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 GENERAL PROPERTY

LEGAL CITATION:
M.C.L. 211.1 et seq.; 1893 PA 206; Sec. 3 and 6, Art. 9, state Constitution.
YEAR ADOPTED: Territorial Act (current basic act enacted in 1893).
BASIS OF TAX: Real and personal property not otherwise exempted.

Real versus Personal Property

The distinction between real and personal property is relatively straightforward. Real property is basically land and buildings. Personal property is generally movable. Personal property includes a broad array of assets, including most equipment, furniture, and fixtures used by businesses. In addition, electric transmission and distribution equipment, gas transmission and distribution equipment, and oil pipelines are all considered personal property.

Establishing the assessed value of real versus personal property involves different methodologies, although all taxable property is required to be assessed at 50% of true cash value, the state equalized valuation. Real property assessments are developed by comparing similar properties and principally use sales and cost data to establish assessment changes. Personal property assessments use acquisition costs adjusted by depreciation multipliers to reflect declining values, as an asset ages.

Property taxes are determined by multiplying the tax rate by the taxable value of a parcel of property. The taxable value of a parcel may differ from the state equalized value as a result of limits on increases placed in the Michigan Constitution by Proposal A of 1994. Taxable value may not rise by more than the lesser of the increase in the consumer price index or 5%. The methodology used to assess personal property virtually assures that a parcel's assessed and taxable values will be the same. In contrast, real property had a gap of over 22% between assessed and taxable values in 2005.
MEASURE OF TAX (BASE): Taxable value, which cannot increase in any one year by more than the lesser of 5% or inflation, excluding additions and losses. When transferred, property is reassessed in accordance with state equalized valuation which equals 50% of true cash value. The assessment for agricultural property being transferred between owners will remain capped if he new owner keeps the property in agricultural use for at least seven years from the date of transfer. If the property ceases to be agricultural property within the seven-year period, the property's assessment will be adjusted to reflect the property's state equalized valuation. The assessment for qualified forest property being transferred between owners will remain capped if the new owner keeps the property as qualified forest property for at least 10 years from the date of transfer. If the property ceases to be qualified forest property within the 10-year period, the property's assessment will be adjusted to reflect the property's state equalized valuation.

Numerous exemptions exist, notably:

  1. certain property owned by nonprofit religious, charitable, or educational organizations;
  2. government property;
  3. property subject to specific state taxes (e.g., railroad and telephone property, intangibles, motor vehicles);
  4. property subject to specific local taxes in lieu of property taxation, such as commercial forest land; mobile homes; low grade iron ore; certified industrial, commercial, technological, commercial housing facilities, obsolete property rehabilitation;
  5. certain household property, personal business property and mechanic's tools;
  6. personal property used in agricultural operations;
  7. inventory property;
  8. special manufacturing tools (dies, jigs, fixtures, molds, etc.);
  9. solar, water or wind energy conversion devices (pre-1984);
  10. property in transit located in a public warehouse, dock or port facility;
  11. property located in a renaissance zone, except for the portion of tax attributable to special assessments, taxes levied for the payment of general obligation bonds, intermediate-school-district wide enhancement mills and local school district sinking fund millages;
  12. federally-qualified health centers;
  13. biomass gasification systems, thermal depolymerization systems, and methane digesters.

Credits for property taxes paid: see Personal Income Tax.

RATE:

Varies by local unit, but certain statewide constitutional and statutory restrictions exist. The rate may not exceed 15 mills ($15 per $1,000) or 18 mills in counties with separate, voter-fixed allocations for all jurisdictions. (These limitations were reduced by the number of mills allocated to local school districts in 1993, after which local school districts may not receive allocated millage.)

The foregoing limitations may be increased up to 50 mills with voter approval. Excluded from these limitations are:

  1. Debt service taxes for all full faith and credit obligations of local units (after December 22, 1978, this exclusion applies only for obligations approved by voters);
  2. Taxes imposed by units having separate tax limitations provided by charter or general law (cities, villages, charter townships, and charter counties);
  3. Taxes imposed by certain districts or authorities having separate limits (e.g., charter water authorities, port districts, metropolitan districts, and downtown development authorities);
  4. Certain taxes imposed by municipalities for special purposes (garbage services, library services, services to the aged, and police and fire pension funding).

The state constitutional tax limitation amendment of 1978 (Headlee) requires a taxing jurisdiction to roll back maximum authorized rates if the state equalized value, excluding new construction, increases faster than the rate of inflation, and state law requires a rate rollback to offset assessment increases (which the governing body can overcome by vote). Local school district operating taxes are limited to the lesser of 18 mills or the 1993 millage rate. Homestead and qualified agricultural property is exempt from this millage. However, school districts with a 1994-95 per pupil foundation allowance of over $6,500 may reduce the exemption on homestead and qualified agricultural property by the number of mills necessary to raise that portion of their per pupil foundation allowance over $6,500 and, if necessary, also may levy additional mills on all property to generate that per pupil dollar amount. In addition, voters in intermediate school districts may approve up to 3 additional mills for operating purposes. In calendar 2005, the state average millage rate, including the 6-mill state education tax, was 39.88 mills.

ADMINISTRATION: Property assessed by city and township assessors; values equalized by county and state among six classifications of real property (residential, commercial, industrial, developmental, agricultural, and timber cutover) plus personal property. Collection by township, city, and village treasurers. Delinquent taxes on real property collected by county treasurers (except in the City of Kalamazoo).
REPORT AND PAYMENT: Township and county taxes due December 1. School taxes due December 1, unless school board elects to make all or one-half due July 1. City and village taxes due in accordance with charters.
DISPOSITION: As locally determined. The state reimburses local governments for certain lands controlled by the Michigan Department of Natural Resources, in lieu of property taxes (often called "the swamp tax"); this reimbursement is equal to $2.00 an acre.
2004-05 COLLECTIONS:
  2004 Levy     2005 Levy  
School $5,440,921,510 52.47%   $5,710,027,883 52.36%
City 2,178,716,784 21.01%   2,294,324,115 21.04
County 1,918,051,074 18.50%   2,017,064,502 18.50
Township 743,252,490 7.17%   793,380,177 7.27
Village 88,174,916 0.85%   91,050,743 0.83
Total Levy $10,369,118,778 100.00%   $10,905,847,420 100.00
2005 COLLECTIONS/UNIT: $322 million per mill
General Property Tax Law Changes

Historic Michigan State and Local Property Tax Revenues

THE NUMBERS BEHIND THE CHART

A 1933 Constitutional Amendment 15 mill limitation.
B 1979 Constitutional Amendment Headlee Amendment established requiring voter approval for any new local taxes and limited the rate of growth for the assessed values of property for each local unit of government.
C 1993 PA 145 Exempted, beginning December 1, 1993, property from millage levied by a local or intermediate school district for school operating purposes.
    PA 312 Limited school operating property taxes on non-homestead property to lesser of 18 mills or 1993 rate; exempted homestead and qualified agricultural property from millage in most instances; authorized school districts to levy up to 3 additional mills with voter approval.
    PA 331 State Education Tax established at 6 mills beginning in 1994.
D 1994 Constitutional Amendment Proposal A adopted establishing a cap on assessments and taxable value as the tax base.

Historic Michigan Property Tax Revenues by Unit of Government

THE NUMBERS BEHIND THE CHART

Historic Michigan Statewide Average Tax Rate

THE NUMBERS BEHIND THE CHART

 

 

 

 

 

 

Last Updated January 25, 2007