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Michigan Department of Treasury January 2018

Personal Property Tax Reimbursements. Michigan Department of Treasury January 2018. Personal Property Tax Legislation.

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Michigan Department of Treasury January 2018

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  1. Personal Property Tax Reimbursements Michigan Department of Treasury January 2018

  2. Personal Property Tax Legislation In 2012, legislation was passed providing personal property exemptions for small taxpayers (starting in 2014) and Eligible Manufacturing Personal Property (phase-in starting in 2016). Laws have been revised in 2013 through 2017. Reimbursement is provided through a share of the 6% Use Tax levied by the Local Community Stabilization Authority. August 2014 voter approval of Proposal 1 allowed laws to take effect.

  3. Local Community Stabilization Authority Act Beginning for calendar year 2016, the Local Community Stabilization Authority (LCSA) Act, 2014 Public Act 86, (MCL 123.1341 to 123.1362) requires personal property tax (PPT) reimbursement to municipalities for operating and debt millages. The LCSA Act requires Treasury to calculate the PPT reimbursements. The LCSA Act requires the LCSA to distribute the PPT reimbursements.

  4. Personal Property Tax Reimbursement Priority The LCSA shall distribute reimbursements in the following order of priority: 100% reimbursement for: Local school district and intermediate school district (ISD) school debt loss in the current year and local school district sinking fund millage and public recreation and playground millage; ISD operating millage; School operating loss not reimbursed by the school aid fund; Millages used to fund essential services (i.e. police, fire, ambulance and jails); Decline in the tax increment finance authority (TIFA) plan captured value of commercial and industrial personal property; and 2015 small taxpayer exemption loss.

  5. Personal Property Tax Reimbursement Priority (continued) Reimbursement for other millages are prorated and may be less than or more than 100%: Beginning for calendar year 2019 personal property tax losses, municipality (other than local school district, ISD, or TIFA) reimbursement is based on the proportionate share of total acquisition cost of all eligible manufacturing personal property statewide based on the Local Community Stabilization share (LCSS) revenue available for this distribution. This distribution type will phase-in 5% a year starting in calendar year 2019. For calendar year 2016 to calendar year 2037, municipality (other than local school district, ISD, or TIFA) reimbursement for remaining qualified loss prorated based on the LCSS revenue available for this distribution. This distribution type will phase-out 5% a year starting in calendar year 2019.

  6. Personal Property Tax Reimbursement Reimbursements for most millages will be calculated using millage rates available to Treasury and personal property taxable values reported by county equalization directors and county treasurers. Most municipalities do not need to submit a claim for reimbursement. Tax increment finance authorities must claim a personal property loss reimbursement by June 15 on Form 5176, Form 5176BR, or Form 5176ICV. Local school districts and intermediate school districts must report debt millage levied by August 15 on Form 5451.

  7. Personal Property Exemption Loss (PPEL) For municipalities, other than school districts, intermediate school districts, or tax increment finance authorities, the PPEL is calculated by subtracting the current year taxable value of commercial personal property (CPP) and industrial personal property (IPP) and the small taxpayer exemption loss from the 2013 taxable value of CPP and IPP. The small taxpayer exemption loss (STEL) is the greater of the 2013 taxable value of CPP and IPP minus the 2014 taxable value of CPP and IPP or the 2013 taxable value of CPP and IPP minus the 2015 taxable value of CPP and IPP.

  8. Personal Property Exemption Loss (PPEL) (continued) Calculations include Industrial Facilities Tax (IFT) property (new facilities at 50%). Calculations exclude property classified as either CPP or IPP in one year but classified as real property or utility personal in another year. For operating millage reimbursement calculations, Treasury will subtract renaissance zone personal property taxable value from the PPEL and STEL calculations. The current year taxable value of CPP and IPP is reported by county equalization directors to Treasury by June 20.

  9. Millage Rates Used Except for local school district and intermediate school district debt millage and hold harmless millage, personal property tax reimbursements are calculated using each municipalities lowest rate of each individual millage levied between 2012 and the immediately preceding year. For an individual millage rate not levied in one of the years, the lowest millage rate is zero. A millage used in the reimbursement calculation must be levied against both real property and personal property. Treasury reports the lowest millage rates by May 1 of each year. Millage rates are posted at www.michigan.gov/pptreimbursement

  10. Millage Used to Fund Essential Services Reimbursement for essential service millage (used for police, fire, ambulance, or jails) is calculated separately from reimbursement for other millages and includes reimbursement for loss from expiring tax exemptions. The personal property exemption loss is increased for any increased value from expired tax exemptions for the current year. Assessors report loss from expired or expiring tax exemptions on Form 5403 and/or Form 5429 by June 5.

  11. Millage Used to Fund Essential Services In order to calculate the reimbursement for general operating millage(s) used to fund essential services, Treasury requested cities, villages, townships, counties, and authorities to file Form 5448 – FYE 2012 Percentage of General Operating Millage Used to Fund Essential Services by July 15, 2016. For those municipalities that did not file Form 5448, Treasury calculated the FYE 2012 percentage of general operating millage used to fund essential services based on FYE 2012 audited financial statements and/or the FYE 2012 F65 report. The Form 5448 was a one-time form.

  12. Prior Year Adjustments Beginning for calendar year 2017, except for school debt loss, school operating loss not reimbursed by the school aid fund, and essential services loss, reimbursements for a calendar year are adjusted to reflect the final order of a court or body of competent jurisdiction related to any prior year calculation. The prior year adjustment will be made only if changes in the prior year taxable value can be calculated from taxable values reported by county treasurers to the Michigan Department of Education.

  13. When Should a Municipality Expect a Reimbursement? Note: If a payment date falls on a Saturday, Sunday, or State holiday, the payment date will be the next business day.

  14. Recording PPT Reimbursement Revenue For counties, cities, villages, townships, libraries, authorities, and tax increment finance authorities, the PPT reimbursement revenue should be recorded to revenue account 573, Local Community Stabilization Share. The LCSA Act requires the following restrictions related to the PPT reimbursements: The essential services distribution shall be used to fund essential services (MCL 123.1357(4)(a)(iv)) The amount of the distribution received for debt millage shall be used to pay debt. If a payment for debt millage is not used to pay debt, the amount not used to pay debt shall be deducted from a subsequent PPT reimbursement (MCL 123.1361(2))

  15. Local Community Stabilization Share (LCSS) Revenue • The LCSS revenue is derived from the State Use Tax. The LCSA Act established the amount of revenue that shall be distributed by the LCSA. The following table provides the amount of revenue that shall be distributed for each tax year:

  16. Local Community Stabilization Share (LCSS) Revenue (continued)

  17. House Bill 5086 Highlights Amend the definition and calculation of the “personal property exemption loss” to only subtract the small taxpayer exemption loss if it is greater than zero. Enhance the transparency of the calculation by adding the renaissance zone adjustment to the definition and calculation of the “personal property exemption loss” and “small taxpayer exemption loss”. Accelerate reporting due dates for assessors, county equalization directors, school districts, and ISDs.

  18. House Bill 5086 Highlights (continued) Change the calculation to use the lowest rate of each individual millage levied in the period between 2014 and the prior year in the calculation of personal property tax reimbursements. Change calculation of essential services distribution to subtract the TIF captured taxes instead of subtracting the TIF captured taxable value for consistency. Require municipalities to allocate the PPT reimbursement revenue, up to 100% reimbursement, among all the millages and account for the revenue accordingly.

  19. House Bill 5086 Highlights (continued) Change the payment date for county allocated millage to October 20. Allow for municipalities to keep the final debt millage reimbursement even if the debt obligation was paid off in the prior fiscal year.

  20. For Information about Personal Property Tax Reimbursements Revenue Sharing and Grants Division Michigan Department of Treasury For more information, visit: www.michigan.gov/pptreimbursement Questions: 517-373-2697 TreasORTAPPT@michigan.gov

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