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Follow Through with Personal Property Tax Reforms

Author: Charles Owens Date: January 10, 2014

Follow Through with Personal Property Tax Reforms

NFIB supported reforms to the Personal Property Tax passed in 2012 will require a statewide vote of the people in order to implement the structure for local government revenue reimbursement. If voters reject the proposal, then the entire Personal Property Tax Reform effort will be in jeopardy. NFIB will be working to ensure the success of the statewide Personal Property Tax ballot proposal.

In the wee hours of the morning on the last day of the 2012 Lame Duck session, legislation implementing NFIB supported reforms to the Personal Property Tax were passed. The legislation will phase out the industrial portion of the tax over six years beginning in 2016 with all industrial personal property purchased after 2011 becoming completely exempt in fiscal year 2015-16. Starting in 2014, small business owners with commercial personal property less than $80,000 True Cash Value will be exempt from paying any personal property tax.

Although the bills passed and were signed by Governor Snyder, there is one more hurdle that must be cleared before the Personal Property Tax reforms go into effect. In order to pass the bills, a mechanism was established in the law that would provide for reimbursement of lost revenue to local governments. To implement the structure for reimbursement, a statewide vote of the people will be required in order to allow an override of constitutional Headlee limits. All of the Personal Property Tax reform bills in the entire package were tie-barred to this voter approval at the August 2014 election. If voters reject the proposal, then the entire Personal Property Tax reform fails and we get to start over.

The Personal Property Tax is a levy on equipment, furniture, tools, computers etc. used by business in their operations. While both businesses and individuals pay real property taxes, in Michigan, only businesses pay the personal property tax (PPT). Many states that compete with Michigan for jobs have eliminated their Personal Property Tax.

While getting rid of the job killing Michigan Business Tax (MBT) and replacing it with the new Corporate Income Tax was a major boost for small business in Michigan, the Personal Property Tax remained a serious disincentive for investment and job growth. NFIB worked with the legislature and Governor Snyder to find a way to eliminate this tax and on the last day of the 2012 Lame Duck session, legislation implementing NFIB supported reforms to the Personal Property Tax were passed.

Combined with the recent move away from the Michigan Business Tax to the new Corporate Income Tax these Personal Property Tax reforms will give our state a powerful one-two punch in the competition for jobs.

• The legislation will phase out the industrial portion of the tax over six years beginning in 2016 (from 2016-2022).
• Starting in the 2014, business owners with commercial personal property (mostly small business) with less than $80,000 True Cash Value in total commercial or industrial personal property in any one jurisdiction would not have to pay any personal property tax to that jurisdiction.
• All industrial personal property purchased after 2011 would become exempt in fiscal year 2015-16. Then industrial personal property would become exempt as it reaches 10 years old beginning in fiscal year 2015-16.
 

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