When voters repealed Michigan’s personal property tax for manufacturers in 2014, it was hailed as a major victory in a prolonged fight by the business community to revamp the state’s tax code.
The new policy, which went into effect for the 2015 fiscal year, exempts manufacturers from paying annual property tax on equipment that was already taxed at the time of sale. However, enthusiasm for the change in tax policy has waned this year, as many companies struggled through the process of filing their taxes under the new scheme.
Manufacturers and state tax officials reported a laundry list of issues ranging from a lack of communication and clarity on the part of the state, to companies inaccurately filling out their exemptions or simply not applying for them at all.
“It was the newness of the process for both assessors and manufacturers,” said Mike Johnston, vice president of government affairs at the Michigan Manufacturers Association (MMA). “As a result, a lot of people didn’t file or didn’t file correctly, and it was just so pervasive that everyone, including the State Treasurer, agreed that it didn’t go well.”
In response to the problems, lawmakers are in the process of considering a package of bills that would allow manufacturers an opportunity to refile their taxes. If passed, Michigan House Bills 5525, 5526, 5527 and 5545 would open a 30-day window ending May 31 to allow companies to refile their personal property taxes to claim the exemptions.
At the time this story went the press, the bills had passed the state House of Representatives with near unanimous support and were headed to the Senate for approval.
Johnston expected them to pass and head to Governor Rick Snyder’s office for his signature.
“Because the newness of the process, the policy, as voted on by the legislature and endorsed by the people of Michigan, didn’t happen,” Johnston said. “It makes sense to do a do-over, so to speak.
One of the primary criticisms from manufacturers over the rollout of the tax program came from what seemed like state tax assessor’s intolerance for errors on the form, no matter how minor, sources said.
For example, if a CFO filing the forms failed to check a box indicating his or her role at the company, state officials would reject the application.
“If you didn’t check one of those boxes, then they were rejecting the whole application,” Johnston said. “It was just ridiculous. For very minor things, they were getting instructions to throw those applications out, and really that’s not appropriate.”
Grand Rapids received 225 timely and accurate exemptions, 22 exemptions that were filed after the deadline and only two exemptions that were rejected for being incomplete, City Assessor Scott Engerson said in an email to MiBiz.
On the state level, the Michigan Department of Treasury received exemptions for 10,500 parcels of land, said Jeremy Sampson, a communications specialist with the state. The state did not have any indication of how many exemptions it was expecting to receive.
Manufacturing executives also cited a lack of communication and clarification on the new policy from state and township officials.
One financial officer at a Grand Rapids area manufacturer said the process to claim the exemption took five times longer than it did in previous years. Moreover, the executive, who asked not to be named, said getting any clarification from state and local tax officials was “next to impossible” despite having worked “hand-in-hand” with them in the past.
But township tax assessors and other stakeholders maintain that there was plenty of opportunity for clarification and education about the process.
“In talking to a couple of township officials that are assessors, they went out of their way to help,” said Judy Allen, director of government relations with the Michigan Township Association. “They shared with me that they went out of their way that businesses knew about it, and were there to answer any questions.”
The state also partnered with the MMA to host five seminars on the repeal of the personal property tax to educate manufacturers.
Still, the MMA received numerous phone calls from manufacturers asking for clarification, prompting the organization to begin a dialogue with state tax officials about opening a new window to apply for the exemption, Johnston said.
“We were getting a lot of calls and anecdotally, it became clear to us that we had a widespread problem,” he said.