Property Classification Appeals Slow Down - Legislative Solution?
The following update on the status of property classification appeals is provided by Mark Hilpert, former State Tax Comission member and currently with Honnigman in Lansing. However, earlier this week, the incoming state Treasurer and current Speaker of the House, Andy Dillion said that a legislative solution may be worked out in the next few months.
As part of the enactment of the Michigan Business Tax (MBT) package in 2007, special tax benefits were provided for industrial and commercial personal property. Generally, the property tax rate for commercial personal property was reduced by 12 mills and the rate on industrial personal property was reduced by 24 mills. In addition, the remaining taxes paid on industrial personal property are eligible for a 35% refundable MBT credit. Due to the tax and revenue implications, the classification of business property has now become very important.
Local assessors establish the classification of the parcels of real and personal property each year, and taxpayers can appeal that classification to the State Tax Commission (STC). The Michigan Department of Treasury (the Department) may also appeal a classification to the Michigan Tax Tribunal before December 31st of the year under appeal. At the end of 2009 the Department had filed over 10,000 appeals and had announced it was planning to file another 10,000 cases for 2010. Most of these cases involve real estate parcels classed as industrial that the Department claims should have been classified as commercial.
In the last several weeks, the Tax Tribunal has begun hearing the first of these 2009 cases. After a relatively few cases had been heard the Department appears to be having difficulty satisfying their burden of proof. Possibly as a result of the findings in these early cases, the STC and the Department have decided to withdraw all their pending appeals that are currently before the Tax Tribunal. The STC has instead indicated that it will order classification changes [from industrial to commercial] under its authority to "seize" local assessment rolls.
To date, the Attorney General's office has only requested that the cases that have been scheduled for a hearing be adjourned and it is still possible that they will not move to withdraw the thousands of remaining cases. However, if motions to withdraw are filed, taxpayers will have the right to respond and oppose the motion, if they so choose. Depending on the facts of the particular case, it may be preferable for your client to move forward and get a decision from the Tax Tribunal, rather than to try to appeal an order from the STC that resulted from their seizure of the local assessment roll.