May 31 is the deadline for filing property tax assessment appeals in the Michigan Tax Tribunal which contest the value of property classified as commercial real property, industrial real property, developmental real property, commercial personal property, industrial personal property, or utility personal property. Owners and managers should consider periodic review of property tax assessments because an over assessment can increase a major cost of property ownership.
Property tax assessments in Michigan may not exceed 50% of “true cash value”, which is market value. Notices of assessments are sent annually by the assessor’s office, usually in early February. The notice states the previous and proposed assessed values. A taxpayer is not limited to appealing only if the assessment was increased this year. A review of the assessment may reveal that the assessment is far too high and has been for a number of years. While retroactive relief beyond the current year typically cannot be obtained, a timely successful appeal may have an annuity value for years to come.
Most business taxpayers have a reasonably good sense of what their property is worth; a formal appraisal is not necessary to begin a tax appeal and many appeals are resolved before appraisals are required. An owner will want to consider comparable sales, income from income properties, and the effect of obsolescence and deterioration may have on the property and general market trends for the type of property at issue.
Independent of market value, assessed values are required to be uniform, so if your assessment is higher than other similar and competing properties without justification, relief can be obtained on that ground as well.
Property assessments in Michigan are also affected by a property’s Taxable Value (TV), which is stated on the assessment notice. TV is the lower of SEV or the previous year’s TV adjusted downward for losses, multiplied by an inflation multiplier, and then adjusted upward for additions. TV is often lower than SEV. If the capping effect of TV has held the TV down to a value much lower than the SEV, a value appeal will not produce tax refunds unless SEV can be reduced to an amount less than the TV, thus forcing a reduction of TV and therefore the ultimate tax liability. A property’s Taxable Value is reset, or uncapped, to the current SEV when property is transferred to a new owner. If the TV for the present year is greater than the previous year adjusted for the inflation multiplier stated in the note, then the assessor has increased taxable value based on a perceived addition or transfer. If there have been no such additions or transfers that may be a reason to appeal the taxable value.