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VIEWpoint Issue 2 | 2018
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In August, nearly 70 percent of Michigan voters cast their votes at the polls in support of Proposal 1, approving Michigan’s personal property tax (PPT) reform.
Designed to help Michigan’s communities and businesses create a more competitive environment for jobs and growth, the reform package includes an exemption for small businesses and manufacturers’ personal property, as well as a state-imposed essential services assessment.
The passage of this proposal will help boost Michigan’s economy in many ways, including:
With the exception of the small businesses, the phase-out of PPT is planned to take seven years beginning on Jan. 1, 2016.
Small business exemption began for the 2014 tax year and allows businesses that have industrial and personal property with a true cash value of less than $80,000 as of Dec. 31 of the preceding year in a particular assessing unit to be exempt from PPT. In order to claim the exemption the business must file an affidavit for exemption on an annual basis by Feb.10 with local taxing agencies.
One of the biggest benefactors of the PPT reform is Michigan’s manufacturers, who will not only gain from a more competitive climate, but reap the benefit of saving hundreds of millions in taxes on an annual basis.
The PPT on industrial and commercial property originally acted as an annual business tax imposed by municipalities on property that was not part of a structure, including machinery, equipment and furniture. Proposal 1 was designed to phase out the tax on eligible manufacturing personal property by 2023. The exemption is segmented into two parts:
To claim the exemption the owner must file an affidavit for exemption on an annual basis by Feb.10 with local taxing agencies.
Coming into effect on Jan. 1, 2016, there will be a new state tax referred to as the “State Essential Services Assessment” tailored to continue funding to local municipalities’ police, fire, schools, ambulances, jails, roads and libraries. This tax will be assessed to eligible manufacturing personal property exempt from PPT in order to replace funds that would previously be generated by PPT. Additionally the proposal prohibits authorities from increasing taxes and total use tax rate from exceeding existing constitutional 6 percent limitation.
Eliminating the annual PPT tax for small businesses and manufacturers will allow Michigan’s economy to increase investments in both products and people, while protecting municipalities from falling under. To ensure you take full advantage of this tax reform to reduce your tax liability, contact our Michigan tax advisors today.
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