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A Better Partnership
February 24, 2012

COA Opinion: Homestead property tax credit is not income

The plaintiff in Ferrero v. Walton Twp., received a homestead property tax credit for property taxes paid in 2008. Because the plaintiff did not owe state income taxes for 2008, she received a check for payment of the amount of the credit. In 2009, the plaintiff requested an exemption from property taxes under the homestead property tax exemption (MCL 211.7u), which states that a person whose income is below the poverty line is exempted from paying that year's property taxes. The plaintiff received $9,732 in social security disability income in 2009. The tax tribunal treated the $1,093 tax credit paid to her in 2009 as income, and concluded that her income exceeded the poverty line of $10,400 for an individual. The Court of Appeals reversed, concluding that the homestead property tax credit was a refund of taxes, and therefore, it was not income. The court reasoned that the tax credit functioned as a refund because its purpose is to 'rebate a portion of the property taxes a person has already paid.' Judge Shapiro authored the majority opinion, and Judge Beckering joined. Judge Owens dissented, stating that the tax credit is not a refund ' which involves an overpayment or incorrect payment of taxes ' but rather a 'refundable tax credit,' which uses state funds to pay a portion of property taxes that was paid to a local government.

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