Personal Property Tax

What is the Small Parcel Personal Property Tax Exemption?
Use Michigan Department of Treasury Form 5076

As of the 2014 tax year, a small parcel personal property tax exemption has been available with regard to personal property where the owner of such property annually qualifies for and claims the exemption.

In order to be eligible personal property, the combined true cash value of all industrial and commercial personal property owned by, leased by, or in the possession of the owner or related entity claiming the exemption must be less than $80,000 in the local tax collecting unit.

The exemption is intended for small businesses with little personal property.

INDUSTRIAL PERSONAL PROPERTY IS DEFINED AS:
All machinery, equipment, furniture, fixtures and dies on industrial parcels, and inventories not exempt by law.
Personal property of mining companies

COMMERCIAL PERSONAL PROPERTY IS DEFINED AS:
All equipment, furniture and fixtures on commercial parcels, and inventories not exempt by law
All outdoor advertising signs and billboards
Well drilling rigs and other equipment attached to transporting vehicles but not designed for operation while the vehicle is moving on the highway
Unlicensed commercial vehicles or commercial vehicles licensed as special mobile equipment or by temporary permits

HOW IS THE SMALL PARCEL EXEMPTION CLAIMED?

The owner of the eligible personal property must ANNUALLY file an affidavit with the assessor by no later that February 10th.  If the affidavit is mailed, it must be postmarked by February 10th to be considered filed.

A BUSINESS THAT HAD RECEIVED THE SMALL PARCEL EXEMPTION FOR THE PREVIOUS YEAR DID NOT FILE THE CURRENT AFFIDAVIT UNTIL FEBRUARY 27.  CAN THE BUSINESS STILL RECEIVE A CURRENT SMALL PARCEL EXEMPTION?

No.  The business would be ineligible for the small parcel personal property tax exemption for the current tax year. 

The Feburary 10th deadline is a hard deadline***and there are NO exemptions.  Not even the March, July, or December boards of review have authority to grant the exemption if the business fails to file by February 10th.

The new law requires that by JANUARY 10 of each year, the assessor or supervisor must send personal property statements to persons they believe have personal property and must provide notice therein regarding the availability of the personal property tax exemption. 

A BUSINESS OWNER TIMELY FILED AN AFFIDAVIT CLAIMING THE SMALL PARCEL EXEMPTION, BUT WAS DENIED BY THE ASSESSOR.  DOES THE BUSINESS OWNER HAVE ANY RECOURSE?

Unlike the failure to file hard deadline, there is an appeal process for those that timely file.  The owner can appeal a denial of the exemption to the March board of review or a qualified error to the July or December boards of review.  Further, a board of review decision may be appealed to the Small Claims Division of the Michigan Tax Tribunal.

A BUSINESS OWNER HAS TWO LOCATIONS IN THE TOWNSHIP EACH LOCATION HAS $40,000 OF PERSONAL PROPERTY.  CAN THE BUSINESS OWNER QUALIFY FOR THE SMALL PARCEL EXEMPTION AT EACH LOCATION?

No.  All of the owner's personal property must be added together for all locations in the tax collecting unit.  Since the business owner's personal property when added together is not less that $80,000 the property is not eligible for the exemption.

A COMMERCIAL BUSINESS IN THE TOWNSHIP OWNS $40,000 IN PERSONAL PROPERTY--SUCH AS OFFICE EQUIPMENT, DESKS, CHAIRS AND COMPUTERS.  THE BUSINESS ALSO LEASES TWO COLOR COPY MACHINES WITH A TRUE CASH VALUE OF $40,000 FOR BOTH.  IS THE BUSINESS'S PERSONAL PROPERTY ELIGIBLE FOR THE SMALL PARCEL EXEMPTION?

No, it is not eligible for the exemption.  In order to determine the threshold amount of less than $80,000, all personal property OWNED BY, LEASED BY or IN THE POSSESSION OF the business is included, and reported on the affidavit.  This gives the assessor a "visual test," so to speak, as all commercial personal property that the assessor views at the business location would be included to determine the threshold.  The assessor is not required to determine whether the property is leased or owned by another party.

Although the leased color copiers are included in determining whether the business owner meets the threshold, the business owner would only be required to pay the tax on the personal property that it owns.  Similarly, it should be noted that if the personal property including the leased copiers was less that $80,000, then the exemption only covers the personal property owned by the business and the leased personal property may still be taxable to the lessor.

ARE THERE ANY RECORDKEEPING REQUIREMENTS ASSOCIATED WITH THE SMALL PARCEL PERSONAL PROPERTY TAX EXEMPTION?

Yes.  Townships must keep the affidavits on file for at least four years.  The taxpayer must maintain books and records to support a claim for four years after the exemption is claimed and must provide access to the records.

CAN A TOWNSHIP DO ANYTHING IF IT LATER BELIEVES THAT A SMALL PARCEL EXEMPTION WAS IMPROPERLY GRANTED?

Yes.  An assessor may deny an exemption claim for the current year and three preceding years.  The taxpayer recordkeeping requirements are important in this regard as they will allow the assessor to audit the taxpayer's records regarding its small parcel personal property tax exemption claim.  A township should develop an audit policy to review small parcel exemption claims.

Credit for the above information  TOWNSHIP FOCUS magazine, April 2015 page 10
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