Eligible Manufacturing PPT Exemption
Michigan law exempts eligible manufacturing personal property (EMPP) from PPT with a full phase-out by 2023. In 2023, all EMPP will be exempt from PPT.
EMPP is any personal property located on occupied real property and predominantly used in industrial processing or direct integrated support. It’s measured asset by asset, so if all the assets are used more than 50% of the time in industrial processing or direct integrated support, then the parcel qualifies for the manufacturing exemption.
EMPP can include commercial personal property and industrial personal property. Used in industrial processing is determined by whether the asset qualifies for the industrial processing exemption under the Michigan Sales and Use Tax Acts.
What’s direct integrated support?
It’s services or functions such as research and development, quality control and product testing, and engineering.
If more than 50% of the original cost of the personal property is used in industrial processing or direct integrated support, the whole parcel or group of contiguous (connecting) parcels is exempt.
If your parcel qualifies for the exemption, you must complete Form 5278 – Eligible Manufacturing Personal Property Tax Affidavit – and file it with your local assessor’s office by February 20 each year.
Small Business Taxpayer PPT Exemption
The small business exemption applies to parcels of industrial personal property or commercial personal property. You qualify for the exemption if the true cash value (TCV) of these properties is less than $80,000 in a local taxing jurisdiction (city or township).
If you qualify for the exemption, you don’t pay any PPT in that taxing jurisdiction for the year. Please note, you’ll still pay real property taxes if you own real estate.
If you have personal property on more than one parcel within a single taxing jurisdiction, the total TCV for all parcels must be less than $80,000. If you have multiple entities that are related to each other, the combined TCV in the taxing jurisdiction must be less than $80,000.
However, if you have personal property in more than one taxing jurisdiction, the $80,000 limitation applies separately to each jurisdiction. You could qualify for the exemption in some jurisdictions, but not in others.
You must calculate your TCV as of December 31 each year. The TCV calculation depends on the year when you first acquired the property, its cost, and the type of asset. Form 632 – Personal Property Statement walks you through calculating your TCV.
If I do qualify, how do I claim the small business exemption?
File Form 5076 – Small Business Property Tax Exemption Claim – with your local assessor(s) by February 20 each year. This form doesn’t require you to disclose your TCV on the form, but you should maintain the TCV calculation for your books and records in case of an audit.
If you filed a complete and properly executed Form 5076 by February 20, 2019, and your TCV is less than $80,000 for the current year, you don’t have to file anything with the local taxing jurisdiction.
This policy begins with PPT filings due on or before Feb. 20, 2020. Again, you must maintain TCV calculations for each year for your books and records.
Originally published 1/5/16. Updated 1/6/20.
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