February 20 is the Deadline for Manufacturing Property Exemptions!
2016 Business Personal Property Tax Changes
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 through two main provisions:
1) Small Business
Taxpayer Exemption – Filing Deadline of February 10th
The Small Business Taxpayer Exemption had an effective date
of December 31, 2013 for the 2014 tax year. The Small Business exemption applies
to personal property with a combined true cash value less than $80,000 that is owned
by, leased by or in the possession of the owner (or a related entity claiming
the exemption) in the local tax collecting unit.
In order to claim the exemption the owner must annually file
an affidavit, Form 5076. The form must be filed with the local unit assessor no
later than February 10. A personal property statement (Form 632) is not
required to be filed for property that is properly claimed using this
affidavit. More information on the Small Business Personal Property Tax Exemption
can be found HERE.
Download Form
5076 HERE.
2) Eligible
Manufacturing Personal Property Exemption – Filing Deadline of February 20th
The legislation also began a phase out of Eligible
Manufacturing Personal Property (EMPP) that will begin in 2016 and 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 February 20 (February 22 in 2016). This form contains three Parts; 1) an
affidavit which certifies the property meets the definition of EMPP, 2) an ad
valorem personal property statement with multipliers for the EMPP still subject
to ad valorem tax, and 3) 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.
Key dates
As mentioned previously, no later than February 20 (February 22 in 2016) a taxpayer must complete
the ESA affidavit and Statement (Form 5278) and file with the local Unit
Assessor. Over the next 2 weeks the
assessor will review the affidavit for completeness/qualification and accept or
deny the affidavit. The assessor will
then enter that data from accepted affidavits into their assessing
software. The assessing software
provider (at this time BS&A is the only software provider that will be performing
this function) will compile the taxpayer, parcel and affidavit data from local
assessors and submit it to the Department of Treasury.
Beginning May 1st
2016, taxpayer’s statements, based on the information provided from their
assessor and on their affidavit, will be created by the Department and accessible
through MTO. Taxpayers will have the
ability to review and edit their statements through the MTO portal. Taxpayers
will have until August 15th
2016 to file their ESA statement through MTO or with approved e-file software
and make their payment without penalty. A taxpayer will need to be registered in MTO
in order to access their statement and the Department’s electronic payment
portal. Taxpayers can pay via EFT debit
or credit.
Amended returns will be accepted until September 15th 2016. The last day for
a taxpayer to file and pay their ESA with penalty is October 15th 2016. If the ESA statement and full payment are not
received by the Department on October 15th, the Department is
required to recommend to the State Tax Commission that the exemption be
rescinded for those parcels and they be returned to the ad valorem property tax
roll.
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].
