In Rentschler v. Township of Melrose, No. 33633, the Court of Appeals addressed the issue of whether an individual is entitled to a Principal Residence Exemption (PRE) even though the individual rented the residence for over 14 days in a year. Specifically the court addressed whether the provision of the Michigan Department of Treasury Guidelines for the Principal Resident Exemption program (PRE guidelines) relied on by the Tax Tribunal in denying the petitioner’s PRE was consistent with General Property Tax Act (“GPTA”). The Court of Appeals held it was not.
In this case, David Rentschler (“Petitioner”) applied for a PRE on property located in Boyne City, Michigan. The Township of Melrose (“Respondent”) denied the application reasoning that the property was not Petitioner’s principal residence and the propriety was possibly rented during part of the year. Petitioner appealed to the Michigan Tax Tribunal contesting Respondents decision to deny the PRE. The Tribunal upheld Respondent’s decision relying on the PRE guideline which states that “[I]f an owner rents his property for more than 14 days in a year, the property is not entitled to a principal residence exemption.”
The Court of Appeals disagreed with the decision of the Tribunal holding that the PRE guidelines do not have the force of law, and the PRE guideline relied upon in the Tribunal’s decision was erroneous and inconsistent with the GTPA. In reaching the decision the Court of Appeals stated that the language of MCL 211.7cc(2) is clear and unambiguous in granting tax exemption for a property owners principal residence. The court further stated that MCL211.7cc(3) sets forth multiple scenarios that disqualify a property from perceiving PRE and none of them include renting the property for more than 14 days in a year. In addition to the GTPA failing to deny property from primary residence status for simply being rented for more than 14 days in a year, the Court of Appeals referenced federal income tax law in support of its decision. Under federal income tax law, a piece of property can be used as a primary residence and well as for rental purposes without losing its status as a primary residence.
Therefore, because the language of the GTPA as it relates to the PRE is clear and unambiguous, the PRE guidelines lack force of law, and federal income tax law allows a piece of property to have a dual purpose without losing its primary residence status, the Court of Appeals overruled the Tribunal and ordered it to enter judgement granting Petitioner’s request for PRE.
In this case, David Rentschler (“Petitioner”) applied for a PRE on property located in Boyne City, Michigan. The Township of Melrose (“Respondent”) denied the application reasoning that the property was not Petitioner’s principal residence and the propriety was possibly rented during part of the year. Petitioner appealed to the Michigan Tax Tribunal contesting Respondents decision to deny the PRE. The Tribunal upheld Respondent’s decision relying on the PRE guideline which states that “[I]f an owner rents his property for more than 14 days in a year, the property is not entitled to a principal residence exemption.”
The Court of Appeals disagreed with the decision of the Tribunal holding that the PRE guidelines do not have the force of law, and the PRE guideline relied upon in the Tribunal’s decision was erroneous and inconsistent with the GTPA. In reaching the decision the Court of Appeals stated that the language of MCL 211.7cc(2) is clear and unambiguous in granting tax exemption for a property owners principal residence. The court further stated that MCL211.7cc(3) sets forth multiple scenarios that disqualify a property from perceiving PRE and none of them include renting the property for more than 14 days in a year. In addition to the GTPA failing to deny property from primary residence status for simply being rented for more than 14 days in a year, the Court of Appeals referenced federal income tax law in support of its decision. Under federal income tax law, a piece of property can be used as a primary residence and well as for rental purposes without losing its status as a primary residence.
Therefore, because the language of the GTPA as it relates to the PRE is clear and unambiguous, the PRE guidelines lack force of law, and federal income tax law allows a piece of property to have a dual purpose without losing its primary residence status, the Court of Appeals overruled the Tribunal and ordered it to enter judgement granting Petitioner’s request for PRE.
