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Classification Appeals Will Affect Thousands of Business Owners

September 16, 2010
Tax Advisory

The Michigan Department of Treasury has filed approximately 10,000 appeals with the Michigan Tax Tribunal contesting the classification of certain property for the 2009 tax year. These appeals attempt to have industrial property (both real and personal) reclassified as commercial property. Some of the appeals appear to have been filed with little prior due diligence by the Michigan Department of Treasury.

The distinction in classification between industrial and commercial property is significant for several reasons. First, industrial personal property is exempt from 24 mills of personal property tax, while commercial personal property is exempt from 12 mills. In addition, the Michigan Business Tax includes a significant credit for personal property taxes paid on industrial personal property that is not available for commercial personal property. Because the classification of personal property is contingent upon the classification of the real property on which the personal property is located, classification of the real property is also significant. The Michigan Department of Treasury is actively pursuing reclassification in order to obtain additional tax revenue for the State.

Due to the large number of appeals filed, service of the appeals on taxpayers by the Michigan Tax Tribunal was delayed for several months. Recently, the Michigan Tax Tribunal began serving appeals on taxpayers. Answers to classification appeals must be mailed to the Michigan Tax Tribunal within 28 days after the appeal was mailed to the taxpayer by the Michigan Tax Tribunal.

The Michigan Department of Treasury, through the Attorney General's office, has also been sending taxpayers letters enclosing stipulations for entry of consent judgment concerning the appeals. Taxpayers should not sign a stipulation for entry of consent judgment without first consulting with legal counsel.

Varnum has a long history of successfully representing property owners before the Michigan Tax Tribunal on all types of matters, including classification appeals. If you have received notice of an appeal of the classification of your property, or if you would like to talk with a Varnum attorney to discuss your property tax strategies, please contact any member of Varnum's Property Tax Services and Appeals team.

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