2014 marks the first year of the phase-out of personal property tax for businesses in Michigan. While the phase-out is a several year process, one significant component taking effect in 2014 is an exemption of commercial or industrial personal property of a business that has a combined value of less than $80,000.

The most important aspect is that a taxpayer must file an affidavit claiming the exemption within the taxing jurisdiction by February 10 of each year. However, if you have not timely filed the affidavit, you may seek the exemption at the taxing jurisdiction’s Board of Review in March.

Location

The location of the property is important because the $80,000 exemption applies to the combined true cash value of all property located in each “local tax collecting unit.” 

Type of Property

“Personal property” is a term that encompasses most equipment, machinery, and furniture. Industrial property is generally used for manufacturing or preparing materials for manufacturing. Other business property will likely qualify as commercial property. To determine the true cash value of the personal property, the State Tax Commission provides a personal property form and many cities also provide this form.

Control of Property

One additional criteria is that the property is not leased to or under control of a previous owner of the property.

While this exemption may provide a significant exemption, it may be limited in time. The exemption can be rescinded if a “use-tax” that is meant to replace some of the revenue is not approved by voters in August of 2014.