The Michigan Department of Treasury has asked us to share some information detailing changes to the Personal Property Tax local government reimbursements for 2016-17 budget preparation. Treasury has prepared a document below and requested the Michigan Municipal League pass it along to our members. If you have any questions, there is contact information at the end.
Here is the information from Treasury:
In 2012, legislation was passed providing new personal property tax exemptions for small taxpayers (starting in 2014) and eligible manufacturing personal property (EMPP, phase-in starting in 2016). The Local Community Stabilization Authority (LCSA) Act, 2014 PA 86, requires reimbursement for the loss from the personal property exemptions. The payments are made using the Authority’s share of the 6% use tax.
How the Loss in Taxable Value is Measured. Beginning for 2016, the personal property exemption loss is calculated by subtracting each local unit’s current year taxable value of all industrial and commercial personal property from its 2013 taxable value of industrial and commercial personal property. Calculations include IFT property, with IFT new facility TV reported at 50%. Calculations exclude property classified as either industrial or commercial personal in one year but classified as either real property or utility personal in the other year. County equalization directors will report the personal property exemption loss amounts to Treasury.
Millage Rates Being Reimbursed. All types of millage are being reimbursed. Except for local school district/ISD debt millage, reimbursements are calculated using each taxing unit’s sum of the lowest rate of each individual millage levied between 2012 and the immediately preceding year. Treasury posts these rates on the Internet by May 1 of each year. School districts/ISDs must report their current-year debt millage to Treasury by August 15.
Calculation of Reimbursements. The personal property exemption loss is multiplied by the millage rates being reimbursed. It is estimated there will be 100% reimbursement for all losses. While all millages are being reimbursed, the reimbursements for certain losses and millage are calculated separately. The following losses/millages are guaranteed 100% reimbursement:
- Local school district and ISD millages;
- Millage used to fund essential services, i.e. police, fire, ambulance and jails, including the loss from expiring tax exemptions that is reported on Form 5403 by the assessor;
- Tax increment financing loss, including, for certain TIF plans, any loss from increased captured value; and
- 2015 small taxpayer exemption loss.
Reimbursement for other millages may be at less than 100% or more than 100%, depending on the total calculated losses for those millages and the $ available for reimbursement. We estimate the LCSA will have sufficient $ to reimburse all losses at 100%.
Beginning for 2019, 5% of the $ available for reimbursement under the previous paragraph will be distributed based on each taxing unit’s share of EMPP tax loss calculated using a modified acquisition cost of exempt EMPP. That 5% is increased by 5% each year for 20 years, until no $ are distributed under the previous paragraph.
Taxing units will not have to claim reimbursement, except for tax increment financing plans, which will file Form 5176. Reimbursements for most millage will be calculated using millage rates already available to Treasury. Most local school districts receive reimbursement for their basic operating mills through operation of the state school aid formula.
Timing of reimbursements. Reimbursement for county allocated millage will be paid on September 20th. Reimbursement for other county millage, township millage, and other millage levied 100% in December will be paid the following February 20. All other millage reimbursements will be paid on October 20th.
Fiscal Year 2016-2017 budget preparation. In estimating FY 17 revenues, for the millage rates being reimbursed, local units should assume that their FY 17 property tax revenues from industrial/commercial personal property, including LCSA reimbursement, will equal their FY 14 property tax revenue from industrial/commercial personal property. Millage increases after 2012 will not be reimbursed.
Total Amount of Reimbursements. Reimbursements will total $374 million for calendar year 2016 losses, increasing to over $500 million for calendar year 2021 losses, as the EMPP exemption phases in.
For additional personal property tax reimbursement information, please email [email protected], or call 517-373-2697.
Matt Bach is director of media relations for the Michigan Municipal League. He can be reached at [email protected].