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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667




Monday, October 18 2010

Levy of a Local School Debt Service Property Tax Was Improper

In LaFarge Midwest, Inc. v. City of Detroit, Michigan Court of Appeals, No. 289292, October 12, 2010 the levy of a local Michigan school debt service property tax on three parcels of land located within a renaissance zone was improper because the tax was not levied for the payment of obligations approved by the electors of a local governmental unit as provided by the statutory exception that allowed property located in a renaissance zone to be taxed.  The 13 mill tax was consistent with the school district electors' approval of money in school building and site bonds.  The taxpayer filed a petition with the Michigan Tax Tribunal challenging the tax on the ground that the property was subject to the renaissance zone tax provisions and exempt from the tax.

In this case, the dispute between the parties was centered on the interpretation of the applicable statutory exception to the general exemption. The city argued that the exception applied to the taxpayer's property because the taxes were "levied for the payment of principal and interest of obligations approved by the electors." The taxes were not levied for "obligations pledging the unlimited taxing power of the local governmental unit."  The city argued that the statute detailed two separate debt obligations that were excepted from the exemption and that the modifier phrase "of the local governmental unit" applied only to the second type of debt obligation for which taxes may be levied, in accord with the last antecedent rule, and not to the first type of debt obligation that was at issue in this case.  The taxpayer argued to the contrary that the phrase "of the local governmental unit" applied and modified both types of debt obligations consistent with the plain language and purpose of the renaissance zone tax provisions.  Therefore, according to the taxpayer, because the applicable statute itself required a different interpretation than would be accorded by the last antecedent rule, that rule did not apply.

After applying the conventional means of statutory interpretation, the Michigan Court of Appeals concluded that the phrase "of the local governmental unit" clearly applied to both the "obligations approved by the electors" and the "obligations pledging the unlimited taxing power." There was no ambiguity. Therefore, the Tax Tribunal correctly held that the definition of "local governmental unit" did not include school districts, and the city was properly ordered to remove the school debt service tax from the taxes charged to the taxpayer's property and refund any overpaid taxes.

Posted by: AT 10:11 am   |  Permalink   |  0 Comments  |  Email

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