New Version of Summer Tax Deferral Bill Raises Major Concerns

Posted on July 23, 2020 by Dene Westbrook

Late last night, the Michigan House of Representatives passed a new version of the previously vetoed summer tax deferral legislation.  This new version of SB 943 was approved along mainly partisan lines and was developed without prior input from local government groups or schools.

The proposal strikes all of the previous language providing for any advance payment or advance settlement that would have preserved local government cash flow and instead creates a new deferment allowance for the 2020 summer property tax bill and places the burden of developing guidelines for eligibility, documentation, and approval or denial of an undefined “COVID hardship” on the local city, village, or township.

The League joined with officials from the Michigan Association of Counties and Michigan Townships Association to highlight a series of concerns and flaws in the language that was eventually adopted by the House.  Due to the tight legislative session schedule, Senate consideration of this new proposal is expected later today and members are urged to review these concerns and share them with their state senator.

The following are a list of the concerns that were shared with House and Senate legislators:

  • Local government negotiations over the previous (vetoed) proposal had been based on achieving two goals – balancing tax relief for small business with an assurance of uninterrupted cash flow for local units, schools, and other taxing jurisdictions. One was predicated on the other. This new proposal offers no revenue support for local taxing authorities and would result in potentially a delay in tax receipts until May or June of 2021.
  • Any such deferrals will also cause an unanticipated negative impact on State Education Tax collections for the current state fiscal year.
  • This new version was presented late Wednesday as an alternative with no discussion in advance and no prior input from local governments or schools. This approach is a significant departure from all previous discussions and the complexity of the topic requires a much more thoughtful review and response from practitioners.  There is a great potential for unintended consequences as this legislation is rushed through the process without proper feedback. The previous proposal was discussed through workgroups that lasted from May thru early July.
  • The new language appears to mandate that a deferment program be offered by every jurisdiction, but that the city, village or township would determine what documentation or criteria each community could use to determine eligibility and could approve or deny applications at their discretion. This creates a situation where uniformity of taxation/deferment will be brought into question and charges of unequal treatment will be leveled, exposing local units to legal risks that run beyond the local board of review and could involve the circuit courts.
  • The mandate to offer this new deferment program will necessitate the creation of individualized standards, criteria and processes by each local unit, something that will require time to establish.  This is unrealistic given the fact that summer tax bills have already been mailed and many local units have July 31 tax due dates. It also allows the deferment application to be filed through September 15, despite those varied and swiftly approaching due dates.
  • The existing statutory requirements for other deferral programs would also apply to this new program, so municipal treasurers would be required:
    • to publish notice of the deferment availability in a newspaper of general circulation.
    • to assist persons in completing the deferment form.
    • to send a statement of deferred taxes with the Winter tax bill.
  • Other deferment programs that already exist have very clear standards for application and no review process if those standards are met by the taxpayer, creating a much more objective system and one that treats like taxpayers alike.
  • The bill language appears to require the local tax collecting unit (the city council or township board) to make each approval or denial decision.
  • Communities may allow deferments without knowing the extent to which property owners will seek the deferral and find themselves unable to afford the deferments they have granted.
  • Deferments are granted by the city, village, or township, but impact all other taxing jurisdictions. Without the revenue support from previous versions of this proposal, this will create budget problems in jurisdictions across the state.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and [email protected].

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