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Jul 2014
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July 28, 2014

Michigan Voters to Decide Fate of Controversial Business Tax


On August 5 Michigan voters will be asked to repeal Michigan’s personal property tax for most businesses. Under the current tax structure, Michigan businesses pay sales tax when purchasing personal property as well as an annual personal property tax for the same property.  The proposal seeks to eliminate the personal property tax, replacing the lost revenues from use taxes.

The ballot language is as follows:

APPROVAL OR DISAPPROVAL OF AMENDATORY ACT TO REDUCE STATE USE TAX AND REPLACE WITH A LOCAL COMMUNITY STABILIZATION SHARE TO MODERNIZE THE TAX SYSTEM TO HELP SMALL BUSINESSES GROW AND CREATE JOBS

The amendatory act adopted by the Legislature would:
  1. Reduce the state use tax and replace with a local community stabilization share of the tax for the purpose of modernizing the tax system to help small businesses grow and create jobs in Michigan.
  2. Require Local Community Stabilization Authority to provide revenue to local governments dedicated for local purposes, including police safety, fire protection, and ambulance emergency services.
  3. Increase portion of state use tax dedicated for aid to local school districts.
  4. Prohibit Authority from increasing taxes.
  5. Prohibit total use tax rate from exceeding existing constitutional 6% limitation.

Should this law be approved?

YES [ ]

NO [ ]

This proposal would continue the tax changes started under PA 408 of 2012 by permanently eliminating the personal property tax for most businesses, beginning in 2016. Currently, businesses with less than $80,000 (true cash value) of industrial and commercial property do not have to pay personal property tax; this exemption would remain unchanged under the new law. Certain “eligible manufacturing” property would also be exempt from personal property tax. Additionally, the new law would exempt any personal property a taxpayer purchased in 2013 or later and any personal property that is over 10 years old. Personal property taxes on all other personal property would be phased out over 10 years.

Beginning in 2016, the proposal would also create a mechanism to fully reimburse local governments for the loss in tax revenue due to the elimination of personal property tax. The law would create a specific share of the use tax (the “local community stabilization share”) that the state would automatically turn over to “local community stabilization authorities.”  Also, the proposal will establish an “Essential Services Assessment” on certain personal property that is subject to a personal property exemption.  The state will then use the funds derived from this assessment to maintain funding for essential services (e.g., fire, police, etc.).

Please contact any member of the Corporate and Business Services, Real Estate Services or Tax Law Practice Groups if you have any questions regarding the ballot issue.

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