SENATE BILL NO. 62 January 26, 1999, Introduced by Senators BULLARD, SIKKEMA, GOSCHKA, ROGERS, MCCOTTER, HAMMERSTROM, DUNASKISS, JAYE and SHUGARS and referred to the Committee on Finance. A bill to amend 1893 PA 206, entitled "The general property tax act," by amending section 27a (MCL 211.27a), as amended by 1996 PA 476. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 27a. (1) Except as otherwise provided in this section, 2 property shall be assessedat 50% of its true cash valueunder 3 section 3 of article IX of the state constitution of 1963.AS 4 FOLLOWS: 5 (A) FOR TAXES LEVIED PRIOR TO JANUARY 1, 2000, AT 50% OF THE 6 PROPERTY'S TRUE CASH VALUE. 7 (B) FOR TAXES LEVIED AFTER DECEMBER 31, 1999 AND PRIOR TO 8 JANUARY 1, 2001, AT 45% OF THE PROPERTY'S TRUE CASH VALUE. 9 (C) FOR TAXES LEVIED AFTER DECEMBER 31, 2000, AT 40% OF THE 10 PROPERTY'S TRUE CASH VALUE. 00020'99 FDD 2 1 (2) Except as otherwise provided in subsection (3), for 2 taxes levied in 1995 and for each year after 1995, the taxable 3 value of each parcel of property is the lesser of the following: 4 (a) The property's taxable value in the immediately preced- 5 ing year minus any losses, multiplied by the lesser of 1.05 or 6 the inflation rate, plus all additions. For taxes levied in 7 1995, the property's taxable value in the immediately preceding 8 year is the property's state equalized valuation in 1994. 9 (b) The property's current state equalized valuation. 10 (3) Upon a transfer of ownership of property after 1994, the 11 property's taxable value for the calendar year following the year 12 of the transfer is the property's state equalized valuation for 13 the calendar year following the transfer. 14 (4) If the taxable value of property is adjusted under sub- 15 section (3), a subsequent increase in the property's taxable 16 value is subject to the limitation set forth in subsection (2) 17 until a subsequent transfer of ownership occurs. 18 (5) Assessment of property, as required in this section and 19 section 27, is inapplicable to the assessment of property subject 20 to the levy of ad valorem taxes within voted tax limitation 21 increases to pay principal and interest on limited tax bonds 22 issued by any governmental unit, including a county, township, 23 community college district, or school district, before January 1, 24 1964, if the assessment required to be made under this act would 25 be less than the assessment as state equalized prevailing on the 26 property at the time of the issuance of the bonds. This 27 inapplicability shall continue until levy of taxes to pay 00020'99 3 1 principal and interest on the bonds is no longer required. The 2 assessment of property required by this act shall be applicable 3 for all other purposes. 4 (6) As used in this act, "transfer of ownership" means the 5 conveyance of title to or a present interest in property, includ- 6 ing the beneficial use of the property, the value of which is 7 substantially equal to the value of the fee interest. Transfer 8 of ownership of property includes, but is not limited to, the 9 following: 10 (a) A conveyance by deed. 11 (b) A conveyance by land contract. The taxable value of 12 property conveyed by a land contract executed after December 31, 13 1994 shall be adjusted under subsection (3) for the calendar year 14 following the year in which the contract is entered into and 15 shall not be subsequently adjusted under subsection (3) when the 16 deed conveying title to the property is recorded in the office of 17 the register of deeds in the county in which the property is 18 located. 19 (c) A conveyance to a trust after December 31, 1994, except 20 if the settlor or the settlor's spouse, or both, conveys the 21 property to the trust and the sole present beneficiary or benefi- 22 ciaries are the settlor or the settlor's spouse, or both. 23 (d) A conveyance by distribution from a trust, except if the 24 distributee is the sole present beneficiary or the spouse of the 25 sole present beneficiary, or both. 00020'99 4 1 (e) A change in the sole present beneficiary or 2 beneficiaries of a trust, except a change that adds or 3 substitutes the spouse of the sole present beneficiary. 4 (f) A conveyance by distribution under a will or by intes- 5 tate succession, except if the distributee is the decedent's 6 spouse. 7 (g) A conveyance by lease if the total duration of the 8 lease, including the initial term and all options for renewal, is 9 more than 35 years or the lease grants theleaseeLESSEE a bar- 10 gain purchase option. As used in this subdivision, "bargain pur- 11 chase option" means the right to purchase the property at the 12 termination of the lease for not more than 80% of the property's 13 projected true cash value at the termination of the lease. After 14 December 31, 1994, the taxable value of property conveyed by a 15 lease with a total duration of more than 35 years or with a bar- 16 gain purchase option shall be adjusted under subsection (3) for 17 the calendar year following the year in which the lease is 18 entered into. This subdivision does not apply to personal prop- 19 erty except buildings described in section 14(6) and personal 20 property described in section 8(h), (i), and (j). This subdivi- 21 sion does not apply to that portion of the property not subject 22 to the leasehold interest conveyed. 23 (h) A conveyance of an ownership interest in a corporation, 24 partnership, sole proprietorship, limited liability company, 25 limited liability partnership, or other legal entity if the 26 ownership interest conveyed is more than 50% of the corporation, 27 partnership, sole proprietorship, limited liability company, 00020'99 5 1 limited liability partnership, or other legal entity. Unless 2 notification is provided under subsection (8), the corporation, 3 partnership, sole proprietorship, limited liability company, 4 limited liability partnership, or other legal entity shall notify 5 the assessing officer on a form provided by the state tax commis- 6 sion not more than 45 days after a conveyance of an ownership 7 interest that constitutes a transfer of ownership under this 8 subdivision. 9 (i) A transfer of property held as a tenancy in common, 10 except that portion of the property not subject to the ownership 11 interest conveyed. 12 (j) A conveyance of an ownership interest in a cooperative 13 housing corporation, except that portion of the property not 14 subject to the ownership interest conveyed. 15 (7) Transfer of ownership does not include the following: 16 (a) The transfer of property from 1 spouse to the other 17 spouse or from a decedent to a surviving spouse. 18 (b) A transfer from a husband, a wife, or a husband and wife 19 creating or disjoining a tenancy by the entireties in the grant- 20 ors or the grantor and his or her spouse. 21 (c) A transfer of that portion of property subject to a life 22 estate or life lease retained by the transferor, until expiration 23 or termination of the life estate or life lease. That portion of 24 property transferred that is not subject to a life lease shall be 25 adjusted under subsection (3). 26 (d) A transfer through foreclosure or forfeiture of a 27 recorded instrument under chapter 31, 32, or 57 of the revised 00020'99 6 1 judicature act of 1961,Act No. 236 of the Public Acts of 1961,2being sections 600.3101 to 600.3280 and 600.5701 to 600.5785 of3the Michigan Compiled Laws1961 PA 236, MCL 600.3101 TO 600.3280 4 AND 600.5701 TO 600.5785, or through deed or conveyance in lieu 5 of a foreclosure or forfeiture, until the mortgagee or land con- 6 tract vendor subsequently transfers the property. If a mortgagee 7 does not transfer the property within 1 year of the expiration of 8 any applicable redemption period, the property shall be adjusted 9 under subsection (3). 10 (e) A transfer by redemption by the person to whom taxes are 11 assessed of property previously sold for delinquent taxes. 12 (f) A conveyance to a trust if the settlor or the settlor's 13 spouse, or both, conveys the property to the trust and the sole 14 present beneficiary of the trust is the settlor or the settlor's 15 spouse, or both. 16 (g) A transfer pursuant to a judgment or order of a court of 17 record making or ordering a transfer, unless a specific monetary 18 consideration is specified or ordered by the court for the 19 transfer. 20 (h) A transfer creating or terminating a joint tenancy 21 between 2 or more persons if at least 1 of the persons was an 22 original owner of the property before the joint tenancy was ini- 23 tially created and, if the property is held as a joint tenancy at 24 the time of conveyance, at least 1 of the persons was a joint 25 tenant when the joint tenancy was initially created and that 26 person has remained a joint tenant since the joint tenancy was 27 initially created. A joint owner at the time of the last 00020'99 7 1 transfer of ownership of the property is an original owner of the 2 property. For purposes of this subdivision, a person is an orig- 3 inal owner of property owned by that person's spouse. 4 (i) A transfer for security or an assignment or discharge of 5 a security interest. 6 (j) A transfer of real property or other ownership interests 7 among members of an affiliated group. As used in this subsec- 8 tion, "affiliated group" means 1 or more corporations connected 9 by stock ownership to a common parent corporation. Upon request 10 by the state tax commission, a corporation shall furnish proof 11 within 45 days that a transfer meets the requirements of this 12 subdivision. A corporation that fails to comply with a request 13 by the state tax commission under this subdivision is subject to 14 a fine of $200.00. 15 (k) Normal public trading of shares of stock or other owner- 16 ship interests that, over any period of time, cumulatively repre- 17 sent more than 50% of the total ownership interest in a corpora- 18 tion or other legal entity and are traded in multiple transac- 19 tions involving unrelated individuals, institutions, or other 20 legal entities. 21 (l) A transfer of real property or other ownership interests 22 among corporations, partnerships, limited liability companies, 23 limited liability partnerships, or other legal entities if the 24 entities involved are commonly controlled. Upon request by the 25 state tax commission, a corporation, partnership, limited liabil- 26 ity company, limited liability partnership, or other legal entity 27 shall furnish proof within 45 days that a transfer meets the 00020'99 8 1 requirements of this subdivision. A corporation, partnership, 2 limited liability company, limited liability partnership, or 3 other legal entity that fails to comply with a request by the 4 state tax commission under this subdivision is subject to a fine 5 of $200.00. 6 (m) A direct or indirect transfer of real property or other 7 ownership interests resulting from a transaction that qualifies 8 as a tax-free reorganization under section 368 of the internal 9 revenue code of 1986, 26 U.S.C. 368. Upon request by the state 10 tax commission, a property owner shall furnish proof within 45 11 days that a transfer meets the requirements of this subdivision. 12 A property owner who fails to comply with a request by the state 13 tax commission under this subdivision is subject to a fine of 14 $200.00. 15 (8) The register of deeds of the county where deeds or other 16 title documents are recorded shall notify the assessing officer 17 of the appropriate local taxing unit not less than once each 18 month of any recorded transaction involving the ownership of 19 property and shall make any recorded deeds or other title docu- 20 ments available to that county's tax or equalization department. 21 Unless notification is provided under subsection (6), the buyer, 22 grantee, or other transferee of the property shall notify the 23 appropriate assessing office in the local unit of government in 24 which the property is located of the transfer of ownership of the 25 property within 45 days of the transfer of ownership, on a form 26 prescribed by the state tax commission that states the parties to 27 the transfer, the date of the transfer, the actual consideration 00020'99 9 1 for the transfer, and the property's parcel identification number 2 or legal description. Forms filed in the assessing office of a 3 local unit of government under this subsection shall be made 4 available to the county tax or equalization department for the 5 county in which that local unit of government is located. This 6 subsection does not apply to personal property except buildings 7 described in section 14(6) and personal property described in 8 section 8(h), (i), and (j). 9 (9) As used in this section: 10 (a) "Additions" means that term as defined in section 34d. 11 (b) "Beneficial use" means the right to possession, use, and 12 enjoyment of property, limited only by encumbrances, easements, 13 and restrictions of record. 14 (c) "Inflation rate" means that term as defined in section 15 34d. 16 (d) "Losses" means that term as defined in section 34d. 00020'99 Final page. FDD