HOUSE BILL No. 6463 November 7, 2002, Introduced by Rep. Adamini and referred to the Committee on Tax Policy. A bill to amend 1893 PA 206, entitled "The general property tax act," by amending section 27a (MCL 211.27a), as amended by 2000 PA 260. 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 08003'02 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 08003'02 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 08003'02 4 1 more than 35 years or the lease grants the lessee a bargain 2 purchase option. As used in this subdivision, "bargain purchase 3 option" means the right to purchase the property at the termina- 4 tion 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 (10), 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. 08003'02 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, 1961 PA 236, MCL 600.3101 to 600.3280 and 21 MCL 600.5701 to 600.5785, or through deed or conveyance in lieu 22 of a foreclosure or forfeiture, until the mortgagee or land con- 23 tract vendor subsequently transfers the property. If a mortgagee 24 does not transfer the property within 1 year of the expiration of 25 any applicable redemption period, the property shall be adjusted 26 under subsection (3). 08003'02 6 1 (e) A transfer by redemption by the person to whom taxes are 2 assessed of property previously sold for delinquent taxes. 3 (f) A conveyance to a trust if the settlor or the settlor's 4 spouse, or both, conveys the property to the trust and the sole 5 present beneficiary of the trust is the settlor or the settlor's 6 spouse, or both. 7 (g) A transfer pursuant to a judgment or order of a court of 8 record making or ordering a transfer, unless a specific monetary 9 consideration is specified or ordered by the court for the 10 transfer. 11 (h) A transfer creating or terminating a joint tenancy 12 between 2 or more persons if at least 1 of the persons was an 13 original owner of the property before the joint tenancy was ini- 14 tially created and, if the property is held as a joint tenancy at 15 the time of conveyance, at least 1 of the persons was a joint 16 tenant when the joint tenancy was initially created and that 17 person has remained a joint tenant since the joint tenancy was 18 initially created. A joint owner at the time of the last trans- 19 fer of ownership of the property is an original owner of the 20 property. For purposes of this subdivision, a person is an orig- 21 inal owner of property owned by that person's spouse. 22 (i) A transfer for security or an assignment or discharge of 23 a security interest. 24 (j) A transfer of real property or other ownership interests 25 among members of an affiliated group. As used in this subsec- 26 tion, "affiliated group" means 1 or more corporations connected 27 by stock ownership to a common parent corporation. Upon request 08003'02 7 1 by the state tax commission, a corporation shall furnish proof 2 within 45 days that a transfer meets the requirements of this 3 subdivision. A corporation that fails to comply with a request 4 by the state tax commission under this subdivision is subject to 5 a fine of $200.00. 6 (k) Normal public trading of shares of stock or other owner- 7 ship interests that, over any period of time, cumulatively repre- 8 sent more than 50% of the total ownership interest in a corpora- 9 tion or other legal entity and are traded in multiple transac- 10 tions involving unrelated individuals, institutions, or other 11 legal entities. 12 (l) A transfer of real property or other ownership interests 13 among corporations, partnerships, limited liability companies, 14 limited liability partnerships, or other legal entities if the 15 entities involved are commonly controlled. Upon request by the 16 state tax commission, a corporation, partnership, limited liabil- 17 ity company, limited liability partnership, or other legal entity 18 shall furnish proof within 45 days that a transfer meets the 19 requirements of this subdivision. A corporation, partnership, 20 limited liability company, limited liability partnership, or 21 other legal entity that fails to comply with a request by the 22 state tax commission under this subdivision is subject to a fine 23 of $200.00. 24 (m) A direct or indirect transfer of real property or other 25 ownership interests resulting from a transaction that qualifies 26 as a tax-free reorganization under section 368 of the internal 27 revenue code of 1986. Upon request by the state tax commission, 08003'02 8 1 a property owner shall furnish proof within 45 days that a 2 transfer meets the requirements of this subdivision. A property 3 owner who fails to comply with a request by the state tax commis- 4 sion under this subdivision is subject to a fine of $200.00. 5 (n) A transfer of qualified agricultural property, if the 6 person to whom the qualified agricultural property is transferred 7 files an affidavit with the assessor of the local tax collecting 8 unit in which the qualified agricultural property is located and 9 with the register of deeds for the county in which the qualified 10 agricultural property is located attesting that the qualified 11 agricultural property shall remain qualified agricultural 12 property. The affidavit under this subdivision shall be in a 13 form prescribed by the department of treasury. An owner of qual- 14 ified agricultural property shall inform a prospective buyer of 15 that qualified agricultural property that the qualified agricul- 16 tural property is subject to the recapture tax provided in the 17 agricultural property recapture act, 2000 PA 261, MCL 211.1001 TO 18 211.1007, if the qualified agricultural property is converted by 19 a change in use. If property ceases to be qualified agricultural 20 property at any time after being transferred, all of the follow- 21 ing shall occur: 22 (i) The taxable value of that property shall be adjusted 23 under subsection (3) as of the December 31 in the year that the 24 property ceases to be qualified agricultural property. 25 (ii) The property is subject to the recapture tax provided 26 for under the agricultural property recapture act, 2000 PA 261, 27 MCL 211.1001 TO 211.1007. 08003'02 9 1 (O) A TRANSFER OF REAL PROPERTY FROM A TRUSTEE OF A TRUST TO 2 A SUCCESSOR TRUSTEE IF THE TRANSFER DOES NOT CHANGE THE BENEFI- 3 CIARY OF THE TRUST OR THE BENEFICIAL USE OF THE PROPERTY. 4 (8) If all of the following conditions are satisfied, the 5 local tax collecting unit shall revise the taxable value of qual- 6 ified agricultural property taxable on the tax roll in the pos- 7 session of that local tax collecting unit to the taxable value 8 that qualified agricultural property would have had if there had 9 been no transfer of ownership of that qualified agricultural 10 property since December 31, 1999 and there had been no adjustment 11 of that qualified agricultural property's taxable value under 12 subsection (3) since December 31, 1999: 13 (a) The qualified agricultural property was qualified agri- 14 cultural property for taxes levied in 1999 and each year after 15 1999. 16 (b) The owner of the qualified agricultural property files 17 an affidavit with the assessor of the local tax collecting unit 18 under subsection (7)(n). 19 (9) If the taxable value of qualified agricultural property 20 is adjusted under subsection (8), the owner of that qualified 21 agricultural property shall not be entitled to a refund for any 22 property taxes collected under this act on that qualified agri- 23 cultural property before the adjustment under subsection (8). 24 (10) The register of deeds of the county where deeds or 25 other title documents are recorded shall notify the assessing 26 officer of the appropriate local taxing unit not less than once 27 each month of any recorded transaction involving the ownership of 08003'02 10 1 property and shall make any recorded deeds or other title 2 documents available to that county's tax or equalization 3 department. Unless notification is provided under subsection 4 (6), the buyer, grantee, or other transferee of the property 5 shall notify the appropriate assessing office in the local unit 6 of government in which the property is located of the transfer of 7 ownership of the property within 45 days of the transfer of 8 ownership, on a form prescribed by the state tax commission that 9 states the parties to the transfer, the date of the transfer, the 10 actual consideration for the transfer, and the property's parcel 11 identification number or legal description. Forms filed in the 12 assessing office of a local unit of government under this subsec- 13 tion shall be made available to the county tax or equalization 14 department for the county in which that local unit of government 15 is located. This subsection does not apply to personal property 16 except buildings described in section 14(6) and personal property 17 described in section 8(h), (i), and (j). 18 (11) As used in this section: 19 (a) "Additions" means that term as defined in section 34d. 20 (b) "Beneficial use" means the right to possession, use, and 21 enjoyment of property, limited only by encumbrances, easements, 22 and restrictions of record. 23 (c) "Converted by a change in use" means that term as 24 defined in the agricultural property recapture act, 2000 PA 261, 25 MCL 211.1001 TO 211.1007. 26 (d) "Inflation rate" means that term as defined in section 27 34d. 08003'02 11 1 (e) "Losses" means that term as defined in section 34d. 2 (f) "Qualified agricultural property" means that term as 3 defined in section 7dd. 08003'02 Final page. FDD