Much has been written about the confusing state of Michigan personal property tax reform and the several bills passed in 2012 (and subsequently amended) designed to eliminate, over time, personal property taxes (“PPT”) on “eligible manufacturing personal property” (“EMPP”). The various bills are designed so that virtually all industrial personal property is likely to meet the EMPP definition. Good news, right? That depends. The bills, which would provide PPT relief beginning in 2016, are contingent upon voter approval of a ballot proposal in August 2014. Municipalities may attempt to defeat the ballot proposal out of concern that the bills fail to provide for adequate replacement for the lost PPT revenues (although pending amendments to the PPT reform bills may alleviate this concern). It remains possible that the PPT reform bills will never go into effect. Here’s where the PPT gamble comes into play.
One of the largest and longest existing PPT exemption programs available to eligible manufacturers is the Industrial Facilities Exemption (IFE). Under appropriate circumstances, a qualified manufacturer who obtains an IFE certificate is entitled to exemption from ad valorem real and/or personal property taxes for anywhere from one to twelve years, as determined by the municipality. The IFE is fairly complex, but it may be generally summarized as providing a 50% reduction in gross PPT for the life of the exemption.
Since there are important timing requirements for obtaining the IFE (e.g., you must obtain both state and local approval within six months after commencement), the gamble that is presented to qualified manufacturers who are about to install new and costly equipment into a qualified facility is that if they do not seek the IFE and the PPT reform ballot measure is defeated, they may be left without any form of PPT exemption or relief. Perhaps you have already carefully assessed your own particular PPT situation in light of this gamble and have “placed your bet.” If you have not, you’ll want to become fully informed with the qualifications and “rules of the game” to make your best bet, lest you end up on the wrong end of Clint Eastwood/Dirty Harry’s famous question, “Are you feeling lucky…”? If you have recently, or will soon, put new personal property into your Michigan facility, we can help you with all of the information and understanding you will need to make the safe bet.