Property Tax Law
To qualify for the 18 mill exemption from school operating taxes (formerly the “Homestead Exemption”; now the Principal Residence Exemption), the property must be owned and occupied as a primary residence. On a property with a taxable value of $100,000, the exemption would be $1,800.
Commercial, industrial, multi-family and rental properties generally do not qualify for a Principal Residence Exemption.
Recently passed State Statutes increased the authority and responsibility of local assessors to audit Principal Residence Exemptions and determine their eligibility. For those found to be ineligible, the assessor shall deny the exemption for the current and three (3) previous years, including penalty and interest at 1.25% per month from the date the tax was originally due. Denials can be appealed to the Residential Small Claims Division of the State Tax Tribunal within 35 days of the date of the denial.
If the status of a property changes, the owner shall rescind the claim of exemption by filing the appropriate form with the local assessor, within 90 days of the change in status. The penalty for failure to file a rescind form is $5 per day, up to a maximum of $200.
In addition, the law is very clear on providing proper notice of Transfer of Ownership, within 45 days of the transaction, subject to a penalty up to a maximum of $200 and/or supplemental taxes and interest, depending on the circumstances.
Each property owner should receive an Assessment Change Notice on or before March 1, 2004, detailing the changes in assessed value, taxable value and state equalized value. The state equalized value reflects 50% of market value. Taxable value (used to calculate taxes) is based on the prior year’s taxable value (modified for additions and losses), adjusted by the Consumer Price Index or 5%, whichever is less. If ownership transferred in 2003, the 2004 taxable value will be the same as the state equalized value, as required by law.
Please review the Assessment Change Notice carefully. If you do not receive one or if we can help answer any other property assessment questions, please call your local assessor at 517-264-4830.
Principal Residence Exemption
Principal Residence Exemptions (fka Homestead Exemption), as defined by state law, is that portion of a dwelling or unit in a multiple-unit dwelling that is subject to taxation and is owned and occupied as a principle residence by the person claiming the exemption. Principal residence property also includes all of an owner’s unoccupied property classified as residential and contiguous to the dwelling that is owned and occupied as a principal residence by the owner of record. Principal residence properties are exempt from the tax levied by a local school district for school operating purposes to the extent provided under section 1211 of the revised school code, Act No. 451 of Public Acts 1976. Principal Residence Exemption forms are available from the link below or at the Assessor’s office.
For all properties sold during the prior year, the current year Taxable Value will be ‘uncapped’ and changed to the current year State Equalized Value of the property. There is no limitation on the amount of change in Taxable Value in the year after a property transfers. However, beginning with the current year, the cap goes back on the Taxable Value and increases in Taxable Value are limited to the capped value formula.
Assessed value (tentative SEV) is based on 50% of the market value as required by law. Numerous factors are taken into consideration by the assessor’s office when determining the market value of a property. Increases or decreases in market value from year to year are attributable to fluctuations in sale prices within an assessing neighborhood, as well as the amount of additions and losses to a property.
Fluctuations in market value may result in increased or decreased assessed values (tentative SEV). The sale price of an individual property does not necessarily determine its market value and property is not assessed at 50% of a sale price. After local assessment rolls are reviewed and approved (the equalization process) by County and State authorities, the tentative assessed values become the State Equalized Values (SEV) and are not subject to a ‘cap’ or limit on increases.
Taxable value is the value in which millage rates are applied against for the purpose of determining the annual tax liability. Taxable value is subject to a ‘cap’ and can increase only by the amount of the CPI (consumer price index) or 5%, whichever is lower. This results in another value called the Capped Value. Taxable value must be the lower of the SEV or Capped Value which is computed as follows:
Capped Value = ((Previous year’s Taxable Value – Losses) x Lower of 1.05 or Inflation Rate) + Additions
Additions are all increases in value caused by new construction, remodeling, and the value of property exempt from taxes or not previously included on the assessment roll.
Losses are all decreases in value caused by removal or destruction of property or the value of property previously assessable that is now exempt or removed from the assessment roll.
Inflation Rate is the increase in the Consumer Price Index (CPI) which is provided to taxing jurisdictions by the State Tax Commission. The CPI changes annually.
Reviewing and Appealing Your Property Assessment
The State of Michigan established the appeal process to assure that the property tax system would function in an equitable manner. It is the taxpayers right to take advantage of this process.
Valid Basis for an Appeal
Claiming that your property taxes are too high and continue to increase is not a valid basis for a property assessment appeal. Remember that the Taxable Value may increase each year based on the Consumer Price Index or 1.05, whichever is less, therefore, to actually see a reduction in taxes, the Assessed Value (SEV) or Capped Value must decrease to less than your current taxable value.
To have an adequate basis for appeal you need to provide evidence which indicates the Assessed Value is in excess of 50% of True Cash Value. This may require some research and fact finding on your part. The value of individual properties should be similar to comparable properties within a neighborhood that have transferred ownership.
Board of Review
March Board of Review meets the 2nd Monday in March to hear appeals, for the current year only, regarding Assessed Values, Tentative Taxable Values, Property Classifications, Poverty Exemptions, Equity and Status of Property. Meetings of the Board of Review are subject to the Open Meetings Act, which means that anyone can attend. You must appeal to the March Board of Review before you can continue any appeal process before the Michigan Tax Tribunal. Additional information regarding the Michigan Tax Tribunal may be obtained from the MTT Website.
Please contact the Assessor’s Office for specific dates and times of the local March Board of Review.
The Board of Review also meets in July and December of every year to correct clerical errors, mutual mistake of fact, poverty exemptions not heard at the March Board of Review and Homestead Exemptions. The July Board of Review meets the Tuesday following the third Monday in July. The December Board of Review meets the Tuesday following the second Monday in December. Please contact the Assessor’s office for specific dates and times.