SB-0359, As Passed House, May 24, 2017

SB-0359, As Passed Senate, May 16, 2017

SUBSTITUTE FOR

SENATE BILL NO. 359

A bill to amend 1893 PA 206, entitled

"The general property tax act,"

by amending sections 9m and 9n (MCL 211.9m and 211.9n), as amended

by 2016 PA 108.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 9m. (1) Beginning December 31, 2015 and each year

thereafter, qualified new personal property for which an exemption

has been properly claimed under subsection (2) is exempt from the

collection of taxes under this act.

(2) A person shall claim the exemption under this section and

section 9n by filing each year a combined document that includes:

the form to claim the exemption under this section and section 9n,

a report of the fair market value and year of acquisition by the

first owner of qualified new personal property, and for any year

before 2023, a statement under section 19. All of the following

apply to a claim of the exemption under this section:

(a) The combined document shall be in a form and manner

prescribed by the department of treasury.

(b) Leasing companies are not eligible to receive the

exemption under this section and may not use the combined document

prescribed in this section. With respect to personal property that

is the subject of a lease agreement, regardless of whether the

agreement constitutes a lease for financial or tax purposes, all of

the following apply:

(i) If the personal property is eligible manufacturing

personal property, the lessee and lessor may elect that the lessee

report the leased personal property on the combined document.

(ii) An election made by the lessee and the lessor under this

subdivision shall be made in a form and manner approved by the

department.

(iii) Absent an election, the personal property shall be

reported by the lessor on the personal property statement unless

the exemption for eligible manufacturing personal property is

claimed by the lessee on the combined document.

completed and delivered to the assessor of the township or city in

which the qualified new personal property is located by February 20

of each year.

(d) The assessor shall transmit to the department of treasury

the information contained in the combined document filed under this

section, and other parcel information required by the department of

treasury, in the form and manner prescribed by the department of

treasury by no later than April 1.

(e) A person claiming an exemption under this section shall

rescind the claim of exemption by December 31 of the year in which

exempted property is no longer eligible for the exemption by filing

with the assessor of the township or city a rescission affidavit in

a form prescribed by the department of treasury.

(f) The assessor of the township or city shall annually

transmit the rescission affidavits filed, or the information

contained in the rescission affidavits filed, under this section to

the department of treasury in the form and in the manner prescribed

by the department of treasury no later than April 1.

(3) If the assessor of the township or city believes that

personal property for which the form claiming an exemption is

timely filed by February 20 each year is not qualified new personal

property or the form filed was incomplete, the assessor may deny

that claim for exemption by notifying the person that filed the

form in writing of the reason for the denial and advising the

person that the denial shall be appealed to the board of review

under section 30 by filing a combined document as prescribed under

subsection (2). If the denial is issued after the first meeting of

the March board of review that follows the organizational meeting,

the appeal of the denial is either to the March board of review or

the Michigan tax tribunal by filing a petition and a completed

combined document as prescribed under subsection (2), within 35

days of the denial notice. The assessor may deny a claim for

exemption under this subsection for the current year only. If the

assessor denies a claim for exemption, the assessor shall remove

the exemption of that personal property and amend the tax roll to

reflect the denial and the local treasurer shall within 30 days of

the date of the denial issue a corrected tax bill for any

additional taxes.

(4) A person claiming an exemption for qualified new personal

property exempt under this section shall maintain books and records

and shall provide access to those books and records as provided in

section 22.

(5) If a person fraudulently claims an exemption for personal

property under this section, that person is subject to the

penalties provided for in section 21(2).

(6) For 2016 only, if an owner of qualified new personal

property did not file form 5278 by February 22, 2016 or filed an

incomplete form 5278 by February 22, 2016 to claim the exemption

under this section with the assessor of the city or township in

which the qualified new personal property is located, that owner

may file form 5278 with the assessor of the city or township in

which the qualified new personal property is located no later than

May 31, 2016. If the assessor determines that the property

qualifies for the exemption under this section, the assessor shall

immediately amend the assessment roll to reflect the exemption. The

assessor of the township or city shall transmit the affidavits

filed, or the information contained in the affidavits filed, under

this section, and other parcel information required by the

department of treasury, to the department of treasury in the form

and in the manner prescribed by the department of treasury no later

than June 7, 2016. The owner shall still be required to meet all

deadlines required under section 7 of the state essential services

assessment act, 2014 PA 92, MCL 211.1057. If the assessor of the

township or city believes that personal property for which an

affidavit claiming an exemption is filed under this subsection by

May 31, 2016 is not qualified new personal property, the assessor

may deny that claim for exemption by notifying the person that

filed the affidavit in writing of the reason for the denial and

advising the person that the denial may be appealed to the Michigan

tax tribunal within 35 days of the date of the denial.

(7) For 2017 only, if an owner of qualified new personal

property did not file the combined document by February 21, 2017 to

claim the exemption under this section with the assessor of the

city or township in which the qualified new personal property is

located, that owner may file the combined document with the

assessor of the city or township in which the qualified new

personal property is located no later than May 31, 2017. If the

assessor determines that the property qualifies for the exemption

under this section, the assessor shall immediately amend the

assessment roll to reflect the exemption. The assessor of the

township or city shall transmit the combined document filed, or the

information contained in the combined document filed, under this

section, and other parcel information required by the department of

treasury, to the department of treasury in the form and in the

manner prescribed by the department of treasury no later than June

9, 2017. The owner shall still meet all deadlines required under

section 7 of the state essential services assessment act, 2014 PA

92, MCL 211.1057. If the assessor of the township or city believes

that personal property for which a combined document claiming an

exemption filed under this subsection by May 31, 2017 is not

qualified new personal property, the assessor may deny that claim

for exemption by notifying the person that filed the combined

document in writing of the reason for the denial and advising the

person that the denial may be appealed to the Michigan tax tribunal

within 35 days of the date of the denial.

(8) ~~(7)~~ As used in this section:

(a) "Affiliated person" means a sole proprietorship,

partnership, limited liability company, corporation, association,

flow-through entity, member of a unitary business group, or other

entity related to a person claiming an exemption under this

section.

(b) "Direct integrated support" means any of the following:

(i) Research and development related to goods produced in

industrial processing and conducted in furtherance of that

industrial processing.

(ii) Testing and quality control functions related to goods

produced in industrial processing and conducted in furtherance of

that industrial processing.

(iii) Engineering related to goods produced in industrial

processing and conducted in furtherance of that industrial

processing.

(iv) Receiving or storing equipment, materials, supplies,

parts, or components for industrial processing, or scrap materials

or waste resulting from industrial processing, at the industrial

processing site or at another site owned or leased by the owner or

lessee of the industrial processing site.

(v) Storing of finished goods inventory if the inventory was

produced by a business engaged primarily in industrial processing

and if the inventory is stored either at the site where it was

produced or at another site owned or leased by the business that

produced the inventory.

(vi) Sorting, distributing, or sequencing functions that

optimize transportation and just-in-time inventory management and

material handling for inputs to industrial processing.

personal property located on occupied real property if that

personal property is predominantly used in industrial processing or

direct integrated support. For personal property that is

construction in progress and part of a new facility not in

operation, eligible manufacturing personal property means all

personal property that is part of that new facility if that

personal property will be predominantly used in industrial

processing when the facility becomes operational. Personal property

that is not owned, leased, or used by the person who owns or leases

occupied real property where the personal property is located is

not eligible manufacturing personal property, unless the personal

property is located on the occupied real property to carry on a

current on-site business activity. Personal property that is placed

on occupied real property solely to qualify the personal property

for an exemption under this section or section 9n is not eligible

manufacturing personal property. Utility personal property as

described in section 34c(3)(e) and personal property used in the

generation, transmission, or distribution of electricity for sale

are not eligible manufacturing personal property. Personal property

located on occupied real property is predominantly used in

industrial processing or direct integrated support if the result of

the following calculation is more than 50%:

(i) Multiply the original cost of all personal property that

is subject to the collection of taxes under this act and all

personal property that is exempt from the collection of taxes under

sections 7k, 9b, 9f, 9n, and 9o and this section that is located on

that occupied real property and that is not construction in

progress by its percentage of use in industrial processing or in

direct integrated support. For an item of personal property that is

used in industrial processing, its percentage of use in industrial

processing shall equal the percentage of the exemption the property

would be eligible for under section 4t of the general sales tax

act, 1933 PA 167, MCL 205.54t, or section 4o of the use tax act,

1937 PA 94, MCL 205.94o. Utility personal property as described in

section 34c(3)(e) and personal property used in the generation,

transmission, or distribution of electricity for sale is not

included in this calculation.

(ii) Divide the result of the calculation under subparagraph

(i) by the total original cost of all personal property that is

subject to the collection of taxes under this act and all personal

property that is exempt from the collection of taxes under sections

7k, 9b, 9f, 9n, and 9o and this section that is located on that

occupied real property and that is not construction in progress.

Utility personal property as described in section 34c(3)(e) and

personal property used in the generation, transmission, or

distribution of electricity for sale is not included in this

calculation.

(d) "Fair market value" means the fair market value of

personal property at the time of acquisition by the first owner,

including the cost of freight, sales tax, installation, and other

capitalized costs, except capitalized interest. There is a

rebuttable presumption that the acquisition price paid by the first

owner for personal property, and any costs of freight, sales tax,

installation, and other capitalized costs, except capitalized

interest, reflect the fair market value.

(e) "Industrial processing" means that term as defined in

section 4t of the general sales tax act, 1933 PA 167, MCL 205.54t,

or section 4o of the use tax act, 1937 PA 94, MCL 205.94o.

Industrial processing does not include the generation,

transmission, or distribution of electricity for sale.

(f) "New personal property" means property that was initially

placed in service in this state or outside of this state after

December 31, 2012 or that was construction in progress on or after

December 31, 2012 that had not been placed in service in this state

or outside of this state before 2013.

(g) "Occupied real property" means any of the following:

(i) A parcel of real property that is entirely owned, leased,

or otherwise occupied by a person claiming an exemption under this

section or under section 9n.

(ii) Contiguous parcels of real property that are entirely

owned, leased, or otherwise occupied by a person claiming an

exemption under this section or under section 9n and that host a

single, integrated business operation engaged primarily in

industrial processing, direct integrated support, or both. A

business operation is not engaged primarily in industrial

processing, direct integrated support, or both if it engages in

significant business activities that are not directly related to

industrial processing or direct integrated support. Contiguity is

not broken by a boundary between local tax collecting units, a

road, a right-of-way, or property purchased or taken under

condemnation proceedings by a public utility for power transmission

lines if the 2 parcels separated by the purchased or condemned

property were a single parcel prior to the sale or condemnation. As

used in this subparagraph, "single, integrated business operation"

means a company that combines 1 or more related operations or

divisions and operates as a single business unit.

(iii) The portion of a parcel of real property that is owned,

leased, or otherwise occupied by a person claiming the exemption

under this section or under section 9n or by an affiliated person.

(h) "Original cost" means the fair market value of personal

property at the time of acquisition by the first owner. There is a

rebuttable presumption that the acquisition price paid by the first

owner for personal property reflects the original cost of that

personal property. The department of treasury may provide

guidelines for 1 or more of the following circumstances:

(i) Determining original cost of personal property when the

actual acquisition price paid by the first owner for personal

property is not determinative of the original cost of that personal

property.

(ii) Estimating original cost of personal property when the

actual acquisition price paid by the first owner for the personal

property is unknown.

(iii) Adjusting original cost of personal property when the

personal property is idle, is obsolete or has material

obsolescence, or is surplus.

(i) "Person" means an individual, partnership, corporation,

association, limited liability company, or any other legal entity.

(j) "Qualified new personal property" means property that

meets all of the following conditions:

(i) Is eligible manufacturing personal property.

(ii) Is new personal property.

Sec. 9n. (1) Beginning December 31, 2015 and each year

thereafter, qualified previously existing personal property for

which an exemption has been properly claimed under subsection (2)

is exempt from the collection of taxes under this act.

(2) A person shall claim the exemption under this section and

section 9m by filing each year a combined document that includes:

the form to claim the exemption under this section and section 9m,

a report of the fair market value and year of acquisition by the

first owner of qualified previously existing personal property, and

for any year before 2023, a statement under section 19. All of the

following apply to a claim of the exemption under this section:

(a) The combined document shall be in a form and manner

prescribed by the department of treasury.

(b) Leasing companies are not eligible to receive the

exemption under this section and may not use the combined document

prescribed in this section. With respect to personal property that

is the subject of a lease agreement, regardless of whether the

agreement constitutes a lease for financial or tax purposes, all of

the following apply:

(i) If the personal property is eligible manufacturing

personal property, the lessee and lessor may elect that the lessee

report the leased personal property on the combined document.

(ii) An election made by the lessee and the lessor under this

subdivision shall be made in a form and manner approved by the

department.

(iii) Absent an election, the personal property shall be

reported by the lessor on the personal property statement unless

the exemption for eligible manufacturing personal property is

claimed by the lessee on the combined document.

completed and delivered to the assessor of the township or city in

which the qualified previously existing personal property is

located by February 20 of each year.

(d) The assessor shall transmit to the department of treasury

the information contained in the combined document filed under this

section, and other parcel information required by the department of

treasury and in the manner prescribed by the department of treasury

no later than April 1.

(e) A person claiming an exemption under this section shall

rescind the claim of exemption by December 31 of the year in which

exempted property is no longer eligible for the exemption by filing

with the assessor of the township or city a rescission affidavit in

a form prescribed by the department of treasury.

(f) The assessor of the township or city shall annually

transmit the rescission affidavits filed, or the information

contained in the rescission affidavits filed, under this section to

the department of treasury in the form and in the manner prescribed

by the department of treasury no later than April 1.

(3) If the assessor of the township or city believes that

personal property for which the form claiming an exemption is

timely filed by February 20 each year is not qualified previously

existing personal property or the form filed was incomplete, the

assessor may deny that claim for exemption by notifying the person

that filed the form in writing of the reason for the denial and

advising the person that the denial, shall be appealed to the board

of review under section 30 by filing a combined document as

prescribed under subsection (2). If the denial is issued after the

first meeting of the March board of review that follows the

organizational meeting, the appeal of the denial is either to the

March board of review or the Michigan tax tribunal by filing a

petition and a completed combined document as prescribed under

subsection (2), within 35 days of the denial notice. The assessor

may deny a claim for exemption under this subsection for the

current year only. If the assessor denies a claim for exemption,

the assessor shall remove the exemption of that personal property

and amend the tax roll to reflect the denial and the local

treasurer shall within 30 days of the date of the denial issue a

corrected tax bill for any additional taxes.

(4) A person claiming an exemption for qualified previously

existing personal property exempt under this section shall maintain

books and records and shall provide access to those books and

records as provided in section 22.

(5) If a person fraudulently claims an exemption for personal

property under this section, that person is subject to the

penalties provided for in section 21(2).

(6) For 2016 only, if an owner of qualified previously

existing personal property did not file form 5278 by February 22,

2016 or filed an incomplete form 5278 by February 22, 2016 to claim

the exemption under this section with the assessor of the city or

township in which the qualified previously existing personal

property is located, that owner may file form 5278 with the

assessor of the city or township in which the qualified previously

existing personal property is located no later than May 31, 2016.

If the assessor determines the property qualifies for the exemption

under this section, the assessor shall immediately amend the

assessment roll to reflect the exemption. The assessor of the

township or city shall transmit the affidavits filed, or the

information contained in the affidavits filed, under this section,

and other parcel information required by the department of

treasury, to the department of treasury in the form and in the

manner prescribed by the department of treasury no later than June

7, 2016. The owner shall still be required to meet all deadlines

required under section 7 of the state essential services assessment

act, 2014 PA 92, MCL 211.1057. If the assessor of the township or

city believes that personal property for which an affidavit

claiming an exemption is filed under this subsection by May 31,

2016 is not qualified previously existing personal property, the

assessor may deny that claim for exemption by notifying the person

that filed the affidavit in writing of the reason for the denial

and advising the person that the denial may be appealed to the

Michigan tax tribunal within 35 days of the date of the denial.

(7) For 2017 only, if an owner of qualified previously

existing personal property did not file the combined document by

February 21, 2017 to claim the exemption under this section with

the assessor of the city or township in which the qualified

previously existing personal property is located, that owner may

file the combined document with the assessor of the city or

township in which the qualified previously existing personal

property is located no later than May 31, 2017. If the assessor

determines the property qualifies for the exemption under this

section, the assessor shall immediately amend the assessment roll

to reflect the exemption. The assessor of the township or city

shall transmit the combined document filed, or the information

contained in the combined document filed, under this section, and

other parcel information required by the department of treasury, to

the department of treasury in the form and in the manner prescribed

by the department of treasury no later than June 9, 2017. The owner

shall still meet all deadlines required under section 7 of the

state essential services assessment act, 2014 PA 92, MCL 211.1057.

If the assessor of the township or city believes that personal

property for which a combined document claiming an exemption filed

under this subsection by May 31, 2017 is not qualified previously

existing personal property, the assessor may deny that claim for

exemption by notifying the person that filed the combined document

in writing of the reason for the denial and advising the person

that the denial may be appealed to the Michigan tax tribunal within

35 days of the date of the denial.

(8) ~~(7)~~ As used in this section:

(a) "Direct integrated support", "eligible manufacturing

personal property", "fair market value", and "industrial

processing" mean those terms as defined in section 9m.

(b) "Person" means an individual, partnership, corporation,

association, limited liability company, or any other legal entity.

personal property that meets both of the following conditions:

(i) Is eligible manufacturing personal property.

(ii) Was first placed in service within this state or outside

this state more than 10 years before the current calendar year.