Real & Personal Property Information

On March 15, 1994, Michigan voters approved the constitutional amendment known as Proposal “A”. Prior to Proposal “A” property tax calculations were based on State Equalized Value (SEV). Proposal “A” established “Taxable Value” (TV) as the basis for the calculation of property taxes. Increases in Taxable Value (TV) are limited to the percent of change in the rate of inflation or 5%, whichever is less, as long as there were no losses or additions to the property. The limit on TV does not apply to a property in the year following a transfer of ownership (sale).

The Michigan Constitution requires that property be uniformly assessed and not exceed 50% of the usual selling price, often referred to as True Cash Value. Each tax year, the local assessor determines the Assessed Value (AV) of each parcel of real property based on the condition of the property as of December 31 (Tax Day) of the previous year.

The State Equalized Value (SEV) is the Assessed Value as adjusted following county and state equalization.

The County Board of Commissioners and State Tax Commission must review local assessment jurisdictions and adjust (equalize) them so that they do not exceed 50%.

“Capped Value” is the value established when the TV of the prior year, with adjustments for additions and losses, is multiplied by the Inflation Rate Multiplier (IRM). The multiplier is capped and cannot be greater than 1.05 (1 + 5%). It represents the change in the rate of inflation during the previous year. The final product is Capped Value (CV).

Capped Value = (Prior TV - Losses) x (IRM)* + Additions

The Capped Value limitation on Taxable Value does not apply if you purchased your home last year.

*Percent of change is the rate of inflation or 5%, whichever is less, expressed as a multiplier

Market sale transactions for real property are used by Michigan assessors to compare assessed values (AV) with the actual sale prices (market values) for those same properties. Market value can be defined as the most probable price, as of a specific date, where both buyer and seller are knowledgeable and neither is under duress.

The average ratio between the AV and the sale price should be 50%. Since the market for real estate constantly changes, the average ratio actually found will usually not be 50%. Local assessors are required to reestablish the 50% ratio on an annual basis.

Each year, prior to the March meetings of the local boards of review, informational notices are mailed. The “Notice of Assessment, Taxable Valuation, and Property Classification” also includes State Equalized Value, the percent of exemption as a Principal Residence, Michigan Business Tax, or Qualified Agricultural Property, and if there was or was not a Transfer of Ownership.

If you own and occupy your home as your principal residence, it may be exempt from a portion of local school operating taxes. On your “Notice of Assessment”, review your percentage of principal residence exemption.

To claim an exemption for the current year, you must own and occupy your home and file a “PRE Affidavit” with your city or township by June 1 for the immediately succeeding summer tax levy and all subsequent tax levies or by November 1 for the immediately succeeding winter tax levy and all subsequent tax levies.

Taxable Value (TV) is the lesser of State Equalized Value (SEV) or Capped Value (CV) unless the property experienced a Transfer of Ownership in the prior year.

When a property, or interest in a property, is transferred, the following year’s State Equalized Value (SEV) becomes that year’s Taxable Value (TV). In other words, if you purchase property, your Taxable Value for the following year will be the same as the SEV. The Taxable Value will then be “capped” for the second year following the transfer of ownership.

A 24 month sales study is performed in order to determine property assessments. The timeframe of the sales study, determined by the State Tax Commission, is detailed below for this year.

2 Year Sales Study

Shall be used in increasing markets

2 Year Sales Study Timeframe

April 1, 2020 - March 31, 2022

You Purchased a New Home - Last year, you purchased a new home valued at $200,000 (true cash value) with Assessed Value (AV) and State Equalized Value (SEV) both at $100,000, and a Taxable Value (TV) of $80,000.

A study of sales in the neighborhood shows the true cash value of the property has increased to $210,000 for the current year.

Current Year

• Assessed Value (AV) is (1/2 of 210,000) -> $105,000
• SEV (tentative) is $105,000
• Value is "uncapped" the year following an ownership transfer (sale) of a property, the Taxable Value will be the same as the State Equalized Value.
• Taxable Value (TV) is $105,000

You Added a Family Room to Your Home - Last year, your home valued at $200,000 had a $100,000 SEV, and a Taxable Value (TV) of $80,000. You added a family room addition valued at $40,000 (true cash value).

A study of sales in the neighborhood shows the true cash value of your property (with the addition) has increased to $240,000.

Current Year

• Assessed Value (AV) is (1/2 of 240,000) -> $120,000
• SEV (tentative) is $120,000
• Capped Value (CV) is (($80,000 x 1.05)* + 50% of 40,000 -> $104,000
• Taxable Value, the lesser of SEV or CV, is $104,000

Increased SEV/TV Increase - Last year, your home valued at $200,000 (true cash value) had a $100,000 State Equalized Value (SEV), and a Taxable Value (TV) of $80,000.

A study of sales in the neighborhood shows the true cash value of your property has increased to $220,000 for the current year.

Current Year

• Assessed Value (AV) is (1/2 of $220,000) -> $110,000
• SEV (tentative) is $110,000
• Capped Value (CV) is ($80,000 x 1.05)* -> $84,000
• Taxable Value, the lesser of SEV or CV, is $84,000

Increased SEV/TV Increase - Last year, your home valued at $200,000 (true cash value) had a $100,000 State Equalized Value (SEV), and a Taxable Value (TV) of $100,000.

A study of sales in the neighborhood shows the true cash value of your property has increased to $200,100 for the current year.

Current Year

• Assessed Value (AV) is (1/2 of $200,100) -> $100,050
• SEV (tentative) is $100,050
• Capped Value (CV) is ($100,000 x 1.05)* -> $105,000
• Taxable Value, the lesser of SEV or CV, is $100,050

Decreased SEV/TV Increase - Last year, your home valued at $200,000 (true cash value) had a $100,000 State Equalized Value (SEV), and a Taxable Value (TV) of $80,000.

A study of sales in the neighborhood shows the true cash value of your property has de- creased to $180,000 for the current year.

Current Year

• Assessed Value (AV) is (1/2 of $180,000) -> $90,000
• SEV (tentative) is $90,000
• Capped Value (CV) is ($80,000 x 1.05)* -> $84,000
• Taxable Value, the lesser of SEV or CV, is $84,000

• February 20th: 5076 small business exemption filing deadline
• February 20th: PPS filing deadline. Form 632
• February 20th: 5278 EMPP filing deadline
• All appeals of local decisions are further appealed to the state.

Form 5076: Under $180,000 TCV will be exempt (if the 5076 is filed timely)

For personal property valued less than $80,000, once the exemption is granted for personal property valued at less than $80,000 the taxpayer will continue to receive the exemption until they no longer qualify and file a rescission form.

For personal property valued greater than or equal to $80,000 but less than $180,000, Form 632 must be filed along with Form 5076, And MUST be filed ANNUALLY.

Other Factors Include

• Related entities, leased equipment & trade fixtures

Form 5278 - Eligible Manufacturing Personal Property (EMPP)

Phase out of new Personal Property, existing Personal Property, and existing Personal Property tax abatement starting in the 2016 tax year.

Some equipment will be subject to a specific tax known as the Essential Service Assessment (ESA) per PA 92 of 2014.

Essential Services Assessment (ESA)

A specific tax at the state level for some of the equipment filed within the EMPP statement, Form 5278.

• State Tax Commission
• Frequently Asked Questions Regarding Personal Property
• Personal Property Forms