The potential increase in taxable value of real property in Michigan is capped each year unless an “uncapping” event occurs. One such uncapping event is the sale or transfer of ownership of property. However, when the transfer is among entities that are commonly controlled, uncapping may not occur. On October 22, 2013 the Michigan Court of Appeals issued an opinion discussing this issue.
In Detroit Lions, Inc. and WCF Land, LLC v. City of Dearborn and City of Allen Park, the Michigan Court of Appeals held that the purchase of the Detroit Lion’s practice facility by WCF Land, LLC from an unrelated entity, despite WCF Land being under common control with the Detroit Lions, was an uncapping event. The practice facility was previously owned by Ford Motor Land Development Corporation and leased to the Lions. The Lions had an option to purchase the property, which it assigned to WCF Land. WCF Land then purchased the property from Ford Land, a separate entity.
The Lions and WCF Land argued that because the taxable value had been uncapped when the Lions took possession of the property, and because the Lions and WCF Land were under common control at the time of sale, the taxable value should remained capped. The Michigan Tax Tribunal Agreed. The Michigan Court of Appeals overturned the MTT decision, finding that because the Lions were not a party to the sale, and because neither the Lions nor WCF Land were under common control with Ford Land, the taxable value of the property could be uncapped for property tax purposes. Common control existed, but on the wrong side of the transaction.
Click here for the full opinion.