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2014 Michigan Personal Property Tax Changes: The Small Business Exemption

December 09, 2013

Effective for the 2014 Personal Property Tax filing season there is an exemption available for taxpayers with less than $80,000 of combined true cash value of personal property owned by, leased by or in the possession of the claimant and/or related entities, per jurisdiction (not per parcel). The value of trade fixtures and leasehold improvements not assessed as real property as well as the value of property exempt as Eligible Manufacturing Personal Property must also be included in the computation of True Cash Value for purposes of the $80,000 threshold. The exemption is available for industrial as well as commercial property. The owner must apply for exemption every year by February 10. An affidavit on Form 5076 for each jurisdiction should be in the possession of the assessor on or before February 10 in order to qualify for the exemption. While there is some argument that the application need only be mailed by February 10, we would recommend that it be in the assessor’s hand by that date to avoid any confusion.

Taxpayers are required to complete and maintain a full calculation of all parcels within the same jurisdiction to determine if they qualify for the exemption. When performing the calculation, property of related entities will be counted together against the $80,000 threshold. As a reminder, assets must be included in the computation of true cash value even if they are written off per a company policy in compliance with the federal depreciation requirements. 

There is no relief provision for those who meet the qualifications but fail to timely file the affidavit on Form 5076 by February 10. If the application for exemption is denied, a taxpayer will need to appeal to the March Board of Review in the appropriate jurisdiction. For 2014 only, the taxpayer may file an appeal to the March Board of Review if the affidavit was filed after February 10, however, there is no requirement that the Board of Review grant the exemption. An affidavit on Form 5076 must be timely filed for each year the taxpayer qualifies as each year stands on its own. The taxpayer must maintain the books and records including the calculation of value that substantiates the claim for exemption for the 4 years following a claim for exemption. An owner or officer must sign the affidavit as the person signing is legally responsible for the validity of the information. The penalty provision may be quite onerous for those that file the affidavit and claim the exemption, but do not qualify. The applicable penalty provisions include a penalty for fraud.

This is only a brief overview of the requirements to qualify for the Small Business Exemption for Michigan Personal Property Tax. Each taxpayer’s situation is unique. The professionals at Beene Garter, LLP are ready to assist you with your Michigan Personal Property Tax needs. Please contact David Barrons or a Beene Garter Professional at 616.235.5200 if you have questions.