Legislative Update 9-11-20

New PPT bills would affect heavy equipment, solar

The House Committee on Tax Policy took testimony this week on House Bills 5778 and 5779, by Rep. Jim Ellison (D-Oakland), that would change the way rented heavy equipment is taxed in Michigan. Currently, heavy equipment is taxed as personal property (PPT) and credited to the taxing jurisdiction where it physically sits on Dec. 31 of each year. 

Since this equipment is rented and movable, neither the companies paying the taxes are clear what their obligations will be on a year to year basis nor can the local tax collecting units forecast the revenue in an efficient manner. The bills seek to eliminate PPT on this equipment and instead replace it with a 2 percent tax on the rental of the equipment. This tax would be paid by the customer, collected by the company renting the equipment and submitted quarterly to the Michigan Department of Treasury.

By May 20 of each year, Treasury would be required to send 90 percent of this revenue to the local tax collecting unit where the rental transaction originated, and 10 percent of the revenue to the other counties, cities, villages and townships not receiving a share of the distribution. Within 35 days of receiving the revenue, the tax collecting unit would be required to disburse the revenue to the taxing units (counties, et al) in the same proportion as it distributes property taxes. 

In addition to the equipment rental bills, bills affecting the PPT on solar energy facilities have been introduced. Senate Bill 1105, by Sen. Curt VanderWall (R-Mason) and SB 1101, by Sen. Kevin Daley (R-Tuscola), would exempt solar energy facilities and storage systems from the PPT and instead create a PILT (payment in lieu of taxes) system. 

Proponents are seeking a standardized, statewide system that will provide predictability in the taxes owed, regardless of the jurisdiction; escape the variability in assessments and millage rates; and provide a flat stream of revenue for those communities that host this equipment. The legislation would create a PILT of $3,500 per megawatt maximum annual payment, as opposed to a tax based on an assessed value and depreciation schedule.

In order to qualify for PILT as opposed to a tax, the owner of the facility would be required to file for and receive an exemption certificate, which would not expire unless they permanently ceased production, received a judicial determination that they failed to make their payments, or upon the jointly agreed upon termination date. MAC is seeking clarification on the equitable amount per megawatt hour, the assumptions that brought them to that amount, the efforts of the Michigan Tax Tribunal to make recommendations on standardizing the assessment of the equipment and the overall financial impact to counties.

MAC has not yet taken a position on any of these bills. The legislation will be discussed at our September Finance and General Government Committee session.

 For more information on this issue, contact Deena Bosworth at bosworth@micounties.org.