BOMA West Michigan | Press Release

Press Release
Property Tax Alert
1/2004

In the new year, resolve to… examine your 2004 property tax assessment notices. Here is a checklist of what to look for, when to look for it, and what to do about it. Following the checklist is a short list of property tax law changes for 2004 that you should know about.

Checklist - Do by January 31, 2004

Have you received all your assessments notices for real property (land, buildings, land improvements)?
Do these notices cover every parcel of land? Remember that one location can consist of several parcels, each of which with a separate assessment notice. You may not be able to tell which land is covered merely by looking at the notice.
Do you lease any property from a landlord? Has the assessment notice gone to the landlord? If you are responsible for the property taxes, either through the lease or otherwise, have you seen a copy of the notice? Will the landlord let you tell the city or township to send the assessment notices directly to you? Does your lease address these issues correctly?
Have you received all assessment notices for property covered by a tax abatement?
Has the “taxable value” for 2004 increased from 2003? Is that increase greater than 2.3% (the applicable Proposal A inflation rate for 2004)? If so, is there an explanation, such as additional construction, renovation, purchase of additional property, etc.?
If you double the “taxable value”, could you sell that property for that amount? If not, you may be over assessed.
Do you see a separately stated “taxable value” for leasehold improvements or any of your notices? This is a change for 2004: assessment notices must separately state taxable value for leasehold improvements. Have you coordinated this assessment with your landlord, to make sure that no double assessment is occurring (assessment against both the tenant and the landlord for the same improvements)?
Does any notice state that a “transfer of ownership” occurred in 2003? If so, do you know what event caused the transfer of ownership? Do you know whether that event really constitutes a “transfer of ownership” under the somewhat complicated statute defining those events? “Transfer of ownership” disputes must be appealed within thirty-five (35) days after you receive the notice. If you wait until the typical March board of review, you will be too late!

PERSONAL PROPERTY PECULIARITIES:
CHECKLIST OF ITEMS TO COMPLETE IN FEBRUARY

Remember to file your personal property statement by February 20, the statutory deadline.
Have you received an assessment notice by March 1 for the personal property described in your statement? Does the “taxable value” on the notice correspond to the numbers reported on your statement? The assessor is not required to assess you exactly in accordance with the numbers you report.
Will you be reporting any exemption for “special tools”? New legislation awaiting the Governor’s signature expands this exemption, providing more opportunity for taxpayers to reduce expenses.

SIGNIFICANT LAW CHANGES FOR 2004

The new year 2004 brings significant property tax changes you should know about:

Separately Assessed Leasehold Improvements. Assessment notices in January of 2004 must separate “leasehold improvement” assessments and taxable values from the balance of your assessment. This is good news for taxpayers because it gives you more detailed information about the makeup of your assessment. Assessors also have the choice of whether to give your leasehold improvements a separate permanent parcel number. If the assessor chooses to do so, you will not only get a separate assessment notice for those leasehold improvements, you will also receive a separate tax bill. This is a significant opportunity for tenants and landlords in leased facilities to determine whether leasehold improvements are being fairly assessed, and whether the taxation of those improvements is adequately addressed in the lease.
Occupancy Rate Increases and Decreases. You may recall the WPW case ruling that Proposal A’s cap prevents assessors from increasing your taxable value above the inflation rate based on increased occupancy rates. Landlords should also pay more attention to decreases in value caused by lower occupancy rates. Those situations now present a more attractive opportunity for an appeal, since any future increases in occupancy rates would be capped. Carefully examine your assessment notice and evaluate this against your leased property, fair market value and taxable value.
Homestead Exemption Changes. The Homestead Exemption undergoes two significant changes for 2004 and one “flip-flop”. First change: the name of the Homestead Exemption has been changed to the “Principal Residence” Exemption. Second change: appeals from an assessor’s denial of your exemptions are now made to the Small Claims Division of the Michigan Tax Tribunal. No change was made to the appeal deadline: no later than thirty-five (35) days after you receive notice from the assessor. The flip-flop: In July 2003, the status date for the Principal Residence Exemption was changed from May 1 to December 31. In December, the legislature changed it back to May 1.
Board of Review Meeting Date Changes. Beginning in 2004, a city or township may authorize an alternative starting date for the March Board of Review. Before this change, the Board of Review met beginning on the second Monday in March. The new law allows a city or township to adopt an ordinance or a resolution authorizing the Board of Review to begin on either the Tuesday or Wednesday following that second Monday. Just be sure to check the date when your local Board of Review begins meeting this year; it may be different from last year. Remember that appearance at the Board of Review is a necessary step to preserve your right to appeal your property tax assessment.
Receive State Tax Commission Communications By Email. In April 2003, the State Tax Commission authorized any interested person (not just assessors and equalization directors) to sign up for automatic email receipt of State Tax Commission bulletins, letters and other communications. To sign up for this system, you must enter your email address at www.state.mi.us/listserv/subscribe.html. The list that you want to receive is called “TREAS-STC-PTD.” Any interested taxpayer should take advantage of this service to stay current on STC property tax communications in Michigan.
Personal Property Tax Audits. In the fall of 2003, the state appropriated funds for local governments to conduct enhanced personal property tax audits. Grant funds are available to local governmental units and many units have applied for these grants. Whether or not you have property in a local governmental unit receiving a grant, you can expect more attention by assessors to personal property tax audits. Unless taxpayers handle these audits correctly, assessors can use this technique to create significant increases in taxpayer personal property taxes.
“Special Tools” Exemption. In 2002, the Michigan Supreme Court invalidated the State Tax Commission’s rule regarding taxation of “special tools” . That rule had helped assessors by greatly expanding the legislative intent with respect to taxation of tools, jigs, dies, fixtures and other property used to make specific parts. As of December 30, 2003, legislation was passed and sent to the Governor that reverses this STC interpretation. The new law clarifies and expands the statutory exemption for special tools. If your business owns or uses a significant amount of “special tool” property, you should consult with experienced legal counsel before you file your personal property statement to consider how the new legislative amendments can assist you.
Mobile Home Property Taxation. As of this writing, several packages of bills are being considered by the Michigan legislature to subject mobile homes to property taxation like other real property. Currently, mobile homes are exempt from property taxes, being subject instead to a specific fee. If your business involves mobile home or mobile home site ownership or leasing, you should know that the law may likely undergo dramatic changes in the coming months.

STRATEGY

If you suspect one or more problems with your assessment notices, taxable values, transfer of ownership issues, or other matters described above, you will need to make a quick decision regarding whether to appeal. To do so, you must carefully consider the pros and cons of filing an appeal, including the likelihood of success and the impact on other relationships with your local city or township.

To get assistance evaluating the potential savings, risks, likelihood of success, and ways to control your property tax expenses within your overall business and real estate strategy, please contact your Miller Johnson lawyer or Jeffrey S. Ammon at (616) 831-1703 or ammonj@mjsc.com for prompt and specific advice.