News and Insights

Michigan Considers Eliminating Personal Property Tax

Tax Development May 04, 2012

While campaigning to become the Governor of Michigan, candidate Rick Snyder proposed to eliminate the business personal property tax because he felt that it was an impediment to attracting reinvestment and new investment into Michigan. Following the Governor’s lead, legislators in both the House and Senate have filed bills that would eliminate, phase out, or diminish the effects of personal property tax on businesses.

For example, Senate Bill 34 would eliminate the personal property tax completely. Senate Bill 142 attempts to eliminate personal property tax for businesses with fewer than 26 employees. To provide relief and encourage investment, Senate Bill 883 would eliminate property tax on new personal property. A bit more complicated, House Bill 4102 and House Bill 4103 provide for three components: the state education tax, the revised school code, and one-half of the tax that would be levied by the tax jurisdictions in the local tax collecting unit.

Like most other states that tax business personal property, Michigan personal property is a tax on commercial, industrial, and utility assets not otherwise classified as real property. Costs on assets such as furniture, fixtures, machinery, equipment, leasehold improvements, and electrical and gas transmission and distribution infrastructure make up most of the taxable property.

Michigan’s business and government leaders agree that the property tax should be eliminated, and the following will help businesses be prepared for tax changes:

  1. Ensure that real and personal property assets are classified correctly for property tax purposes, not just for federal depreciation purposes.
  2. Monitor costs received from the local municipalities, as replacement revenue will likely include an increase in fees for services.
  3. Be prepared as more cities consider an income tax.
  4. Retain accurate records for any real estate development investments.
  5. Recognize that Michigan assessors will uncap the taxable values on any property purchased in arm’s length transactions and increase taxes.