Michigan Tax Changes - October 2024

Week Of 10.14.2024

Michigan General Administrative Provisions—Michigan Tax Tribunal adds form to request foreign language interpreter.

The Michigan Tax Tribunal has created a new form for parties, witnesses, and other interested parties to use if a foreign language interpreter is needed to accommodate access to hearings. The new form is located on the Tribunal’s website. The Tribunal encourages individuals to file this form as soon as possible. Alternatively, if a Tribunal Member or Administrative Law Judge commences a conference or hearing and determines a foreign language interpreter is needed, the conference or hearing may be adjourned in order for the Tribunal to obtain an interpreter to facilitate communication. (MTT Newsletter 2024-8, Mich. Tax Tribunal, 10/15/2024.)

Michigan Property Tax—Electronic fling not required for railroad’s Michigan maintenance credit claim.

The Michigan Tax Tribunal held that a taxpayer was entitled to a maintenance credit under the Public Utility Tax Act Public (PUTA) even though the taxpayer did not file its credit application electronically. The taxpayer, a railroad company, filed its assessment property reports (APR) and maintenance credit application by U.S. mail before the statutory APR filing deadline. The State Tax Commission (STC) rejected the APR and denied the credit, stating the filing was untimely because it was not filed electronically in accordance with its memo and policy statement providing instructions for filing APRs and credit applications. The Tribunal held that the taxpayer was entitled to file the credit application by mail and that the STC did not clearly prescribe that credit applications must only be filed electronically. It noted that the forms were available on the state's website making taxpayers believe the forms could be mailed in. The Tribunal also found that the STC did not have the power to reject or disregard an APR because the legislature provided for late filing penalties, foreseeing late filings. (Wells Fargo Rail Co. v. Michigan Dept. of Treas. and State Tax Comm., Mich. Tax Tribunal, Dkt. No. 23-002257, 10/14/2024.)

Michigan Property Tax—U.S. Supreme Court Action—petition for certiorari denied in two Michigan cases.

The petitions of certiorari filed with the U.S. Supreme Court in two unclaimed property tax cases have been denied review. Michigan took custody of the owner's property under the Michigan Unclaimed Property Act, and reimbursed the owner for the original value of the property, but not for any net interest earned after its liquidation. The owner sued the state and two officials in their personal capacities, alleging violations of the Takings Clause, i.e., Fifth Amendment and the Due Process Clause, i.e., the 14th Amendment. The U.S. Court of Appeals dismissed the claim under the Takings Clause but ruled that a state court should rule on whether there has been a violation of the Due Process Clause because of the failure to pay interest on the unclaimed property. (Eubanks, et al. v. O'Connor, U.S. Ct. App. 6th Cir., Dkt. No. 22-1780, 10/06/2023, cert. denied, U.S. S. Ct., Dkt. No. 23-1227, 10/15/2024; O'Connor v. Eubanks, et al., U.S. Ct. App. 6th Cir., Dkt. No. 22-1780, 10/06/2023, cert. denied, U.S. S. Ct., Dkt. No. 23-1167, 10/15/2024.)

Michigan Property Tax—Michigan court holds property owners failed to comply with notice requirements to claim excess funds from foreclosure.

The Michigan Court of Appeals held that the circuit erred by concluding that Mich. Comp. Laws Ann. § 211.78t was unconstitutional "as applied" to claimants and by granting their motion to distribute remaining proceeds from the sale of their properties from tax-foreclosure sales when they failed to comply with the notice requirement in Mich. Comp. Laws Ann. § 211.78t(2). The appeals court noted that it has previously rejected the argument advanced by claimants and adopted by the circuit court that presale notices were inadequate because they did not specifically identify the remaining proceeds to be taken. The appeals court held that the circuit court erred by ruling that presale notice of the right to claim remaining proceeds did not satisfy due process. On the basis of this error, the court further erred by concluding that the county treasurer's retention of claimants’ remaining proceeds resulted in an unconstitutional taking. The appeals court also noted that the claimants did not contend in the circuit court, nor do they argue on appeal, that the county treasurer did not adequately comply with the legislature’s system for returning remaining proceeds. (In re Petition of Berrien County Treasurer for Foreclosure (Berrien County Treasurer v. Arent II, et al., Mich. Ct. App., Dkt. No. 366509, 10/10/2024 (unpublished).)

Week Of 10.07.2024

Michigan General Administrative Provisions—Michigan Tax Tribunal small claims division allowed to hold virtual hearings.

L. 2024, S150 (P.A. 129), effective 10/08/2024, allows the Residential Property and Small Claims Division of the Michigan Tax Tribunal to conduct hearings and rehearings telephonically, by videoconferencing, or in person. In addition, the bill provides that upon request by one of the parties, an in-person hearing can take place at a location mutually agreed upon by all parties.

Michigan Property Tax—Michigan court holds estate failed to timely give notice of claim excess proceeds from tax sale.

The Michigan Court of Appeals has held that an estate did not satisfy the requirement to give notice by the July 1 deadline under Mich. Comp. Laws Ann. § 211.78t(2) of its intent to claim the proceeds that remained after the tax-foreclosure sale of property after payment of the property's delinquent taxes, interest, penalties and fees. The appeals court found that the circuit court did not err by declining to apply Mich. Comp. Laws Ann. § 600.5852(1) to toll the claim-filing deadline in Mich. Comp. Laws Ann. § 211.78t(2), or by declining to exercise its authority under Mich. Comp. Laws Ann. § 600.2301 to disregard the estate’s failure to comply with the July 1 deadline. The appeals court also rejected the estate's claim that Mich. Comp. Laws Ann. § 211.78t(2) violated procedural due process. The taxpayer failed to show how the procedures described in Mich. Comp. Laws Ann. § 211.78t infringe on the right to collect excess proceeds. The court found that none of the arguments raised by the estate undermine the conclusion that Mich. Comp. Laws Ann. § 211.78t’s system for recovering remaining proceeds satisfies procedural due process. As to the takings issue, the court noted the estate conceded that Muskegon Treasurer decided this issue in the county treasure's favor. Finally, the court rejected the statute abrogated other actions at law for the recovery of remaining proceeds, as well as equitable remedies established at common law. (In re Petition of Allegan County Treasurer for Foreclosure (Allegan County Treasurer v. Bloss), Mich. Ct. App., Dkt. No. 365754, 10/07/2024 (unpublished).)

Michigan Property Tax—Michigan court denies challenge to storm-sewer charges.

The Michigan Court of Appeals has denied a challenge by a taxpayer alleging that the storm-sewer charges imposed by the city are an unlawful disguised tax for purposes of § 31 of the Headlee Amendment, Mich. Constitution Art. IX § 31, rather than a valid user fee. The court also denied the taxpayer's motion requesting class certification of the case. With regards to the taxpayer's motion for class certification, the court found that the taxpayer failed to demonstrate that it will adequately represent the diverse—and sometimes conflicting—interests of all of the distinct subclasses within the proposed class. The court distinguished the current case from Bolt v. City of Lansing (On Remand), 238 Mich App 37; 604 NW2d 745 (1999). The court found that the  charges at issue are primarily used to fund the operational and capital expenses of the city’s federally mandated storm-sewer system, and concluded that those charges primarily serve valid regulatory purposes, which militates in favor of holding that they are valid user fees. The court also held the taxpayer failed to show that the charges were disproportionate to the underlying costs. The court found that the first and second Bolt factors clearly favor the conclusion that the disputed charges are proper user fees. With regard to the third factor, even though the fact that the charges at issue are effectively compulsory, the totality of factors indicate the charges are a user fee and not a tax. (Platt Convenience Inc. v. City of Ann Arbor, Mich. Ct. App., Dkt. No. 359013, 10/04/2024.)

Michigan Sales & Use Taxes—Michigan explains rescission of rule governing food for human consumption.

The Michigan Department of Treasury has issued a notice that effective September 17, 2024, Rule 86 of the Specific Sales and Use Tax Rules, R 205.136, has been rescinded from the Michigan Administrative Code. Rule 86 had elaborated on the statutory treatment of "food for human consumption" (see State Tax Updates, 09/13/2024). The recent rescission of Rule 86 follows the rescission of many rules in 2023, including rules that had been superseded by case law or that merely had restated a statutory provision. Rule 86 met both criteria: it had been superseded in part by Emagine Entertainment v. Department of Treasury, 334 Mich App 658 (2020), and it restated statutory provisions in the Use Tax Act and the General Sales Tax Act, after those acts were amended in 2023 by Public Acts 141 and 142. For these reasons, the Department rescinded Rule 86. For more on the treatment of food for human consumption, taxpayers should refer to Michigan Revenue Administrative Bulletin No. 2024-13, 08/20/2024. (Notice Regarding Rescission of Rule Governing Food for Human Consumption, Mich. Dept. Treas., 10/10/2024.)

Week Of 09.30.2024

Michigan Business Tax Rates—Michigan sets gross premium tax rate for qualified health plans for 2024.

The Michigan Department of Treasury has issued a notice announcing that for tax year 2024 the Department has calculated the rate of gross premiums attributable to qualified health plans to be 0.94770% (previously, 0.9325%). The Department is required to compute the rate annually by October 1 of each year. (Tax Rate Calculation on Gross Premiums Attributable to Qualified Health Plans for Tax Year 2024, Mich. Dept. Treas., 09/30/2024.)

Michigan Insurance Companies Taxes—Michigan sets gross premium tax rate for qualified health plans for 2024.

The Michigan Department of Treasury has issued a notice announcing that for tax year 2024 the Department has calculated the rate of gross premiums attributable to qualified health plans to be 0.94770% (previously, 0.9325%). The Department is required to compute the rate annually by October 1 of each year. (Tax Rate Calculation on Gross Premiums Attributable to Qualified Health Plans for Tax Year 2024, Mich. Dept. Treas., 09/30/2024.)

Michigan Property Tax—Detroit Michigan homeowners denied class certification.

The United States District Court for the Eastern District of Michigan’s Southern Division rejected an attempt by Detroit homeowners to bring a class action lawsuit on behalf of themselves and other similarly situated homeowners, finding that the purported class members were too dissimilar to warrant class action. The homeowners alleged their due process rights under the United States and Michigan Constitutions were violated by the City of Detroit and other local and state entities when they received purportedly untimely and deficient property tax assessment notices in 2017. The homeowners sought to represent a proposed class of homeowners in the City of Detroit who received untimely or otherwise inadequate notice of the property tax assessments in 2017. The court found that while all members of the class received the same notice, there are not enough other similarities amongst the members, either as a class or a set of subclasses, to make a class action a better way to adjudicate their claims. The court also found that a determination as to the class members' damages would require individual litigation. (Howard, et al., v. The City of Detroit, et al., U.S. Dist. Ct., E.D. Mich., Case No. 10382, 09/30/2024.)

Michigan Property Tax—Michigan court denies exemption for building used by religious society.

The Michigan Court of Appeals affirmed a Tax Tribunal decision that found that the subject property, consisting of a large house with a pole barn and a garage, owned and used by a religious society did not qualify for the property exemption under Mich. Comp. Laws Ann. § 211.7s because the society failed to establish that the subject property was predominately used for religious purposes as required by statute. The court found that the statute does not require merely that the use of a property further the mission of a religious organization, but instead more specifically requires that the property be predominantly used to perform religious services or education. The record evidence did not support the society's claim that it used the subject property predominantly for religious services or the teaching of its religious beliefs, but rather overwhelmingly indicated that society did not predominately use the property at all. The evidence showed the property was predominately used by third parties and appeared to be predominately used for recreational and other nonreligious purposes. The court also upheld the Tribunal's denial of leave to amend the society's petition and rejected the claim that the result violated the society's equal-protection rights. (Woodside Bible Church v. Township of Forester, Mich. Ct. App., Dkt. No. 366944, 09/30/2024 (unpublished).)

Michigan Sales and Use Tax Rates—Michigan sets prepaid sales tax rates for fuel for November 2024.

The Michigan Department of Treasury announced that, effective for the period November 1, 2024 through November 30, 2024, the prepaid sales tax rate for the purchase or receipt of gasoline will decrease to 17.2¢ per gallon from the October 2024 rate of 18.2¢ per gallon. Additionally, for the period November 1, 2024 through November 30, 2024, the prepaid sales tax rate for the purchase or receipt of diesel fuel will decrease to 19.3¢ per gallon from the October 2024 rate of 20.0¢ per gallon. The prepayment rates for both gasoline and diesel fuel are set every month by the Department. (Michigan Revenue Administrative Bulletin No. 2024-15, 10/02/2024.)

Michigan Sales & Use Taxes—Michigan sets prepaid sales tax rates for fuel for November 2024.

The Michigan Department of Treasury announced that, effective for the period November 1, 2024 through November 30, 2024, the prepaid sales tax rate for the purchase or receipt of gasoline will decrease to 17.2¢ per gallon from the October 2024 rate of 18.2¢ per gallon. Additionally, for the period November 1, 2024 through November 30, 2024, the prepaid sales tax rate for the purchase or receipt of diesel fuel will decrease to 19.3¢ per gallon from the October 2024 rate of 20.0¢ per gallon. The prepayment rates for both gasoline and diesel fuel are set every month by the Department. (Michigan Revenue Administrative Bulletin No. 2024-15, 10/02/2024.)

Michigan Property Tax—Michigan court affirms big box store valuation.

The Michigan Court of Appeals affirmed the valuation of the taxpayer's "big box" store. The court found that while it was difficult to determine how the Michigan Tax Tribunal arrived at the true cash value of the property for the years at issue, when the Tribunal's valuation is within the range of valuations in evidence, as is the situation in this case, that valuation necessarily is supported by competent and material evidence. The court also rejected the township's argument that the Tribunal committed an error of law when it valued the property as vacant and available. The court noted that it has previously held that if the property is owner occupied, it must be valued as if vacant and available, and the Tribunal committed no error in law. The court also held the Tribunal's decision to remove or omit the 25% adjustments the township's expert added to the comparable properties was supported by competent, material, and substantial evidence and was not contrary to law. The Tribunal also properly denied the township's motion for a directed verdict. Finally, the court rejected the township's argument that the Tribunal failed to identify the property's highest and best use. (Wal-Mart Real Estate Business Trust v. Township of Madison, Mich. Ct. App., Dkt. No. 366222, 09/23/2024 (unpublished).)

Michigan Treasury Issues Announcement on Income Tax Rate Reduction Court Decision

The Michigan Department of Treasury has issued an announcement on the decision of the Michigan Supreme Court that allows the Court of Appeals decision to stand that concluded the reduction to the income tax rate for tax year 2023 was temporary. Therefore, the rate for tax years beginning in 2024 is 4.25%. (Notice, Mich. Dept. Treas., 09/23/2024.)

Litigation on tax rate reduction. In Associated Builders and Contractors of Michigan v. Eubanks, a group of individual taxpayers and interested parties challenged the implementation of an Attorney General opinion that held the 4.05% tax rate as determined under Mich. Comp. Laws Ann. § 206.51(1)(c) of the Income Tax Act, was temporary and effective for the 2023 tax year only (OAG Opinion No. 7320) (see State Tax Update, 03/30/2023). On December 21, 2023, the Michigan Court of Claims issued an opinion upholding the Attorney General’s interpretation of Mich. Comp. Laws Ann. § 206.51(1)(c). That interpretation was affirmed by the Michigan Court of Appeals in a published opinion issued on March 7, 2024, which held the income tax rate under Mich. Comp. Laws Ann. § 206.51 is 4.25% each tax year that a rate adjustment under Mich. Comp. Laws Ann. § 206.51(1)(c) does not occur (see State Tax Update, 03/11/2024).

On August 30, 2024, the Michigan Supreme Court unanimously declined to hear an appeal from plaintiffs (see State Tax Update, 09/09/2024). Accordingly, the 4.25% tax rate applies to tax years that begin in 2024 for individuals, fiduciaries, and flow-through entities paying the Michigan Flow-Through Entity Tax.

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