HOUSE BILL No. 4760 May 7, 1997, Introduced by Rep. Profit and referred to the Committee on Tax Policy. A bill to amend 1893 PA 206, entitled "The general property tax act," by amending sections 27a and 34d (MCL 211.27a and 211.34d), as amended by 1996 PA 476. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 27a. (1) Except as otherwise provided in this section, 2 property shall be assessed at 50% of its true cash value under 3 section 3 of article IX of the state constitution of 1963. 4 (2) Except as otherwise provided in subsection (3), for 5 taxes levied in 1995 and for each year after 1995, the taxable 6 value of each parcel of property is the lesser of the following: 7 (a) The property's taxable value in the immediately preced- 8 ing year minus any losses, multiplied by the lesser of 1.05 or 9 the inflation rate, plus all additions. For taxes levied in 03109'97 FDD 2 1 1995, the property's taxable value in the immediately preceding 2 year is the property's state equalized valuation in 1994. 3 (b) The property's current state equalized valuation. 4 (3) Upon a transfer of ownership of property after 1994, the 5 property's taxable value for the calendar year following the year 6 of the transfer is the property's state equalized valuation for 7 the calendar year following the transfer. 8 (4) If the taxable value of property is adjusted under sub- 9 section (3), a subsequent increase in the property's taxable 10 value is subject to the limitation set forth in subsection (2) 11 until a subsequent transfer of ownership occurs. 12 (5) Assessment of property, as required in this section and 13 section 27, is inapplicable to the assessment of property subject 14 to the levy of ad valorem taxes within voted tax limitation 15 increases to pay principal and interest on limited tax bonds 16 issued by any governmental unit, including a county, township, 17 community college district, or school district, before January 1, 18 1964, if the assessment required to be made under this act would 19 be less than the assessment as state equalized prevailing on the 20 property at the time of the issuance of the bonds. This inappli- 21 cability shall continue until levy of taxes to pay principal and 22 interest on the bonds is no longer required. The assessment of 23 property required by this act shall be applicable for all other 24 purposes. 25 (6) As used in this act, "transfer of ownership" means the 26 conveyance of title to or a present interest in property, 27 including the beneficial use of the property, the value of which 03109'97 3 1 is substantially equal to the value of the fee interest. 2 Transfer of ownership of property includes, but is not limited 3 to, the following: 4 (a) A conveyance by deed. 5 (b) A conveyance by land contract. The taxable value of 6 property conveyed by a land contract executed after December 31, 7 1994 shall be adjusted under subsection (3) for the calendar year 8 following the year in which the contract is entered into and 9 shall not be subsequently adjusted under subsection (3) when the 10 deed conveying title to the property is recorded in the office of 11 the register of deeds in the county in which the property is 12 located. 13 (c) A conveyance to a trust after December 31, 1994, except 14 if the settlor or the settlor's spouse, or both, conveys the 15 property to the trust and the sole present beneficiary or benefi- 16 ciaries are the settlor or the settlor's spouse, or both. 17 (d) A conveyance by distribution from a trust, except if the 18 distributee is the sole present beneficiary or the spouse of the 19 sole present beneficiary, or both. 20 (e) A change in the sole present beneficiary or beneficia- 21 ries of a trust, except a change that adds or substitutes the 22 spouse of the sole present beneficiary. 23 (f) A conveyance by distribution under a will or by intes- 24 tate succession, except if the distributee is the decedent's 25 spouse. 26 (g) A conveyance by lease if the total duration of the 27 lease, including the initial term and all options for renewal, is 03109'97 4 1 more than 35 years or the lease grants theleaseeLESSEE a 2 bargain purchase option. As used in this subdivision, "bargain 3 purchase option" means the right to purchase the property at the 4 termination of the lease for not more than 80% of the property's 5 projected true cash value at the termination of the lease. After 6 December 31, 1994, the taxable value of property conveyed by a 7 lease with a total duration of more than 35 years or with a bar- 8 gain purchase option shall be adjusted under subsection (3) for 9 the calendar year following the year in which the lease is 10 entered into. This subdivision does not apply to personal prop- 11 erty except buildings described in section 14(6) and personal 12 property described in section 8(h), (i), and (j). This subdivi- 13 sion does not apply to that portion of the property not subject 14 to the leasehold interest conveyed. 15 (h) A conveyance of an ownership interest in a corporation, 16 partnership, sole proprietorship, limited liability company, 17 limited liability partnership, or other legal entity if the 18 ownership interest conveyed is more than 50% of the corporation, 19 partnership, sole proprietorship, limited liability company, 20 limited liability partnership, or other legal entity. Unless 21 notification is provided under subsection (8), the corporation, 22 partnership, sole proprietorship, limited liability company, 23 limited liability partnership, or other legal entity shall notify 24 the assessing officer on a form provided by the state tax commis- 25 sion not more than 45 days after a conveyance of an ownership 26 interest that constitutes a transfer of ownership under this 27 subdivision. 03109'97 5 1 (i) A transfer of property held as a tenancy in common, 2 except that portion of the property not subject to the ownership 3 interest conveyed. 4 (j) A conveyance of an ownership interest in a cooperative 5 housing corporation, except that portion of the property not 6 subject to the ownership interest conveyed. 7 (7) Transfer of ownership does not include the following: 8 (a) The transfer of property from 1 spouse to the other 9 spouse or from a decedent to a surviving spouse. 10 (b) A transfer from a husband, a wife, or a husband and wife 11 creating or disjoining a tenancy by the entireties in the grant- 12 ors or the grantor and his or her spouse. 13 (c) A transfer of that portion of property subject to a life 14 estate or life lease retained by the transferor, until expiration 15 or termination of the life estate or life lease. That portion of 16 property transferred that is not subject to a life lease shall be 17 adjusted under subsection (3). 18 (d) A transfer through foreclosure or forfeiture of a 19 recorded instrument under chapter 31, 32, or 57 of the revised 20 judicature act of 1961,Act No. 236 of the Public Acts of 1961,21being sections 600.3101 to 600.3280 and 600.5701 to 600.5785 of22the Michigan Compiled Laws1961 PA 236, MCL 600.3101 TO 600.3280 23 AND MCL 600.5701 TO 600.5785, or through deed or conveyance in 24 lieu of a foreclosure or forfeiture, until the mortgagee or land 25 contract vendor subsequently transfers the property. If a mort- 26 gagee does not transfer the property within 1 year of the 03109'97 6 1 expiration of any applicable redemption period, the property 2 shall be adjusted under subsection (3). 3 (e) A transfer by redemption by the person to whom taxes are 4 assessed of property previously sold for delinquent taxes. 5 (f) A conveyance to a trust if the settlor or the settlor's 6 spouse, or both, conveys the property to the trust and the sole 7 present beneficiary of the trust is the settlor or the settlor's 8 spouse, or both. 9 (g) A transfer pursuant to a judgment or order of a court of 10 record making or ordering a transfer, unless a specific monetary 11 consideration is specified or ordered by the court for the 12 transfer. 13 (h) A transfer creating or terminating a joint tenancy 14 between 2 or more persons if at least 1 of the persons was an 15 original owner of the property before the joint tenancy was ini- 16 tially created and, if the property is held as a joint tenancy at 17 the time of conveyance, at least 1 of the persons was a joint 18 tenant when the joint tenancy was initially created and that 19 person has remained a joint tenant since the joint tenancy was 20 initially created. A joint owner at the time of the last trans- 21 fer of ownership of the property is an original owner of the 22 property. For purposes of this subdivision, a person is an orig- 23 inal owner of property owned by that person's spouse. 24 (i) A transfer for security or an assignment or discharge of 25 a security interest. 26 (j) A transfer of real property or other ownership interests 27 among members of an affiliated group. As used in this 03109'97 7 1 subsection, "affiliated group" means 1 or more corporations 2 connected by stock ownership to a common parent corporation. 3 Upon request by the state tax commission, a corporation shall 4 furnish proof within 45 days that a transfer meets the require- 5 ments of this subdivision. A corporation that fails to comply 6 with a request by the state tax commission under this subdivision 7 is subject to a fine of $200.00. 8 (k) Normal public trading of shares of stock or other owner- 9 ship interests that, over any period of time, cumulatively repre- 10 sent more than 50% of the total ownership interest in a corpora- 11 tion or other legal entity and are traded in multiple transac- 12 tions involving unrelated individuals, institutions, or other 13 legal entities. 14 (l) A transfer of real property or other ownership interests 15 among corporations, partnerships, limited liability companies, 16 limited liability partnerships, or other legal entities if the 17 entities involved are commonly controlled. Upon request by the 18 state tax commission, a corporation, partnership, limited liabil- 19 ity company, limited liability partnership, or other legal entity 20 shall furnish proof within 45 days that a transfer meets the 21 requirements of this subdivision. A corporation, partnership, 22 limited liability company, limited liability partnership, or 23 other legal entity that fails to comply with a request by the 24 state tax commission under this subdivision is subject to a fine 25 of $200.00. 26 (m) A direct or indirect transfer of real property or other 27 ownership interests resulting from a transaction that qualifies 03109'97 8 1 as a tax-free reorganization under section 368 of the internal 2 revenue code of 1986, 26 U.S.C. 368. Upon request by the state 3 tax commission, a property owner shall furnish proof within 45 4 days that a transfer meets the requirements of this subdivision. 5 A property owner who fails to comply with a request by the state 6 tax commission under this subdivision is subject to a fine of 7 $200.00. 8 (N) A TRANSFER OF REAL PROPERTY UNDER ANNEXATION 9 PROCEEDINGS. 10 (8) The register of deeds of the county where deeds or other 11 title documents are recorded shall notify the assessing officer 12 of the appropriate local taxing unit not less than once each 13 month of any recorded transaction involving the ownership of 14 property and shall make any recorded deeds or other title docu- 15 ments available to that county's tax or equalization department. 16 Unless notification is provided under subsection (6), the buyer, 17 grantee, or other transferee of the property shall notify the 18 appropriate assessing office in the local unit of government in 19 which the property is located of the transfer of ownership of the 20 property within 45 days of the transfer of ownership, on a form 21 prescribed by the state tax commission that states the parties to 22 the transfer, the date of the transfer, the actual consideration 23 for the transfer, and the property's parcel identification number 24 or legal description. Forms filed in the assessing office of a 25 local unit of government under this subsection shall be made 26 available to the county tax or equalization department for the 27 county in which that local unit of government is located. This 03109'97 9 1 subsection does not apply to personal property except buildings 2 described in section 14(6) and personal property described in 3 section 8(h), (i), and (j). 4 (9) As used in this section: 5 (a) "Additions" means that term as defined in section 34d. 6 (b) "Beneficial use" means the right to possession, use, and 7 enjoyment of property, limited only by encumbrances, easements, 8 and restrictions of record. 9 (c) "Inflation rate" means that term as defined in section 10 34d. 11 (d) "Losses" means that term as defined in section 34d. 12 Sec. 34d. (1) As used in this section or section 27a, or 13 section 3 or 31 of article IX of the state constitution of 1963: 14 (a) For taxes levied before 1995, "additions" means all 15 increases in value caused by new construction or a physical addi- 16 tion of equipment or furnishings, and the value of property that 17 was exempt from taxes or not included on the assessment unit's 18 immediately preceding year's assessment roll. 19 (b) For taxes levied after 1994, "additions" means, except 20 as provided in subdivision (c), all of the following: 21 (i) Omitted real property. As used in this subparagraph, 22 "omitted real property" means previously existing tangible real 23 property not included in the assessment. Omitted real property 24 shall not increase taxable value as an addition unless the 25 assessing jurisdiction has a property record card or other docu- 26 mentation showing that the omitted real property was not 27 previously included in the assessment. The assessing 03109'97 10 1 jurisdiction has the burden of proof in establishing whether the 2 omitted real property is included in the assessment. Omitted 3 real property for the current and the 2 immediately preceding 4 years, discovered after the assessment roll has been completed, 5 shall be added to the tax roll pursuant to the procedures estab- 6 lished in section 154. For purposes of determining the taxable 7 value of real property under section 27a, the value of omitted 8 real property is based on the value and the ratio of taxable 9 value to true cash value the omitted real property would have had 10 if the property had not been omitted. 11 (ii) Omitted personal property. As used in this subpara- 12 graph, "omitted personal property" means previously existing tan- 13 gible personal property not included in the assessment. Omitted 14 personal property shall be added to the tax roll pursuant to sec- 15 tion 154. 16 (iii) New construction. As used in this subparagraph, "new 17 construction" means property not in existence on the immediately 18 preceding tax day and not replacement construction. New con- 19 struction includes the physical addition of equipment or furnish- 20 ings, subject to the provisions set forth in section 27(2)(a) to 21 (o). For purposes of determining the taxable value of property 22 under section 27a, the value of new construction is the true cash 23 value of the new construction multiplied by 0.50. 24 (iv) Previously exempt property. As used in this subpara- 25 graph, "previously exempt property" means property that was 26 exempt from ad valorem taxation under this act on the immediately 27 preceding tax day but is subject to ad valorem taxation on the 03109'97 11 1 current tax day under this act. For purposes of determining the 2 taxable value of real property under section 27a: 3 (A) The value of property previously exempt under section 7u 4 is the taxable value the entire parcel of property would have had 5 if that property had not been exempt, minus the product of the 6 entire parcel's taxable value in the immediately preceding year 7 and the lesser of 1.05 or the inflation rate. 8 (B) The taxable value of property that is a facility as that 9 term is defined in section 2 ofAct No. 198 of the Public Acts10of 1974, being section 207.552 of the Michigan Compiled Laws11 1974 PA 198, MCL 207.552, that was previously exempt under 12 section 7k is the taxable value that property would have had 13 under this act if it had not been exempt. 14 (C) The value of property previously exempt under any other 15 section of law is the true cash value of the previously exempt 16 property multiplied by 0.50. 17 (v) Replacement construction. As used in this subparagraph, 18 "replacement construction" means construction that replaced prop- 19 erty damaged or destroyed by accident or act of God and that 20 occurred after the immediately preceding tax day to the extent 21 the construction's true cash value does not exceed the true cash 22 value of property that was damaged or destroyed by accident or 23 act of God in the immediately preceding 3 years. For purposes of 24 determining the taxable value of property under section 27a, the 25 value of the replacement construction is the true cash value of 26 the replacement construction multiplied by a fraction the 27 numerator of which is the taxable value of the property to which 03109'97 12 1 the construction was added in the immediately preceding year and 2 the denominator of which is the true cash value of the property 3 to which the construction was added in the immediately preceding 4 year, and then multiplied by the lesser of 1.05 or the inflation 5 rate. 6 (vi) An increase in taxable value attributable to the com- 7 plete or partial remediation of environmental contamination 8 existing on the immediately preceding tax day. The department of 9 environmental quality shall determine the degree of remediation 10 based on information available in existing department of environ- 11 mental quality records or information made available to the 12 department of environmental quality if the appropriate assessing 13 officer for a local tax collecting unit requests that 14 determination. The increase in taxable value attributable to the 15 remediation is the increase in true cash value attributable to 16 the remediation multiplied by a fraction the numerator of which 17 is the taxable value of the property had it not been contaminated 18 and the denominator of which is the true cash value of the prop- 19 erty had it not been contaminated. 20 (vii) An increase in the value attributable to the 21 property's occupancy rate if either a loss, as that term is 22 defined in this section, had been previously allowed because of a 23 decrease in the property's occupancy rate or if the value of new 24 construction was reduced because of a below-market occupancy 25 rate. For purposes of determining the taxable value of property 26 under section 27a, the value of an addition for the increased 27 occupancy rate is the product of the increase in the true cash 03109'97 13 1 value of the property attributable to the increased occupancy 2 rate multiplied by a fraction the numerator of which is the tax- 3 able value of the property in the immediately preceding year and 4 the denominator of which is the true cash value of the property 5 in the immediately preceding year, and then multiplied by the 6 lesser of 1.05 or the inflation rate. 7 (viii) Public services. As used in this subparagraph, 8 "public services" means water service, sewer service, a primary 9 access road, natural gas service, electrical service, telephone 10 service, sidewalks, or street lighting. For purposes of deter- 11 mining the taxable value of real property under section 27a, the 12 value of public services is the amount of increase in true cash 13 value of the property attributable to the available public serv- 14 ices multiplied by 0.50 and shall be added in the calendar year 15 following the calendar year when those public services are ini- 16 tially available. 17 (c) For taxes levied after 1994, additions do not include 18 increased value attributable to any of the following: 19 (i) Platting, splits, or combinations of property. 20 (ii) A change in the zoning of property. 21 (iii) For the purposes of the calculation of the millage 22 reduction fraction under subsection (7) only, increased taxable 23 value under section 27a(3) after a transfer of ownership of 24 property. 25 (iv) ANNEXATION OF PROPERTY. 26 (d) "Assessed valuation of property as finally equalized" 27 means taxable value under section 27a. 03109'97 14 1 (e) "Financial officer" means the officer responsible for 2 preparing the budget of a unit of local government. 3 (f) "General price level" means the annual average of the 12 4 monthly values for the United States consumer price index for all 5 urban consumers as defined and officially reported by the United 6 States department of labor, bureau of labor statistics. 7 (g) For taxes levied before 1995, "losses" means a decrease 8 in value caused by the removal or destruction of real or personal 9 property and the value of property taxed in the immediately pre- 10 ceding year that has been exempted or removed from the assessment 11 unit's assessment roll. 12 (h) For taxes levied after 1994, "losses" means, except as 13 provided in subdivision (i), all of the following: 14 (i) Property that has been destroyed or removed. For pur- 15 poses of determining the taxable value of property under section 16 27a, the value of property destroyed or removed is the product of 17 the true cash value of that property multiplied by a fraction the 18 numerator of which is the taxable value of that property in the 19 immediately preceding year and the denominator of which is the 20 true cash value of that property in the immediately preceding 21 year. 22 (ii) Property that was subject to ad valorem taxation under 23 this act in the immediately preceding year that is now exempt 24 from ad valorem taxation under this act. For purposes of deter- 25 mining the taxable value of property under section 27a, the value 26 of property exempted from ad valorem taxation under this act is 27 the amount exempted. 03109'97 15 1 (iii) An adjustment in value, if any, because of a decrease 2 in the property's occupancy rate, to the extent provided by law. 3 For purposes of determining the taxable value of real property 4 under section 27a, the value of a loss for a decrease in the 5 property's occupancy rate is the product of the decrease in the 6 true cash value of the property attributable to the decreased 7 occupancy rate multiplied by a fraction the numerator of which is 8 the taxable value of the property in the immediately preceding 9 year and the denominator of which is the true cash value of the 10 property in the immediately preceding year. 11 (iv) A decrease in taxable value attributable to environmen- 12 tal contamination existing on the immediately preceding tax day. 13 The department of environmental quality shall determine the 14 degree to which environmental contamination limits the use of 15 property based on information available in existing department of 16 environmental quality records or information made available to 17 the department of environmental quality if the appropriate 18 assessing officer for a local tax collecting unit requests that 19 determination. The department of environmental quality's deter- 20 mination of the degree to which environmental contamination 21 limits the use of property shall be based on the criteria estab- 22 lished for the classifications set forth in section 20120a(1) of 23 part 201 (environmental remediation) of the natural resources and 24 environmental protection act,Act No. 451 of the Public Acts of251994, being section 324.20120a of the Michigan Compiled Laws26 1994 PA 451, MCL 324.20120A. The decrease in taxable value 27 attributable to the contamination is the decrease in true cash 03109'97 16 1 value attributable to the contamination multiplied by a fraction 2 the numerator of which is the taxable value of the property had 3 it not been contaminated and the denominator of which is the true 4 cash value of the property had it not been contaminated. 5 (i) For taxes levied after 1994, losses do not include 6 decreased value attributable to either of the following: 7 (i) Platting, splits, or combinations of property. 8 (ii) A change in the zoning of property. 9 (j) "New construction and improvements" means additions less 10 losses. 11 (k) "Current year" means the year for which the millage lim- 12 itation is being calculated. 13 (l) "Inflation rate" means the ratio of the general price 14 level for the state fiscal year ending in the calendar year imme- 15 diately preceding the current year divided by the general price 16 level for the state fiscal year ending in the calendar year 17 before the year immediately preceding the current year. 18 (2) On or before the first Monday in May of each year, the 19 assessing officer of each township or city shall tabulate the 20 tentative taxable value as approved by the local board of review 21 and as modified by county equalization for each classification of 22 property that is separately equalized for each unit of local gov- 23 ernment and provide the tabulated tentative taxable values to the 24 county equalization director. The tabulation by the assessing 25 officer shall contain additions and losses for each classifica- 26 tion of property that is separately equalized for each unit of 27 local government or part of a unit of local government in the 03109'97 17 1 township or city. If as a result of state equalization the 2 taxable value of property changes, the assessing officer of each 3 township or city shall revise the calculations required by this 4 subsection on or before the Friday following the fourth Monday in 5 May. The county equalization director shall compute these 6 amounts and the current and immediately preceding year's taxable 7 values for each classification of property that is separately 8 equalized for each unit of local government that levies taxes 9 under this act within the boundary of the county. The county 10 equalization director shall cooperate with equalization directors 11 of neighboring counties, as necessary, to make the computation 12 for units of local government located in more than 1 county. The 13 county equalization director shall calculate the millage reduc- 14 tion fraction for each unit of local government in the county for 15 the current year. The financial officer for each taxing juris- 16 diction shall calculate the compounded millage reduction frac- 17 tions beginning in 1980 resulting from the multiplication of suc- 18 cessive millage reduction fractions and shall recognize a local 19 voter action to increase the compounded millage reduction frac- 20 tion to a maximum of 1 as a new beginning fraction. Upon request 21 of the superintendent of the intermediate school district, the 22 county equalization director shall transmit the complete computa- 23 tions of the taxable values to the superintendent of the interme- 24 diate school district within that county. At the request of the 25 presidents of community colleges, the county equalization direc- 26 tor shall transmit the complete computations of the taxable 03109'97 18 1 values to the presidents of community colleges within the 2 county. 3 (3) On or before the first Monday in June of each year, the 4 county equalization director shall deliver the statement of the 5 computations signed by the county equalization director to the 6 county treasurer. 7 (4) On or before the second Monday in June of each year, the 8 treasurer of each county shall certify the immediately preceding 9 year's taxable values, the current year's taxable values, the 10 amount of additions and losses for the current year, and the cur- 11 rent year's millage reduction fraction for each unit of local 12 government that levies a property tax in the county. 13 (5) The financial officer of each unit of local government 14 shall make the computation of the tax rate using the data certi- 15 fied by the county treasurer and the state tax commission. At 16 the annual session in October, the county board of commissioners 17 shall not authorize the levy of a tax unless the governing body 18 of the taxing jurisdiction has certified that the requested mill- 19 age has been reduced, if necessary, in compliance with section 31 20 of article IX of the state constitution of 1963. 21 (6) The number of mills permitted to be levied in a tax year 22 is limited as provided in this section pursuant to section 31 of 23 article IX of the state constitution of 1963. A unit of local 24 government shall not levy a tax rate greater than the rate deter- 25 mined by reducing its maximum rate or rates authorized by law or 26 charter by a millage reduction fraction as provided in this 27 section without voter approval. 03109'97 19 1 (7) A millage reduction fraction shall be determined for 2 each year for each local unit of government. For ad valorem 3 property taxes that became a lien before January 1, 1983, the 4 numerator of the fraction shall be the total state equalized val- 5 uation for the immediately preceding year multiplied by the 6 inflation rate and the denominator of the fraction shall be the 7 total state equalized valuation for the current year minus new 8 construction and improvements. For ad valorem property taxes 9 that become a lien after December 31, 1982 and through 10 December 31, 1994, the numerator of the fraction shall be the 11 product of the difference between the total state equalized valu- 12 ation for the immediately preceding year minus losses multiplied 13 by the inflation rate and the denominator of the fraction shall 14 be the total state equalized valuation for the current year minus 15 additions. For ad valorem property taxes that are levied after 16 December 31, 1994, the numerator of the fraction shall be the 17 product of the difference between the total taxable value for the 18 immediately preceding year minus losses multiplied by the infla- 19 tion rate and the denominator of the fraction shall be the total 20 taxable value for the current year minus additions. For each 21 year after 1993, a millage reduction fraction shall not exceed 22 1. 23 (8) The compounded millage reduction fraction for each year 24 after 1980 shall be calculated by multiplying the local unit's 25 previous year's compounded millage reduction fraction by the cur- 26 rent year's millage reduction fraction. Beginning with 1980 tax 27 levies, the compounded millage reduction fraction for the year 03109'97 20 1 shall be multiplied by the maximum millage rate authorized by law 2 or charter for the unit of local government for the year, except 3 as provided by subsection (9). A compounded millage reduction 4 fraction shall not exceed 1. 5 (9) The millage reduction shall be determined separately for 6 authorized millage approved by the voters. The limitation on 7 millage authorized by the voters on or before May 31 of a year 8 shall be calculated beginning with the millage reduction fraction 9 for that year. Millage authorized by the voters after May 31 10 shall not be subject to a millage reduction until the year fol- 11 lowing the voter authorization which shall be calculated begin- 12 ning with the millage reduction fraction for the year following 13 the authorization. The first millage reduction fraction used in 14 calculating the limitation on millage approved by the voters 15 after January 1, 1979 shall not exceed 1. 16 (10) A millage reduction fraction shall be applied sepa- 17 rately to the aggregate maximum millage rate authorized by a 18 charter and to each maximum millage rate authorized by state law 19 for a specific purpose. 20 (11) A unit of local government may submit to the voters for 21 their approval the levy in that year of a tax rate in excess of 22 the limit set by this section. The ballot question shall ask the 23 voters to approve the levy of a specific number of mills in 24 excess of the limit. The provisions of this section do not allow 25 the levy of a millage rate in excess of the maximum rate autho- 26 rized by law or charter. If the authorization to levy millage 27 expires after 1993 and a local governmental unit is asking voters 03109'97 21 1 to renew the authorization to levy the millage, the ballot 2 question shall ask for renewed authorization for the number of 3 expiring mills as reduced by the millage reduction required by 4 this section. If the election occurs before June 1 of a year, 5 the millage reduction is based on the immediately preceding 6 year's millage reduction applicable to that millage. If the 7 election occurs after May 31 of a year, the millage reduction 8 shall be based on that year's millage reduction applicable to 9 that millage had it not expired. 10 (12) A reduction or limitation under this section shall not 11 be applied to taxes imposed for the payment of principal and 12 interest on bonds or other evidence of indebtedness or for the 13 payment of assessments or contract obligations in anticipation of 14 which bonds are issued that were authorized before December 23, 15 1978, as provided by former section 4 of chapter I of the munici- 16 pal finance act,Act No. 202 of the Public Acts of 19431943 PA 17 202, or to taxes imposed for the payment of principal and inter- 18 est on bonds or other evidence of indebtedness or for the payment 19 of assessments or contract obligations in anticipation of which 20 bonds are issued that are approved by the voters after December 21 22, 1978. 22 (13) If it is determined subsequent to the levy of a tax 23 that an incorrect millage reduction fraction has been applied, 24 the amount of additional tax revenue or the shortage of tax reve- 25 nue shall be deducted from or added to the next regular tax levy 26 for that unit of local government after the determination of the 27 authorized rate pursuant to this section. 03109'97 22 1 (14) If as a result of an appeal of county equalization or 2 state equalization the taxable value of a unit of local govern- 3 ment changes, the millage reduction fraction for the year shall 4 be recalculated. The financial officer shall effectuate an addi- 5 tion or reduction of tax revenue in the same manner as prescribed 6 in subsection (13). 7 (15) The fractions calculated pursuant to this section shall 8 be rounded to 4 decimal places, except that the inflation rate 9 shall be computed by the state tax commission and shall be 10 rounded to 3 decimal places. The state tax commission shall pub- 11 lish the inflation rate before March 1 of each year. 12 (16) Beginning with taxes levied in 1994, the millage reduc- 13 tion required by section 31 of article IX of the state constitu- 14 tion of 1963 shall permanently reduce the maximum rate or rates 15 authorized by law or charter. The reduced maximum authorized 16 rate or rates for 1994 shall equal the product of the maximum 17 rate or rates authorized by law or charter before application of 18 this section multiplied by the compound millage reduction appli- 19 cable to that millage in 1994 pursuant to subsections (8) to 20 (12). The reduced maximum authorized rate or rates for 1995 and 21 each year after 1995 shall equal the product of the immediately 22 preceding year's reduced maximum authorized rate or rates multi- 23 plied by the current year's millage reduction fraction and shall 24 be adjusted for millage for which authorization has expired and 25 new authorized millage approved by the voters pursuant to subsec- 26 tions (8) to (12). 03109'97 Final page. FDD