HB 6022, 6024, 6025, 6026, and SB 1065-1071 Personal Property Tax (PPT)
On the last day of the lame duck session, Lt. Governor Calley and MAC reached an agreement on the PPT package of bills that would tie bar the entire PPT repeal to the passage of the use tax vote in 2014. This move, along with the inclusion of jails in the essential services assessment and the movement of the minimum threshold for 80% reimbursement from the state, brought MAC to a neutral position on the bills.
Although the package is not perfect, the Lt. Governor and the House and Senate have agreed to keep working throughout the next legislative session to address any unanswered questions and unfinished issues.
This package represents a significant improvement over all other options on the table. It has been our goal to achieve the most comprehensive and reliable replacement revenue source for our counties. The other option on the table was complete elimination of new personal property tax for new purchases starting Jan. 1, 2013 without any reimbursement plan. This would have left counties at a negotiating disadvantage with little incentive for the other interest groups to negotiate reimbursement proposals.
All counties in Michigan will be eligible to assess an essential services assessment and 63 of Michigan’s counties will be eligible for reimbursement from the diversion of the state’s use tax.
SB 1021 and 1022, HB 5367 Payment In Lieu of Tax (PILT)
SB 1021 and SB 1022, sponsored by Sens. Casperson (R-Delta County) and Booher (R-Osceola County) respectively, are on their way to the Governor for a signature. The bills increase state payment in lieu of taxes (PILT) obligations to counties according to inflation. In addition, they would allow counties to apply fees and penalties against the state if PILT payments are late or are not fully paid. In all, the bills would increase PILT payments to local units of government by about $9.7 million. MAC thanks Sens. Casperson and Booher, along with Rep. Frank Foster (R-Emmet County), the Governor, and all of the Northern Senators and Representatives for their hard work on this issue.
Additionally, HB 5367, sponsored by Representative Chuck Moss (R-Oakland County), is on its way to the Governor for a signature. The bill provides supplemental appropriations in the amount of $2.6 million to fully fund the state’s PILT obligation for the current year. Special thanks to Representative Moss, Senators Casperson and Booher, and the Governor for getting this done for counties.
PPT is headed to the House floor for a vote this morning, with a new proposal from house republicans that would exempt all new personal property from January 1, 2013, on, with no reimbursement. This would mean a virtual phase-out, with NO reimbursement to local governments.
This is an URGENT call to action. Please call your state representative to slow this down and not rush this through lame duck. Click here to find contact information for your legislators.
You can reference the Legislative Update from 12-7-12 for more details on the current PPT proposal, on MAC’s website under “resources” then “publications”.
MAC was invited to a special briefing in the Lt. Governor’s office to discuss his new plan for PPT Replacement. MAC’s position on PPT Repeal has remained the same, we will support the repeal if we get full reimbursement through a guaranteed revenue source. Lt. Governor Calley has heard our request and come up with a plan that may get counties 80% guaranteed reimbursement, but with the potential for additional reimbursement through a combination of a dedicated revenue source not subject to legislative appropriation and a special assessment to cover police, fire, and ambulatory services.
The basics of the repeal remain the same as they were when the bills passed out of the Senate. All commercial and industrial personal property with a taxable value of $40,000 or less would be exempt from the tax beginning in 2014. A new category of industrial personal property would be created to avoid giving certain industries, like wind turbines, the exemption. This new category is called Eligible Manufacturing Personal Property. The PPT exemptions for this category would be as follows:
* All new personal property bought after 12/31/2011 will be exempt as of 12/31/2015
* All personal property that is 10 years old would be exempt as of 12/31/2015 and continue each year until all the property is either new or 10 years old to achieve full exemption.
The reimbursement plan, although it meets some of our stated criteria, is not ideal. MAC has been assured by the Lt. Governor that for those counties who have more than 2.5% of their property taxes coming from personal property tax, their reimbursement cannot go below 80% of their PPT loss. Those less dependent on PPT (defined as having PPT revenue less than 2.5% of total property tax revenue) will not see any reimbursement. This revenue would come from utilizing a portion of the State’s use tax. This use tax money would be assessed by a new state-wide authority with broad powers and be distributed by the same entity, thus avoiding the legislature and the appropriations process. We are likely to have significant concerns over the power being granted to the authority, but we are still evaluating the proposal.
Counties would be able to make up more losses by placing a special Essential Services Assessment on industrial real property but only at a rate needed to replace 100% of lost PPT revenue that otherwise would have funded police and ambulance services from the County General Fund.
On the surface this proposal appears slightly better than the version that passed out of the Senate, but we still need time to evaluate it. We need to be especially careful that the lame duck legislature gets this right. When talking with your legislators, please reiterate the fact that the Senate passed version does not provide a good solution,and that the Lt. Governor’s new proposal needs to be fully vetted and any concerns rectified before action is taken.
This alert is an overview of what the plan is, but specific formulas for reimbursement or calculations have not yet been provided. As we learn more about the proposal and the impact it will have on counties, we will update you.
You can find more on the subject and how it will affect local government from these articles:
http://www.mlive.com/opinion/kalamazoo/index.ssf/2012/11/legislators_cannot_eliminate_p.html#incart_river_default
http://www.pressandguide.com/articles/2012/11/23/news/doc50afd57d2121b451047030.txt?viewmode=fullstory
