Governor Snyder recently signed
legislation to extend
the filing window for manufacturers’ 2016 Personal Property Tax exemption from
the original deadline of February 22 to Tuesday, May 31, 2016!
If you have Eligible Manufacturing
Personal Property that qualifies for this tax exemption and you missed the
February 22 deadline to file for the exemption, submit Form 5278 to your local
assessor by Tuesday, May 31, 2016 (must be received by this date, postmarks
will not be accepted).
In December of 2012, NFIB
supported legislation was passed that significantly changed the taxation of
personal property. The Acts, as amended, exempt about ½ of all personal
property in the state from taxation via two important changes – a small
business exemption for those with less than $80,000 in business personal
property and a phased in reduction of the tax for those with Eligible Manufacturing
Personal Property.
The phase out of Eligible
Manufacturing Personal Property (EMPP) that will begin in 2016 also provided
for a replacement specific tax on manufacturing personal property known as the
Essential Services Assessment (ESA) to reimburse local units for a portion of
the lost revenue from the Manufacturing Personal Property Exemption. Even with the new ESA, most businesses
with Manufacturing Personal Property will see a dramatic reduction in their
Personal Property Tax.
Effective December 31, 2015, for
the 2016 assessment year, Qualified New Personal Property and Qualified
Previously Existing Personal Property is exempt from taxation.
Qualified New Personal Property
is defined as property that was initially placed in service in this state or outside
of this state after December 31, 2012 or that was construction in progress on
or after December 31, 2012 that had not been placed in service in this state or
outside of this state before 2013 and is eligible manufacturing personal
property (EMPP).
Qualified Previously Existing
Personal Property means personal property that was first placed in service
within this state or outside of this state more than 10 years before the
current calendar year and is eligible manufacturing personal property (EMPP).
Key to both of these definitions
is that the Qualified New or Qualified Previously Existing personal property
must be Eligible Manufacturing Personal Property.
Eligible Manufacturing Personal
Property (EMPP) is defined as all personal property located on occupied real
property if that personal property is predominantly used in industrial
processing or direct integrated support. For personal property that is
construction in progress and part of a new facility not in operation, EMPP
means all personal property that is part of that new facility if that personal
property will be predominantly used in industrial processing when the facility
becomes operational. Personal property that is not owned, leased or used by the
person who owns or leases occupied real property where the personal property is
located is not EMPP unless the personal property is located on the occupied
real property to carry on a current on-site business activity. Personal
property that is placed on occupied real property solely to qualify the personal
property for an exemption is not EMPP.
A more specific definition of
EMPP, including the definitions of occupied real, predominantly used,
industrial processing and direct integrated support can be found in STC
Bulletin 7 of 2015, available on the ESA website at www.michigan.gov/esa.
These EMPP exemptions will phase
in beginning in 2016 through 2023 when all Eligible Manufacturing Personal
Property is exempt from ad valorem personal property tax. For 2016, EMPP first
placed in service before 2006 or after 2012 is exempt from ad valorem taxation,
while EMPP first placed in service in 2006 through 2012 remains subject to ad
valorem tax.
Taxpayers whose property qualifies
as EMPP will claim the exemption by annually filing Form 5278 with the local
unit assessor no later than May 31, 2016 (extended from the original deadline
of February 22 in 2016) this year and February 20 for years thereafter.
This form contains three Parts;
·
an affidavit
which certifies the property meets the definition of EMPP,
·
an ad
valorem personal property statement with multipliers for the EMPP still subject
to ad valorem tax, and
·
the
Essential Services Assessment Statement.
The Essential Services Assessment
(ESA) is a State specific tax on eligible personal property. In effect, this is
a specific tax that replaces the personal property tax. Information regarding
ESA is detailed in STC Bulletin 9 of 2015 available on the ESA website at www.michigan.gov/esa.
Finally, the statutory changes
affected some special act exemptions. These changes require that some exemption
certificates remain in effect (are extended) until the EMPP exempted by these
certificates become exempt under MCL 211.9m or MCL 211.9n. Detailed information
regarding how these special act exemptions are affected is covered in the ESA
IFT Topic available on the ESA website at www.michigan.gov/esa.
For automated e-mail delivery of
future ESA Topics or other ESA information released by the Department, please
sign up for the ESA ListServ at www.michigan.gov/esa.
Qualified Previously Existing
Personal Property means personal property that was first placed in service
within this state or outside of this state more than 10 years before the
current calendar year and is eligible manufacturing personal property (EMPP).
Key to both of these definitions
is that the Qualified New or Qualified Previously Existing personal property
must be Eligible Manufacturing Personal Property.
The Michigan Department of
Treasury is building a system to support the processing of ESA. The new system
will enable a taxpayer to manage an online account using Michigan Treasury
Online (MTO). Through this system a taxpayer will be able to file and pay their
ESA. Because the information needed to validate taxpayers will come from
their filed affidavit, registered MTO users will not be able to add the ESA tax
to their MTO account until late April. Additionally, the Department is
working with software vendors in developing e-file software for taxpayers
choosing to file their ESA statements electronically.
Additional information and a
sign-up for listserv updates regarding ESA can be found at www.Michigan.gov/esa or email your
questions to [email protected].
