HOUSE BILL No. 4004 January 13, 1999, Introduced by Rep. Jelinek and referred to the Committee on Tax Policy. A bill to amend 1893 PA 206, entitled "The general property tax act," by amending section 34d (MCL 211.34d), as amended by 1996 PA 476. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 34d. (1) As used in this section or section 27a, or 2 section 3 or 31 of article IX of the state constitution of 1963: 3 (a) For taxes levied before 1995, "additions" means all 4 increases in value caused by new construction or a physical addi- 5 tion of equipment or furnishings, and the value of property that 6 was exempt from taxes or not included on the assessment unit's 7 immediately preceding year's assessment roll. 8 (b) For taxes levied after 1994, "additions" means, except 9 as provided in subdivision (c), all of the following: 00214'99 FDD 2 1 (i) Omitted real property. As used in this subparagraph, 2 "omitted real property" means previously existing tangible real 3 property not included in the assessment. Omitted real property 4 shall not increase taxable value as an addition unless the 5 assessing jurisdiction has a property record card or other docu- 6 mentation showing that the omitted real property was not previ- 7 ously included in the assessment. The assessing jurisdiction has 8 the burden of proof in establishing whether the omitted real 9 property is included in the assessment. Omitted real property 10 for the current and the 2 immediately preceding years, discovered 11 after the assessment roll has been completed, shall be added to 12 the tax roll pursuant to the procedures established in section 13 154. For purposes of determining the taxable value of real prop- 14 erty under section 27a, the value of omitted real property is 15 based on the value and the ratio of taxable value to true cash 16 value the omitted real property would have had if the property 17 had not been omitted. 18 (ii) Omitted personal property. As used in this subpara- 19 graph, "omitted personal property" means previously existing tan- 20 gible personal property not included in the assessment. Omitted 21 personal property shall be added to the tax roll pursuant to sec- 22 tion 154. 23 (iii) New construction. As used in this subparagraph, SUB- 24 PARAGRAPH (ix), AND SUBDIVISION (C)(iv), "new construction" means 25 property not in existence on the immediately preceding tax day 26 and not replacement construction. New construction includes the 27 physical addition of equipment or furnishings, subject to the 00214'99 3 1 provisions set forth in section 27(2)(a) to (o). For purposes of 2 determining the taxable value of property under section 27a, the 3 value of new construction is the true cash value of the new con- 4 struction multiplied by 0.50. 5 (iv) Previously exempt property. As used in this subpara- 6 graph, "previously exempt property" means property that was 7 exempt from ad valorem taxation under this act on the immediately 8 preceding tax day but is subject to ad valorem taxation on the 9 current tax day under this act. For purposes of determining the 10 taxable value of real property under section 27a: 11 (A) The value of property previously exempt under section 7u 12 is the taxable value the entire parcel of property would have had 13 if that property had not been exempt, minus the product of the 14 entire parcel's taxable value in the immediately preceding year 15 and the lesser of 1.05 or the inflation rate. 16 (B) The taxable value of property that is a facility as that 17 term is defined in section 2 ofAct No. 198 of the Public Acts18of 1974, being section 207.552 of the Michigan Compiled Laws19 1974 PA 198, MCL 207.552, that was previously exempt under 20 section 7k is the taxable value that property would have had 21 under this act if it had not been exempt. 22 (C) The value of property previously exempt under any other 23 section of law is the true cash value of the previously exempt 24 property multiplied by 0.50. 25 (v) Replacement construction. As used in this subparagraph, 26 "replacement construction" means construction that replaced 27 property damaged or destroyed by accident or act of God and that 00214'99 4 1 occurred after the immediately preceding tax day to the extent 2 the construction's true cash value does not exceed the true cash 3 value of property that was damaged or destroyed by accident or 4 act of God in the immediately preceding 3 years. For purposes of 5 determining the taxable value of property under section 27a, the 6 value of the replacement construction is the true cash value of 7 the replacement construction multiplied by a fraction the numera- 8 tor of which is the taxable value of the property to which the 9 construction was added in the immediately preceding year and the 10 denominator of which is the true cash value of the property to 11 which the construction was added in the immediately preceding 12 year, and then multiplied by the lesser of 1.05 or the inflation 13 rate. 14 (vi) An increase in taxable value attributable to the com- 15 plete or partial remediation of environmental contamination 16 existing on the immediately preceding tax day. The department of 17 environmental quality shall determine the degree of remediation 18 based on information available in existing department of environ- 19 mental quality records or information made available to the 20 department of environmental quality if the appropriate assessing 21 officer for a local tax collecting unit requests that 22 determination. The increase in taxable value attributable to the 23 remediation is the increase in true cash value attributable to 24 the remediation multiplied by a fraction the numerator of which 25 is the taxable value of the property had it not been contaminated 26 and the denominator of which is the true cash value of the 27 property had it not been contaminated. 00214'99 5 1 (vii) An increase in the value attributable to the 2 property's occupancy rate if either a loss, as that term is 3 defined in this section, had been previously allowed because of a 4 decrease in the property's occupancy rate or if the value of new 5 construction was reduced because of a below-market occupancy 6 rate. For purposes of determining the taxable value of property 7 under section 27a, the value of an addition for the increased 8 occupancy rate is the product of the increase in the true cash 9 value of the property attributable to the increased occupancy 10 rate multiplied by a fraction the numerator of which is the tax- 11 able value of the property in the immediately preceding year and 12 the denominator of which is the true cash value of the property 13 in the immediately preceding year, and then multiplied by the 14 lesser of 1.05 or the inflation rate. 15 (viii) Public services. As used in this subparagraph, 16 "public services" means water service, sewer service, a primary 17 access road, natural gas service, electrical service, telephone 18 service, sidewalks, or street lighting. For purposes of deter- 19 mining the taxable value of real property under section 27a, the 20 value of public services is the amount of increase in true cash 21 value of the property attributable to the available public serv- 22 ices multiplied by 0.50 and shall be added in the calendar year 23 following the calendar year when those public services are ini- 24 tially available. 25 (ix) NEW CONSTRUCTION, A MOBILE HOME ASSESSABLE AS REAL 26 PROPERTY UNDER SECTION 2A, OR SIMILAR STRUCTURE, NOT PREVIOUSLY 27 CONSIDERED AN ADDITION PURSUANT TO SUBDIVISION (C)(iv), IF THE 00214'99 6 1 FAMILY MEMBER WHO OCCUPIED THE NEW CONSTRUCTION, MOBILE HOME, OR 2 SIMILAR STRUCTURE HAS NOT OCCUPIED THE NEW CONSTRUCTION, MOBILE 3 HOME, OR SIMILAR STRUCTURE FOR 6 MONTHS OR MORE. 4 (c) For taxes levied after 1994, additions do not include 5 increased value attributable to any of the following: 6 (i) Platting, splits, or combinations of property. 7 (ii) A change in the zoning of property. 8 (iii) For the purposes of the calculation of the millage 9 reduction fraction under subsection (7) only, increased taxable 10 value under section 27a(3) after a transfer of ownership of 11 property. 12 (iv) NEW CONSTRUCTION, A MOBILE HOME ASSESSABLE AS REAL 13 PROPERTY UNDER SECTION 2A, OR SIMILAR STRUCTURE, IF IT IS OCCU- 14 PIED OR WILL BE OCCUPIED BY A FAMILY MEMBER WHO IS 62 YEARS OF 15 AGE OR OLDER. 16 (d) "Assessed valuation of property as finally equalized" 17 means taxable value under section 27a. 18 (e) "Financial officer" means the officer responsible for 19 preparing the budget of a unit of local government. 20 (f) "General price level" means the annual average of the 12 21 monthly values for the United States consumer price index for all 22 urban consumers as defined and officially reported by the United 23 States department of labor, bureau of labor statistics. 24 (g) For taxes levied before 1995, "losses" means a decrease 25 in value caused by the removal or destruction of real or personal 26 property and the value of property taxed in the immediately 00214'99 7 1 preceding year that has been exempted or removed from the 2 assessment unit's assessment roll. 3 (h) For taxes levied after 1994, "losses" means, except as 4 provided in subdivision (i), all of the following: 5 (i) Property that has been destroyed or removed. For pur- 6 poses of determining the taxable value of property under section 7 27a, the value of property destroyed or removed is the product of 8 the true cash value of that property multiplied by a fraction the 9 numerator of which is the taxable value of that property in the 10 immediately preceding year and the denominator of which is the 11 true cash value of that property in the immediately preceding 12 year. 13 (ii) Property that was subject to ad valorem taxation under 14 this act in the immediately preceding year that is now exempt 15 from ad valorem taxation under this act. For purposes of deter- 16 mining the taxable value of property under section 27a, the value 17 of property exempted from ad valorem taxation under this act is 18 the amount exempted. 19 (iii) An adjustment in value, if any, because of a decrease 20 in the property's occupancy rate, to the extent provided by law. 21 For purposes of determining the taxable value of real property 22 under section 27a, the value of a loss for a decrease in the 23 property's occupancy rate is the product of the decrease in the 24 true cash value of the property attributable to the decreased 25 occupancy rate multiplied by a fraction the numerator of which is 26 the taxable value of the property in the immediately preceding 00214'99 8 1 year and the denominator of which is the true cash value of the 2 property in the immediately preceding year. 3 (iv) A decrease in taxable value attributable to environmen- 4 tal contamination existing on the immediately preceding tax day. 5 The department of environmental quality shall determine the 6 degree to which environmental contamination limits the use of 7 property based on information available in existing department of 8 environmental quality records or information made available to 9 the department of environmental quality if the appropriate 10 assessing officer for a local tax collecting unit requests that 11 determination. The department of environmental quality's deter- 12 mination of the degree to which environmental contamination 13 limits the use of property shall be based on the criteria estab- 14 lished for theclassificationsCATEGORIES set forth in section 15 20120a(1) of part 201 (environmental remediation) of the natural 16 resources and environmental protection act,Act No. 451 of the17Public Acts of 1994, being section 324.20120a of the Michigan18Compiled Laws1994 PA 451, MCL 324.20120A. The decrease in tax- 19 able value attributable to the contamination is the decrease in 20 true cash value attributable to the contamination multiplied by a 21 fraction the numerator of which is the taxable value of the prop- 22 erty had it not been contaminated and the denominator of which is 23 the true cash value of the property had it not been 24 contaminated. 25 (i) For taxes levied after 1994, losses do not include 26 decreased value attributable to either of the following: 00214'99 9 1 (i) Platting, splits, or combinations of property. 2 (ii) A change in the zoning of property. 3 (j) "New construction and improvements" means additions less 4 losses. 5 (k) "Current year" means the year for which the millage lim- 6 itation is being calculated. 7 (l) "Inflation rate" means the ratio of the general price 8 level for the state fiscal year ending in the calendar year imme- 9 diately preceding the current year divided by the general price 10 level for the state fiscal year ending in the calendar year 11 before the year immediately preceding the current year. 12 (2) On or before the first Monday in May of each year, the 13 assessing officer of each township or city shall tabulate the 14 tentative taxable value as approved by the local board of review 15 and as modified by county equalization for each classification of 16 property that is separately equalized for each unit of local gov- 17 ernment and provide the tabulated tentative taxable values to the 18 county equalization director. The tabulation by the assessing 19 officer shall contain additions and losses for each classifica- 20 tion of property that is separately equalized for each unit of 21 local government or part of a unit of local government in the 22 township or city. If as a result of state equalization the tax- 23 able value of property changes, the assessing officer of each 24 township or city shall revise the calculations required by this 25 subsection on or before the Friday following the fourth Monday in 26 May. The county equalization director shall compute these 27 amounts and the current and immediately preceding year's taxable 00214'99 10 1 values for each classification of property that is separately 2 equalized for each unit of local government that levies taxes 3 under this act within the boundary of the county. The county 4 equalization director shall cooperate with equalization directors 5 of neighboring counties, as necessary, to make the computation 6 for units of local government located in more than 1 county. The 7 county equalization director shall calculate the millage reduc- 8 tion fraction for each unit of local government in the county for 9 the current year. The financial officer for each taxing juris- 10 diction shall calculate the compounded millage reduction frac- 11 tions beginning in 1980 resulting from the multiplication of suc- 12 cessive millage reduction fractions and shall recognize a local 13 voter action to increase the compounded millage reduction frac- 14 tion to a maximum of 1 as a new beginning fraction. Upon request 15 of the superintendent of the intermediate school district, the 16 county equalization director shall transmit the complete computa- 17 tions of the taxable values to the superintendent of the interme- 18 diate school district within that county. At the request of the 19 presidents of community colleges, the county equalization direc- 20 tor shall transmit the complete computations of the taxable 21 values to the presidents of community colleges within the 22 county. 23 (3) On or before the first Monday in June of each year, the 24 county equalization director shall deliver the statement of the 25 computations signed by the county equalization director to the 26 county treasurer. 00214'99 11 1 (4) On or before the second Monday in June of each year, the 2 treasurer of each county shall certify the immediately preceding 3 year's taxable values, the current year's taxable values, the 4 amount of additions and losses for the current year, and the cur- 5 rent year's millage reduction fraction for each unit of local 6 government that levies a property tax in the county. 7 (5) The financial officer of each unit of local government 8 shall make the computation of the tax rate using the data certi- 9 fied by the county treasurer and the state tax commission. At 10 the annual session in October, the county board of commissioners 11 shall not authorize the levy of a tax unless the governing body 12 of the taxing jurisdiction has certified that the requested mill- 13 age has been reduced, if necessary, in compliance with section 31 14 of article IX of the state constitution of 1963. 15 (6) The number of mills permitted to be levied in a tax year 16 is limited as provided in this section pursuant to section 31 of 17 article IX of the state constitution of 1963. A unit of local 18 government shall not levy a tax rate greater than the rate deter- 19 mined by reducing its maximum rate or rates authorized by law or 20 charter by a millage reduction fraction as provided in this sec- 21 tion without voter approval. 22 (7) A millage reduction fraction shall be determined for 23 each year for each local unit of government. For ad valorem 24 property taxes that became a lien before January 1, 1983, the 25 numerator of the fraction shall be the total state equalized val- 26 uation for the immediately preceding year multiplied by the 27 inflation rate and the denominator of the fraction shall be the 00214'99 12 1 total state equalized valuation for the current year minus new 2 construction and improvements. For ad valorem property taxes 3 that become a lien after December 31, 1982 and through 4 December 31, 1994, the numerator of the fraction shall be the 5 product of the difference between the total state equalized valu- 6 ation for the immediately preceding year minus losses multiplied 7 by the inflation rate and the denominator of the fraction shall 8 be the total state equalized valuation for the current year minus 9 additions. For ad valorem property taxes that are levied after 10 December 31, 1994, the numerator of the fraction shall be the 11 product of the difference between the total taxable value for the 12 immediately preceding year minus losses multiplied by the infla- 13 tion rate and the denominator of the fraction shall be the total 14 taxable value for the current year minus additions. For each 15 year after 1993, a millage reduction fraction shall not exceed 16 1. 17 (8) The compounded millage reduction fraction for each year 18 after 1980 shall be calculated by multiplying the local unit's 19 previous year's compounded millage reduction fraction by the cur- 20 rent year's millage reduction fraction. Beginning with 1980 tax 21 levies, the compounded millage reduction fraction for the year 22 shall be multiplied by the maximum millage rate authorized by law 23 or charter for the unit of local government for the year, except 24 as provided by subsection (9). A compounded millage reduction 25 fraction shall not exceed 1. 26 (9) The millage reduction shall be determined separately for 27 authorized millage approved by the voters. The limitation on 00214'99 13 1 millage authorized by the voters on or before May 31 of a year 2 shall be calculated beginning with the millage reduction fraction 3 for that year. Millage authorized by the voters after May 31 4 shall not be subject to a millage reduction until the year fol- 5 lowing the voter authorization which shall be calculated begin- 6 ning with the millage reduction fraction for the year following 7 the authorization. The first millage reduction fraction used in 8 calculating the limitation on millage approved by the voters 9 after January 1, 1979 shall not exceed 1. 10 (10) A millage reduction fraction shall be applied sepa- 11 rately to the aggregate maximum millage rate authorized by a 12 charter and to each maximum millage rate authorized by state law 13 for a specific purpose. 14 (11) A unit of local government may submit to the voters for 15 their approval the levy in that year of a tax rate in excess of 16 the limit set by this section. The ballot question shall ask the 17 voters to approve the levy of a specific number of mills in 18 excess of the limit. The provisions of this section do not allow 19 the levy of a millage rate in excess of the maximum rate autho- 20 rized by law or charter. If the authorization to levy millage 21 expires after 1993 and a local governmental unit is asking voters 22 to renew the authorization to levy the millage, the ballot ques- 23 tion shall ask for renewed authorization for the number of expir- 24 ing mills as reduced by the millage reduction required by this 25 section. If the election occurs before June 1 of a year, the 26 millage reduction is based on the immediately preceding year's 27 millage reduction applicable to that millage. If the election 00214'99 14 1 occurs after May 31 of a year, the millage reduction shall be 2 based on that year's millage reduction applicable to that millage 3 had it not expired. 4 (12) A reduction or limitation under this section shall not 5 be applied to taxes imposed for the payment of principal and 6 interest on bonds or other evidence of indebtedness or for the 7 payment of assessments or contract obligations in anticipation of 8 which bonds are issued that were authorized before December 23, 9 1978, as provided by former section 4 of chapter I of the munici- 10 pal finance act,Act No. 202 of the Public Acts of 19431943 11 PA 202, or to taxes imposed for the payment of principal and 12 interest on bonds or other evidence of indebtedness or for the 13 payment of assessments or contract obligations in anticipation of 14 which bonds are issued that are approved by the voters after 15 December 22, 1978. 16 (13) If it is determined subsequent to the levy of a tax 17 that an incorrect millage reduction fraction has been applied, 18 the amount of additional tax revenue or the shortage of tax reve- 19 nue shall be deducted from or added to the next regular tax levy 20 for that unit of local government after the determination of the 21 authorized rate pursuant to this section. 22 (14) If as a result of an appeal of county equalization or 23 state equalization the taxable value of a unit of local govern- 24 ment changes, the millage reduction fraction for the year shall 25 be recalculated. The financial officer shall effectuate an addi- 26 tion or reduction of tax revenue in the same manner as prescribed 27 in subsection (13). 00214'99 15 1 (15) The fractions calculated pursuant to this section shall 2 be rounded to 4 decimal places, except that the inflation rate 3 shall be computed by the state tax commission and shall be 4 rounded to 3 decimal places. The state tax commission shall pub- 5 lish the inflation rate before March 1 of each year. 6 (16) Beginning with taxes levied in 1994, the millage reduc- 7 tion required by section 31 of article IX of the state constitu- 8 tion of 1963 shall permanently reduce the maximum rate or rates 9 authorized by law or charter. The reduced maximum authorized 10 rate or rates for 1994 shall equal the product of the maximum 11 rate or rates authorized by law or charter before application of 12 this section multiplied by thecompoundCOMPOUNDED millage 13 reduction applicable to that millage in 1994 pursuant to subsec- 14 tions (8) to (12). The reduced maximum authorized rate or rates 15 for 1995 and each year after 1995 shall equal the product of the 16 immediately preceding year's reduced maximum authorized rate or 17 rates multiplied by the current year's millage reduction fraction 18 and shall be adjusted for millage for which authorization has 19 expired and new authorized millage approved by the voters pursu- 20 ant to subsections (8) to (12). 00214'99 Final page. FDD