCL 207.551 to 207.572, and

effective before January 1, 2013, ~~and~~ which has been extended for

property not yet exempt under section 9m or 9n of the general

property tax act, 1893 PA 206, MCL 211.9m and 211.9n, for property

described in subdivision (e)(iii) that is exempt under an

industrial facilities exemption certificate issued under 1974 PA

198, MCL 207.551 to 207.572, and beginning in 2017 for construction

in progress, and effective before January 1, 2013, acquisition cost

means 1/2 of the fair market value of that personal property at the

time of acquisition by the first owner, including the cost of

freight, sales tax, and installation, and other capitalized costs,

except capitalized interest. The acquisition cost for personal

property exempt under the Michigan renaissance zone act, 1996 PA

376, MCL 125.2681 to 125.2696, is $0.00 except for the 3 years

immediately preceding the expiration of the exemption of that

personal property under the Michigan renaissance zone act, 1996 PA

376, MCL 125.2681 to 125.2696, during which period of time the

acquisition cost for that personal property means the fair market

value of that personal property at the time of acquisition by the

first owner, including the cost of freight, sales tax, and

installation, and other capitalized costs, except capitalized

interest, multiplied by the percentage reduction in the exemption

as provided in section 9(3) of the Michigan renaissance zone act,

1996 PA 376, MCL 125.2689. The ~~state tax commission~~ department may

provide guidelines for circumstances in which the actual

acquisition price is not determinative of acquisition cost and the

basis of determining acquisition cost in those circumstances. When

the acquisition cost, year of acquisition by the first owner, or

both are unknown, the ~~state tax commission~~ department may provide

guidelines for estimating the acquisition cost and year of

acquisition by the first owner. The state tax commission may issue

guidelines that allow for the reduction of acquisition cost for

property that is idle, is obsolete or has material obsolescence, or

is surplus.

(b) "Assessment" means the state essential services assessment

levied under section 5.

essential services assessment levied under section 5 is due.

(d) "Eligible claimant" means a person that claims an

exemption for eligible personal property.

(e) "Eligible personal property" means all of the following:

(i) Personal property exempt under section 9m or 9n of the

general property tax act, 1893 PA 206, MCL 211.9m and 211.9n.

(ii) Personal property that is eligible manufacturing personal

property as defined in section 9m of the general property tax act,

1893 PA 206, MCL 211.9m, and that is exempt under section 9f of the

general property tax act, 1893 PA 206, MCL 211.9f, which exemption

was approved under section 9f of the general property tax act, 1893

PA 206, MCL 211.9f, after 2013, unless both of the following

conditions are satisfied:

(A) The application for the exemption was filed with the

eligible local assessing district or Next Michigan development

corporation before August 5, 2014.

(B) The resolution approving the exemption states that the

project is expected to have total new personal property of over

$25,000,000.00 within 5 years of the adoption of the resolution by

the eligible local assessing district or Next Michigan development

corporation.

(iii) Personal property subject to an extended industrial

facilities exemption certificate under section 11a of 1974 PA 198,

MCL 207.561a.

(iv) Personal property subject to an extended exemption under

section 9f(8)(a) of the general property tax act, 1893 PA 206, MCL

211.9f.

(f) "Fund board" means the board of directors of the Michigan

strategic fund created under the Michigan strategic fund act, 1984

PA 270, MCL 125.2001 to 125.2094.

(g) "Michigan economic development corporation" means the

Michigan economic development corporation, the public body

corporate created under section 28 of article VII of the state

constitution of 1963 and the urban cooperation act of 1967, 1967

(Ex Sess) PA 7, MCL 124.501 to 124.512, by a contractual interlocal

agreement effective April 5, 1999, and subsequently amended,

between local participating economic development corporations

formed under the economic development corporations act, 1974 PA

338, MCL 125.1601 to 125.1636, and the Michigan strategic fund.

(h) "Michigan strategic fund" means the Michigan strategic

fund created under the Michigan strategic fund act, 1984 PA 270,

MCL 125.2001 to 125.2094.

(i) "Next Michigan development corporation" means that term as

defined under the Next Michigan development act, 2010 PA 275, MCL

125.2951 to 125.2959.

(j) "Acquired by" means, for property that is construction in

progress only, the year the property is first reported on the

combined document filed pursuant to section 7(8) in the report of

the fair market value and year of acquisition by the first owner of

qualified new personal property or qualified previously existing

personal property.

(k) "Department" means the department of treasury.

Sec. 7. (1) The department ~~of treasury~~ shall collect and

administer the assessment as provided in this section.

(2) Not later than May 1 in each assessment year, the

department ~~of treasury~~ shall make available in electronic form to

each eligible claimant a statement for calculation of the

assessment as provided in section 5. That statement shall be

developed from the information submitted by the eligible claimant

on the combined document as required by sections 9m and 9n of the

general property tax act, 1893 PA 206, MCL 211.9m and 211.9n.

(3) Not later than August 15 in each assessment year, each

eligible claimant shall ~~submit~~ electronically ~~to the department of~~

~~treasury~~ revise as necessary and certify the completed statement ,

~~in a form and manner prescribed by the department of treasury,~~ and

make full payment of the assessment levied under section 5 for that

assessment year as calculated in section 5(2). The department of

~~treasury~~ may waive or delay the electronic ~~filing~~ certification

requirement at its discretion. The department ~~of treasury~~ may

accept a timely filed statement that calculates the tax under this

act that is transmitted and certified using reporting software

approved by the department, ~~of treasury,~~ subject to audit under

subsection (6). A statement ~~submitted~~ certified by an eligible

claimant shall include all of the eligible claimant's eligible

personal property located in this state subject to the assessment

levied under section 5. The ~~completed~~ statement required under this

subsection shall not be subject to disclosure under the freedom of

information act, 1976 PA 442, MCL 15.231 to 15.246.

(4) If an eligible claimant does not ~~submit~~ certify the

statement and full payment of the assessment levied under section 5

by August 15, the department ~~of treasury~~ shall issue a notice to

the eligible claimant not later than September 15. The notice shall

include a statement explaining the consequences of nonpayment as

set forth in subsection (5) and instructing the eligible claimant

of its potential responsibility under subsection (5)(e). An

eligible claimant shall submit payment in full by October 15 of the

assessment year along with a penalty of 1% per week on the unpaid

balance for each week payment is not made in full up to a maximum

of 5% of the total amount due and unpaid. For the eligible

claimant's first assessment year, the penalty shall be waived if

the eligible claimant ~~submits~~ certifies the statement and makes

full payment of the assessment levied under section 5 by September

15. An eligible claimant may amend a ~~filed~~ certified statement for

the current year up to September 15. Payments made due to an

amended statement are subject to the penalties as described in this

subsection. The department ~~of treasury~~ shall issue refunds for

overpayments due to an amended statement. All refunds due to

overpayment shall be remitted without interest except as provided

by section 37 of the tax tribunal act, 1973 PA 186, MCL 205.737.

(5) For any assessment year in which an eligible claimant does

not submit payment in full and any penalty due under subsection (4)

or (6) by October 15, or if the ~~state tax commission~~ department

discovers that the property is not eligible under section 9m or 9n

of the general property tax act, 1893 PA 206, MCL 211.9m and

211.9n, all of the following shall apply:

(a) The ~~state tax commission~~ department shall ~~issue an order~~

to rescind no later than the first Monday in December for the

assessment year any exemption described in section 9m or 9n of the

general property tax act, 1893 PA 206, MCL 211.9m and 211.9n,

granted for any parcel for which payment in full and any penalty

due have not been received or for which the ~~state tax commission~~

department discovers that the property is not eligible under

section 9m or 9n of the general property tax act, 1893 PA 206, MCL

211.9m and 211.9n.

(b) ~~The~~ Upon request of the department, the state tax

commission shall issue an order to rescind no later than the first

Monday in December for the assessment year any exemption under

section 9f of the general property tax act, 1893 PA 206, MCL

211.9f, which exemption was approved under section 9f of the

general property tax act, 1893 PA 206, MCL 211.9f, after 2013 for

any parcel for which payment in full and any penalty due have not

been received or for which the state tax commission discovers that

the property is not eligible ~~under section 9m or 9n of the general~~

~~property tax act, 1893 PA 206, MCL 211.9m and 211.9n.~~personal

property.

commission shall issue an order to rescind no later than the first

Monday in December for the assessment year any exemption for

eligible personal property subject to an extended industrial

facilities exemption certificate under section 11a of 1974 PA 198,

MCL 207.561a, for any parcel for which payment in full and any

penalty due have not been received or for which the ~~state tax~~

~~commission~~ department discovers that the property is not eligible

~~under section 9m or 9n of the general property tax act, 1893 PA~~

~~206, MCL 211.9m and 211.9n.~~personal property.

(d) ~~The~~ Upon request of the department, the state tax

commission shall issue an order to rescind no later than the first

Monday in December for the assessment year any extended exemption

for eligible personal property under section 9f(8)(a) of the

general property tax act, 1893 PA 206, MCL 211.9f, for any parcel

for which payment in full and any penalty due have not been

received or for which the ~~state tax commission~~ department discovers

that the property is not eligible ~~under section 9m or 9n of the~~

~~general property tax act, 1893 PA 206, MCL 211.9m and~~

~~211.9n.~~personal property.

(e) The eligible claimant shall file with the assessor of the

township or city within 30 days of the date of the ~~state tax~~

~~commission order to rescind~~ rescission issued under subdivisions

(a) to (d) a statement under section 19 of the general property tax

act, 1893 PA 206, MCL 211.19, for all property for which the

exemption has been rescinded under this section.

(f) Within 60 days of ~~an order of~~ a rescission ~~by the state~~

~~tax commission~~ under subdivisions (a) to (d), the treasurer of the

local tax collecting unit shall issue amended tax bills for any

taxes, including penalty and interest, that were not billed under

the general property tax act, 1893 PA 206, MCL 211.1 to 211.155, or

under 1974 PA 198, MCL 207.551 to 207.572, and that are owed as a

result of the ~~order of~~ rescission.

(6) An eligible claimant shall provide access to the books and

records, for audit purposes, relating to the location and

description; the date of purchase, lease, or acquisition; and the

purchase price, lease amount, or value of all personal property

owned by, leased by, or in the possession of that person or a

related entity if requested by the assessor of the township or

city, county equalization department, or department ~~of treasury~~ for

the year in which the statement is filed and the immediately

preceding 3 years. The department ~~of treasury~~ shall develop and

implement an audit program which includes, but is not limited to,

the audit of statements submitted under subsection (3) and amended

statements submitted under subsection (4) for the current calendar

year and the 3 calendar years immediately preceding the

commencement of an audit. An assessment as a result of an audit

shall be paid in full within 35 days of issuance and shall include

penalties and interest as described in section 154(3) of the

general property tax act, 1893 PA 206, MCL 211.154. Refunds as a

result of an audit under this subsection shall be without interest.

The exemption for personal property for which an assessment has

been issued as a result of an audit under this subsection shall be

subject to the rescission provisions of subsection (5) for the

years of the assessment if full payment is not timely made as

required by this subsection.

(7) An eligible claimant may appeal an assessment levied under

section 5 or a penalty or rescission under this section to the

~~state tax commission~~ Michigan tax tribunal by filing a petition not

later than December 31 in that tax year. An eligible claimant may

appeal an assessment issued, including penalties, interest, or

rescission, as a result of an audit conducted under subsection (6)

by filing a petition with the ~~state tax commission~~ Michigan tax

tribunal within 30 35 days of the date of that assessment's

issuance. The department ~~of treasury~~ may appeal to the ~~state tax~~

~~commission~~ Michigan tax tribunal by filing a petition for the

current calendar year and 3 immediately preceding calendar years.

~~The state tax commission shall decide any appeal based on the~~

~~written petition and the written recommendation of state tax~~

~~commission staff and any other relevant information. The department~~

~~of treasury or any eligible claimant may appeal the determination~~

~~of the state tax commission to the Michigan tax tribunal within 35~~

~~days of the date of the determination.~~

(8) ~~For any year before 2023, the~~ The department ~~of treasury~~

may require eligible claimants to annually file by February 20 of

~~the~~ each year a combined document that includes the ~~affidavit~~ form

to claim the exemption under sections 9f(9), 9m, and 9n of the

general property tax act, 1893 PA 206, MCL 211.9f, 211.9m, and

211.9n, ~~the affidavit~~ and under section 11a of 1974 PA 198, MCL

207.561a, a report of the fair market value and year of acquisition

by the first owner of eligible personal property, and for any year

before 2023, a statement under section 19 of the general property

tax act, 1893 PA 206, MCL 211.19. ~~, and a report of the acquisition~~

~~cost and year of acquisition by the first owner of eligible~~

~~personal property.~~ All of the following apply to the filing of a

combined document under this subsection:

(a) The combined document shall be in a form prescribed by the

~~state tax commission.~~ department.

(b) Leasing companies are not eligible to receive the

exemption under this section and may not use the combined document

prescribed in this section. With respect to personal property that

is the subject of a lease agreement, regardless of whether the

agreement constitutes a lease for financial or tax purposes, all of

the following apply:

(i) If the personal property is eligible manufacturing

personal property, the lessee and lessor may elect that the lessee

report the leased personal property on the combined document.

(ii) An election made by the lessor and the lessee under this

subdivision shall be made in a form and manner approved by the

department.

(iii) Absent an election, the personal property shall be

reported by the lessor on the personal property statement unless

the exemption for eligible manufacturing personal property is

claimed by the lessee on the combined document.

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

eligible claimant shall report the fair market value of that

personal property at the time of acquisition by the first owner,

including the cost of freight, sales tax, installation, and other

capitalized costs, except capitalized interest.

(d) The combined document shall be filed with the assessor of

the township or city in which the eligible personal property is

located.

(e) The assessor shall transmit the information contained in

the combined document filed under this subsection, and other parcel

information required by the department, ~~of treasury,~~ to the

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

the department ~~of treasury~~ no later than April 1.

Sec. 9. (1) The fund board may adopt a resolution to exempt

from the assessment under this act eligible personal property

designated in the resolution as provided in this section and

described in subsection (3)(c) that is owned by, leased to, or in

the possession of an eligible claimant. In the resolution, the fund

board may determine that the eligible personal property designated

in the resolution shall be subject to the alternative state

essential services assessment under the alternative state essential

services assessment act. The resolution shall not be approved if

the state treasurer, or his or her designee to the fund board,

votes against the resolution.

(2) An exemption under this section is effective in the

assessment year immediately succeeding the year in which the fund

board adopts the resolution under subsection (1) and shall continue

in effect for a period specified in the resolution. A copy of the

resolution shall be filed with the ~~state tax commission.~~department.

(3) The fund board shall provide for a detailed application,

approval, and compliance process published and available on the

fund's website. The detailed application, approval, and compliance

process shall, at a minimum, contain the following:

(a) An eligible claimant, or a next Michigan development

corporation on behalf of an eligible claimant, may apply for an

exemption to the assessment in a form and manner determined by the

fund board.

(b) After receipt of an application, the fund may enter into

an agreement with an eligible claimant if the eligible claimant

agrees to make certain investments of eligible personal property in

this state.

demonstrate that a minimum of $25,000,000.00 will be invested in

additional eligible personal property in this state during the

duration of the written agreement.

(d) The written agreement shall provide in a clear and concise

manner all of the conditions imposed, including specific time

frames, on the eligible claimant, to receive the exemption to the

assessment under this section.

(e) The written agreement shall provide that the exemption

under this section is revoked if the eligible claimant fails to

comply with the provisions of the written agreement.

(f) The written agreement shall provide for a repayment

provision on the exemption to the assessment if the eligible

claimant fails to comply with the provisions of the written

agreement.

(g) The written agreement shall provide for an audit provision

that requires the fund to verify that the specific time frames for

the investment have been met.

(4) The fund board shall consider the following criteria to

the extent reasonably applicable to the type of investment proposed

when approving an exemption to the assessment:

(a) Out-of-state competition.

(b) Net-positive return to this state.

(d) Business diversification.

(e) Reuse of existing facilities.

(f) Near-term job creation or significant job retention as a

result of the investment made in eligible personal property.

(g) Strong links to Michigan suppliers.

(h) Whether the project is in a local unit of government that

contains an eligible distressed area as that term is defined in

section 11 of the state housing development authority act of 1966,

1966 PA 346, MCL 125.1411.

(5) The fund board, or the Michigan economic development

corporation, may charge actual and reasonable fees for costs

associated with administering the activities authorized under this

section.

Sec. 11. (1) Proceeds of the assessment collected under