SB-0867, As Passed Senate, May 21, 2008

SUBSTITUTE FOR

SENATE BILL NO. 867

A bill to amend 1974 PA 198, entitled

"An act to provide for the establishment of plant rehabilitation

districts and industrial development districts in local

governmental units; to provide for the exemption from certain

taxes; to levy and collect a specific tax upon the owners of

certain facilities; to impose and provide for the disposition of an

administrative fee; to provide for the disposition of the tax; to

provide for the obtaining and transferring of an exemption

certificate and to prescribe the contents of those certificates; to

prescribe the powers and duties of the state tax commission and

certain officers of local governmental units; and to provide

penalties,"

by amending sections 2, 9, and 15 (MCL 207.552, 207.559, and

207.565), sections 2 and 9 as amended by 2007 PA 146 and section 15

as amended by 1996 PA 513.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2. (1) "Commission" means the state tax commission

created by 1927 PA 360, MCL 209.101 to 209.107.

(2) "Facility" means either a replacement facility, a new

facility, or, if applicable by its usage, a speculative building.

(3) "Replacement facility" means 1 of the following:

(a) In the case of a replacement or restoration that occurs on

the same or contiguous land as that which is replaced or restored,

industrial property that is or is to be acquired, constructed,

altered, or installed for the purpose of replacement or restoration

of obsolete industrial property together with any part of the old

altered property that remains for use as industrial property after

the replacement, restoration, or alteration.

(b) In the case of construction on vacant noncontiguous land,

property that is or will be used as industrial property that is or

is to be acquired, constructed, transferred, or installed for the

purpose of being substituted for obsolete industrial property if

the obsolete industrial property is situated in a plant

rehabilitation district in the same city, village, or township as

the land on which the facility is or is to be constructed and

includes the obsolete industrial property itself until the time as

the substituted facility is completed.

(4) "New facility" means new industrial property other than a

replacement facility to be built in a plant rehabilitation district

or industrial development district.

(5) "Local governmental unit" means a city, village, or

township located in this state.

(6) "Industrial property" means land improvements, buildings,

structures, and other real property, and machinery, equipment,

furniture, and fixtures or any part or accessory whether completed

or in the process of construction comprising an integrated whole,

the primary purpose and use of which is the engaging in a high-

technology activity, operation of a strategic response center,

operation of a motorsports entertainment complex, operation of a

logistical optimization center, operation of qualified commercial

activity, operation of a major distribution and logistics facility,

the manufacture of goods or materials, creation or synthesis of

biodiesel fuel, or the processing of goods and materials by

physical or chemical change; property acquired, constructed,

altered, or installed due to the passage of proposal A in 1976; the

operation of a hydro-electric dam by a private company other than a

public utility; or agricultural processing facilities. Industrial

property includes facilities related to a manufacturing operation

under the same ownership, including, but not limited to, office,

engineering, research and development, warehousing, or parts

distribution facilities. Industrial property also includes research

and development laboratories of companies other than those

companies that manufacture the products developed from their

research activities and research development laboratories of a

manufacturing company that are unrelated to the products of the

company. For applications approved by the legislative body of a

local governmental unit between June 30, 1999 and December 31,

2007, industrial property also includes an electric generating

plant that is not owned by a local unit of government, including,

but not limited to, an electric generating plant fueled by biomass.

Industrial property also includes convention and trade centers over

250,000 square feet in size. Industrial property also includes a

federal reserve bank operating under 12 USC 341, located in a city

with a population of 750,000 or more. Industrial property may be

owned or leased. However, in the case of leased property, the

lessee is liable for payment of ad valorem property taxes and shall

furnish proof of that liability. Industrial property does not

include any of the following:

(a) Land.

(b) Property of a public utility other than an electric

generating plant that is not owned by a local unit of government

and for which an application was approved by the legislative body

of a local governmental unit between June 30, 1999 and December 31,

2007.

(7) "Obsolete industrial property" means industrial property

the condition of which is substantially less than an economically

efficient functional condition.

(8) "Economically efficient functional condition" means a

state or condition of property the desirability and usefulness of

which is not impaired due to changes in design, construction,

technology, or improved production processes, or from external

influencing factors that make the property less desirable and

valuable for continued use.

(9) "Research and development laboratories" means building and

structures, including the machinery, equipment, furniture, and

fixtures located in the building or structure, used or to be used

for research or experimental purposes that would be considered

qualified research as that term is used in section 41 of the

internal revenue code, 26 USC 41, except that qualified research

also includes qualified research funded by grant, contract, or

otherwise by another person or governmental entity.

(10) "Manufacture of goods or materials" or "processing of

goods or materials" means any type of operation that would be

conducted by an entity included in the classifications provided by

sector 31-33 — manufacturing, of the North American industry

classification system, United States, 1997, published by the office

of management and budget, regardless of whether the entity

conducting that operation is included in that manual.

(11) "High-technology activity" means that term as defined in

section 3 of the Michigan economic growth authority act, 1995 PA

24, MCL 207.803.

(12) "Logistical optimization center" means a sorting and

distribution center that supports a private passenger motor vehicle

assembly center and its manufacturing process for the purpose of

optimizing transportation, just-in-time inventory management, and

material handling, and to which all of the following apply:

(a) The sorting and distribution center is within 2 miles of a

private passenger motor vehicle assembly center that, together with

supporting facilities, contains at least 800,000 square feet.

(b) The sorting and distribution center contains at least

950,000 square feet.

industrial facilities exemption certificate after June 30, 2005 and

before January 1, 2006.

(d) The private passenger motor vehicle assembly center is

located on land conditionally transferred by a township with a

population of more than 25,000 under 1984 PA 425, MCL 124.21 to

124.30, to a city with a population of more than 100,000 that

levies an income tax under the city income tax act, 1964 PA 284,

MCL 141.501 to 141.787.

(13) "Commercial property" means that term as defined in

section 2 of the obsolete property rehabilitation act, 2000 PA 146,

MCL 125.2782.

(14) "Qualified commercial activity" means commercial property

that meets all of the following:

(a) An application for an exemption certificate approved by

the local governmental unit is filed for approval by the state tax

commission not later than April 30, 2006.

(b) At least 90% of the property, excluding the surrounding

green space, is used for warehousing, distribution, and logistics

purposes that provide food for institutional, restaurant, hospital,

or hotel customers.

Michigan state border.

(d) Occupies 1 or more buildings or structures that together

are greater than 300,000 square feet in size.

(15) "Motorsports entertainment complex" means a closed-course

motorsports facility, and its ancillary grounds and facilities,

that satisfies all of the following:

(a) Has at least 70,000 fixed seats for race patrons.

(b) Has at least 6 scheduled days of motorsports events each

calendar year, at least 2 of which shall be comparable to nascar

nextel cup events held in 2007 or their successor events.

sanctioned events each calendar year through concession outlets, a

majority of which are staffed by individuals who represent or are

members of 1 or more nonprofit civic or charitable organizations

that directly financially benefit from the concession outlets'

sales.

(d) Engages in tourism promotion.

(e) Has permanent exhibitions of motorsports history, events,

or vehicles.

(16) "Major distribution and logistics facility" means a

proposed distribution center that meets all of the following:

(a) Contains at least 300,000 square feet.

(b) Has or will have an assessed value of $5,000,000.00 or

more for the real property.

(d) Has as its purpose the distribution of inventory and

materials to facilities owned by the taxpayer whose primary

business is the retail sale of sporting goods and related

inventory.

Sec. 9. (1) The legislative body of the local governmental

unit, in its resolution approving an application, shall set forth a

finding and determination that the granting of the industrial

facilities exemption certificate, considered together with the

aggregate amount of industrial facilities exemption certificates

previously granted and currently in force, shall not have the

effect of substantially impeding the operation of the local

governmental unit or impairing the financial soundness of a taxing

unit that levies an ad valorem property tax in the local

governmental unit in which the facility is located or to be

located. If the state equalized valuation of property proposed to

be exempt pursuant to an application under consideration,

considered together with the aggregate state equalized valuation of

property exempt under certificates previously granted and currently

in force, exceeds 5% of the state equalized valuation of the local

governmental unit, the commission, with the approval of the state

treasurer, shall make a separate finding and shall include a

statement in the order approving the industrial facilities

exemption certificate that exceeding that amount shall not have the

effect of substantially impeding the operation of the local

governmental unit or impairing the financial soundness of an

affected taxing unit.

(2) Except for an application for a speculative building,

which is governed by subsection (4), the legislative body of the

local governmental unit shall not approve an application and the

commission shall not grant an industrial facilities exemption

certificate unless the applicant complies with all of the following

requirements:

(a) The commencement of the restoration, replacement, or

construction of the facility occurred not earlier than 12 months

before the filing of the application for the industrial facilities

exemption certificate. If the application is not filed within the

12-month period, the application may be filed within the succeeding

12-month period and the industrial facilities exemption certificate

shall in this case expire 1 year earlier than it would have expired

if the application had been timely filed. This subdivision does not

apply for applications filed with the local governmental unit after

December 31, 1983.

(b) For applications made after December 31, 1983, the

proposed facility shall be located within a plant rehabilitation

district or industrial development district that was duly

established in a local governmental unit eligible under this act to

establish a district and that was established upon a request filed

or by the local governmental unit's own initiative taken before the

commencement of the restoration, replacement, or construction of

the facility.

commencement of the restoration, replacement, or construction of

the facility occurred not earlier than 6 months before the filing

of the application for the industrial facilities exemption

certificate.

(d) The application relates to a construction, restoration, or

replacement program that when completed constitutes a new or

replacement facility within the meaning of this act and that shall

be situated within a plant rehabilitation district or industrial

development district duly established in a local governmental unit

eligible under this act to establish the district.

(e) Completion of the facility is calculated to, and will at

the time of issuance of the certificate have the reasonable

likelihood to create employment, retain employment, prevent a loss

of employment, or produce energy in the community in which the

facility is situated.

(f) Completion of the facility does not constitute merely the

addition of machinery and equipment for the purpose of increasing

productive capacity but rather is primarily for the purpose and

will primarily have the effect of restoration, replacement, or

updating the technology of obsolete industrial property. An

increase in productive capacity, even though significant, is not an

impediment to the issuance of an industrial facilities exemption

certificate if other criteria in this section and act are met. This

subdivision does not apply to a new facility.

(g) The provisions of subdivision (c) do not apply to a new

facility located in an existing industrial development district

owned by a person who filed an application for an industrial

facilities exemption certificate in April of 1992 if the

application was approved by the local governing body and was denied

by the state tax commission in April of 1993.

(h) The provisions of subdivisions (b) and (c) and section

4(3) do not apply to 1 or more of the following:

(i) A facility located in an industrial development district

owned by a person who filed an application for an industrial

facilities exemption certificate in October 1995 for construction

that was commenced in July 1992 in a district that was established

by the legislative body of the local governmental unit in July

1994. An industrial facilities exemption certificate described in

this subparagraph shall expire as provided in section 16(3).

(ii) A facility located in an industrial development district

that was established in January 1994 and was owned by a person who

filed an application for an industrial facilities exemption

certificate in February 1994 if the personal property and real

property portions of the application were approved by the

legislative body of the local governmental unit and the personal

property portion of the application was approved by the state tax

commission in December 1994 and the real property portion of the

application was denied by the state tax commission in December

1994. An industrial facilities exemption certificate described in

this subparagraph shall expire as provided in section 16(3).

(iii) A facility located in an industrial development district

that was established in December 1995 and was owned by a person who

filed an application for an industrial facilities exemptions

certificate in November or December 1995 for construction that was

commenced in September 1995.

(iv) A facility located in an industrial development district

owned by a person who filed an application for an industrial

facilities exemption certificate in July 2001 for construction that

was commenced in February 2001 in a district that was established

by the legislative body of the local governmental unit in September

2001. An industrial facilities exemption certificate described in

this subparagraph shall expire as provided in section 16. The

facility described in this subparagraph shall be taxed under this

act as if it was granted an industrial facilities exemption

certificate in October 2001, and a corrected tax bill shall be

issued by the local tax collecting unit if the local tax collecting

unit has possession of the tax roll or by the county treasurer if

the county has possession of the tax roll. If granting the

industrial facilities exemption certificate under this subparagraph

results in an overpayment of the tax, a rebate, including any

interest and penalties paid, shall be made to the taxpayer by the

local tax collecting unit if the local tax collecting unit has

possession of the tax roll or by the county treasurer if the county

has possession of the tax roll within 30 days of the date the

exemption is granted. The rebate shall be without interest.

(v) A facility located in an industrial development district

owned by a person who filed an application for an industrial

facilities exemption certificate in December 2005 for construction

that was commenced in September 2005 in a district that was

established by the legislative body of the local governmental unit

in December 2005. An industrial facilities exemption certificate

described in this subparagraph shall expire as provided in section

16.

(vi) A facility located in an existing industrial development

district owned by a person who filed or amended an application for

an industrial facilities exemption certificate for real property in

July 2006 if the application was approved by the legislative body

of the local governmental unit in September 2006 but not submitted

to the state tax commission until September 2006.

(vii) A new facility located in an existing industrial

development district owned by a person who filed or amended an

application for an industrial facilities exemption certificate for

personal property in June 2006 if the application was approved by

the legislative body of the local governmental unit in August 2006

but not submitted to the state tax commission until 2007. The

effective date of the certificate shall be December 31, 2006.

(viii) A new facility located in an industrial development

district that was established by the legislative body of the local

governmental unit in September of 2007 for construction that was

commenced in March 2007 and for which an application for an

industrial facilities exemption certificate was filed in September

of 2007.

(ix) A facility located in an industrial development district

that was established by the legislative body of the local

governmental unit in August 2007 and was owned by a person who

filed an application for an industrial facilities exemption

certificate in June 2007 for equipment that was purchased in

January 2007.

(i) The provisions of subdivision (c) do not apply to any of

the following:

(i) A new facility located in an existing industrial

development district owned by a person who filed an application for

an industrial facilities exemption certificate in October 1993 if

the application was approved by the legislative body of the local

governmental unit and the real property portion of the application

was denied by the state tax commission in December 1993.

(ii) A new facility located in an existing industrial

development district owned by a person who filed an application for

an industrial facilities exemption certificate in September 1993 if

the personal property portion of the application was approved by

the legislative body of the local governmental unit and the real

property portion of the application was denied by the legislative

body of the local governmental unit in October 1993 and

subsequently approved by the legislative body of the local

governmental unit in September 1994.

(iii) A facility located in an existing industrial development

district owned by a person who filed an application for an

industrial facilities exemption certificate in August 1993 if the

application was approved by the local governmental unit in

September 1993 and the application was denied by the state tax

commission in December 1993.

(iv) A facility located in an existing industrial development

district occupied by a person who filed an application for an

industrial facilities exemption certificate in June of 1995 if the

application was approved by the legislative body of the local

governmental unit in October of 1995 for construction that was

commenced in November or December of 1994.

(v) A facility located in an existing industrial development

district owned by a person who filed an application for an

industrial facilities exemption certificate in June of 1995 if the

application was approved by the legislative body of the local

governmental unit in July of 1995 and the personal property portion

of the application was approved by the state tax commission in

November of 1995.

(j) If the facility is locating in a plant rehabilitation

district or an industrial development district from another

location in this state, the owner of the facility is not delinquent

in any of the taxes described in section 10(1)(a) of the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2690, or substantially

delinquent in any of the taxes described in and as provided under

section 10(1)(b) of the Michigan renaissance zone act, 1996 PA 376,

MCL 125.2690.

(3) If the replacement facility when completed will not be

located on the same premises or contiguous premises as the obsolete

industrial property, then the applicant shall make provision for

the obsolete industrial property by demolition, sale, or transfer

to another person with the effect that the obsolete industrial

property shall within a reasonable time again be subject to

assessment and taxation under the general property tax act, 1893 PA

206, MCL 211.1 to 211.157, or be used in a manner consistent with

the general purposes of this act, subject to approval of the

commission.

(4) The legislative body of the local governmental unit shall

not approve an application and the commission shall not grant an

industrial facilities exemption certificate that applies to a

speculative building unless the speculative building is or is to be

located in a plant rehabilitation district or industrial

development district duly established by a local governmental unit

eligible under this act to establish a district; the speculative

building was constructed less than 9 years before the filing of the

application for the industrial facilities exemption certificate;

the speculative building has not been occupied since completion of

construction; and the speculative building otherwise qualifies

under subsection (2)(e) for an industrial facilities exemption

certificate. An industrial facilities exemption certificate granted

under this subsection shall expire as provided in section 16(3).

(5) Not later than September 1, 1989, the commission shall

provide to all local assessing units the name, address, and

telephone number of the person on the commission staff responsible

for providing procedural information concerning this act. After

October 1, 1989, a local unit of government shall notify each

prospective applicant of this information in writing.

(6) Notwithstanding any other provision of this act, if on

December 29, 1986 a local governmental unit passed a resolution

approving an exemption certificate for 10 years for real and

personal property but the commission did not receive the

application until 1992 and the application was not made complete

until 1995, then the commission shall issue, for that property, an

industrial facilities exemption certificate that begins December

30, 1987 and ends December 30, 1997. The facility described in this

subsection shall be taxed under this act as if it was granted an

industrial facilities exemption certificate on December 30, 1987.

(7) Notwithstanding any other provision of this act, if a

local governmental unit passed a resolution approving an industrial

facilities exemption certificate for a new facility on July 8, 1991

but rescinded that resolution and passed a resolution approving an

industrial facilities exemption certificate for that same facility

as a replacement facility on October 21, 1996, the commission shall

issue for that property an industrial facilities exemption

certificate that begins December 30, 1991 and ends December 2003.

The replacement facility described in this subsection shall be

taxed under this act as if it was granted an industrial facilities

exemption certificate on December 30, 1991.

(8) Property owned or operated by a casino is not industrial

property or otherwise eligible for an abatement or reduction of ad

valorem property taxes under this act. As used in this subsection,

"casino" means a casino or a parking lot, hotel, motel, convention

and trade center, or retail store owned or operated by a casino, an

affiliate, or an affiliated company, regulated by this state

pursuant to the Michigan gaming control and revenue act, 1996 IL 1,

MCL 432.201 to 432.226.

(9) Notwithstanding section 16a and any other provision of

this act, if a local governmental unit passed a resolution

approving an industrial facilities exemption certificate for a new

facility on October 28, 1996 for a certificate that expired in

December 2003 and the local governmental unit passes a resolution

approving the extension of the certificate after December 2003 and

before March 1, 2006, the commission shall issue for that property

an industrial facilities exemption certificate that begins on

December 30, 2005 and ends December 30, 2010 as long as the

property continues to qualify under this act.

(10) Notwithstanding any other provision of this act, if the

commission issued an industrial facilities exemption certificate

for a new facility on December 8, 1998 but revoked that industrial

facilities exemption certificate for that same facility effective

December 30, 2006 and that new facility is purchased by a buyer on

or before November 1, 2007, the commission shall issue for that

property an industrial facilities exemption certificate that begins

December 31, 1998 and ends December 30, 2010 and shall transfer

that industrial facilities exemption certificate to the buyer. The

new facility described in this subsection shall be taxed under this

act as if it was granted an industrial facilities exemption

certificate effective on December 31, 1998.

(11) Notwithstanding any other provision of this act, if the

commission issued industrial facilities exemption certificates for

new facilities on October 30, 2002, September 9, 2003, and November

30, 2005 but revoked the industrial facilities exemption

certificates for the same facilities effective December 30, 2007

and the new facilities continue to qualify under this act, the

commission shall issue for the properties industrial facilities

exemption certificates which end respectively on December 30, 2008,

December 30, 2009, and December 30, 2011.

Sec. 15. (1) Upon receipt of a request by certified mail to

the commission by the holder of an industrial facilities exemption

certificate requesting revocation of the certificate, the

commission shall by order revoke the certificate in whole or revoke

the certificate with respect to its real property component, or its

personal property component, whichever is requested.

(2) The legislative body of a local governmental unit may by

resolution request the commission to revoke the industrial

facilities exemption certificate of a facility upon the grounds

that, except as provided in section 7a, completion of the

replacement facility or new facility has not occurred within 2

years after the effective date of the certificate, unless a greater

time has been authorized by the commission for good cause; that the

replacement, restoration, or construction of the facility has not

occurred within 6 years after the date the initial industrial

facilities exemption certificate was issued as provided in section

7a, unless a greater time has been authorized by the commission for

good cause; that completion of the speculative building has not

occurred within 2 years after the date the certificate was issued

except as provided in section 7a, unless a greater time has been

authorized by the commission for good cause; that a speculative

building for which a certificate has been issued but is not yet

effective has been used as other than a manufacturing facility;

that the certificate issued for a speculative building has not

become effective within 2 years after the December 31 following the

date the certificate was issued; or that the purposes for which the

certificate was issued are not being fulfilled as a result of a

failure of the holder to proceed in good faith with the

replacement, restoration, or construction and operation of the

replacement facility or new facility or with the use of the

speculative building as a manufacturing facility in a manner

consistent with the purposes of this act and in the absence of

circumstances that are beyond the control of the holder.

(3) Upon receipt of the resolution, the commission shall give

notice in writing by certified mail to the holder of the

certificate, to the local legislative body, to the assessor of the

assessing unit, and to the legislative body of each local taxing

unit which levies taxes upon property in the local governmental

unit in which the facility is located. The commission shall afford

to the holder of the certificate, the local legislative body, the

assessor, and a representative of the legislative body of each

taxing unit an opportunity for a hearing. The commission shall by

order revoke the certificate if the commission finds that

completion except as provided in section 7a of the replacement

facility or new facility has not occurred within 2 years after the

effective date of the certificate or a greater time as authorized

by the commission for good cause; that completion of the

speculative building has not occurred within 2 years after the date

the certificate was issued except as provided in section 7a, unless

a greater time has been authorized by the commission for good

cause; that a speculative building for which a certificate has been

issued but is not yet effective has been used as other than a

manufacturing facility; that the certificate issued for a

speculative building has not become effective within 2 years after

the December 31 following the date the certificate was issued; or

that the holder of the certificate has not proceeded in good faith

with the replacement, restoration, or construction and operation of

the facility or with the use of the speculative building as a

manufacturing facility in good faith in a manner consistent with

the purposes of this act and in the absence of circumstances that

are beyond the control of the holder.

(4) The order of the commission revoking the certificate shall

be effective on the December 31 next following the date of the

order and the commission shall send by certified mail copies of its

order of revocation to the holder of the certificate, to the local

legislative body, to the assessor of the assessing unit in which

the facility is located, and to the legislative body of each taxing

unit which levies taxes upon property in the local governmental

unit in which the facility is located.

Senate Bill No. 867 as amended May 21, 2008

(5) A revocation of a certificate issued for a speculative

building shall specify and apply only to that portion of the

speculative building for which the grounds for revocation relate.

(6) Notwithstanding any other provision of this act, upon the

written request of the holder of a revoked industrial facilities

exemption certificate to the local unit of government and the

commission and the submission to the commission of a resolution of

concurrence by the legislative body of the local unit of government

in which the facility is located, <<AND IF THE FACILITY CONTINUES TO

QUALIFY UNDER THIS ACT,>> the commission may reinstate a

revoked industrial facilities exemption certificate.