Andrew P. Campbell challenged the Michigan Department of Treasury's denial of his principal residence exemption (PRE) for the 2017 tax year in the Michigan Tax Tribunal. Despite having received the PRE for years on his Michigan property, Campbell purchased property in Arizona in late 2016, which Arizona automatically classified as his primary residence, granting him a tax credit without his knowledge. When Campbell filed for the PRE on his Michigan property for 2017, the Department denied it, citing that he had received a similar exemption from Arizona.
The tribunal ruled that Campbell's property did not qualify for the PRE under the statute MCL 211.7cc(3)(a), asserting that he had effectively claimed a similar benefit in another state, regardless of the benefit's amount or his later request to change the Arizona classification. However, the tribunal acknowledged that the PRE remained valid until December 31, 2017, resulting in a 100% PRE for that year.
The Court of Appeals affirmed the tribunal's ruling, agreeing that the exemption remained in effect through the end of 2017 due to legislative intent for uniform tax administration. The Michigan Supreme Court later reversed this decision, holding that under MCL 211.7cc(3)(a), Campbell was not entitled to the PRE because he claimed a similar exemption in Arizona. It concluded that Subsection (4) did not apply since his PRE was denied under Subsection (3)(a), and therefore, there was no entitlement to a continuing exemption for the remainder of the year. All property in Michigan is subject to taxation unless exempted, and the PRE statute specifies that an exemption is contingent upon the owner claiming it.
To obtain a Principal Residence Exemption (PRE) under MCL 211.7cc(2), a property owner must submit an affidavit to the local tax collecting unit confirming that the property is their principal residence and that they have not claimed a similar exemption in another state. MCL 211.7cc(3) outlines disqualifying factors that can prevent eligibility for the PRE, including the simultaneous claim of a similar benefit in another state. The Court of Appeals in Stege v Dep’t of Treasury, 252 Mich App 183 (2002), initially allowed for such dual claims, but subsequent amendments to the PRE statute clarified that claiming a similar benefit in another state disqualifies an owner from receiving the PRE in the same calendar year. Specifically, Subsection (3)(a) states that any claim for a similar benefit in another state disqualifies the property owner from receiving the PRE for that year, irrespective of the amount.
When a claim for PRE is denied, as per MCL 211.7cc(4), the property is exempt from local school district taxes until the owner no longer qualifies for the exemption. However, the 2003 amendments expanded the bases for denial, meaning that a property owner cannot maintain an exemption if their PRE claim is denied. The treasury department has the authority under MCL 211.7cc(8) to independently assess and deny PRE claims. In this case, the treasury department denied a petitioner’s 2017 PRE claim because he had claimed a similar exemption in Arizona that year. The Court of Appeals' earlier conclusion that the exemption could be extended through the end of the year was overturned, reaffirming the treasury department's decision.
Justice Viviano, with Justices Zahra and Clement concurring, clarified that the petitioner, Andrew P. Campbell, was not entitled to a principal residence exemption (PRE) through the end of the 2017 tax year under Subsection (4) due to the interpretation of the language concerning entitlement and exemptions. The Court of Appeals misapplied this language, concluding erroneously that Campbell retained his PRE for 2017. The Legislature amended Subsection (3) to state that a property owner cannot claim a PRE if they have claimed a similar tax benefit in another state that remains unrescinded. Prior to amendments in 2003, Subsection (4) incentivized owners to rescind their PREs voluntarily; if rescinded, they could maintain the exemption through the year of rescission. This incentive structure persisted in the amendments. Consequently, if a claim is denied under Subsection (3), Subsection (4) does not apply. Since Campbell did not voluntarily rescind his PRE but had his claim denied by the Treasury Department, he was ineligible for the exemption for the 2017 tax year. The Michigan Supreme Court reversed the Court of Appeals' judgment, reinstating the Treasury's denial of Campbell's PRE. The case arose after Campbell claimed a PRE on his Michigan residence while also receiving a similar exemption for a second home in Arizona, leading to the Treasury's denial based on his out-of-state claim.
At the Tax Tribunal hearing, the petitioner acknowledged receiving a similar property tax exemption in Arizona for his primary residence, which inadvertently affected his eligibility for the Principal Residence Exemption (PRE) on his Michigan property taxes. Upon realizing this conflict, he contacted the Maricopa County Assessor’s Office to correct the classification. Despite this correction, the Michigan Treasury maintained that under state law, the existence of a similar tax benefit in Arizona disqualified him from claiming the PRE for the 2017 tax year, regardless of intent or subsequent actions. The Tax Tribunal supported the Treasury's position but also determined that the petitioner’s Michigan PRE would continue until December 31, 2017, based on a different provision in the law, allowing him to benefit from both the Michigan PRE and the Arizona exemption for that year. The Treasury appealed, but the Court of Appeals affirmed the decision, indicating that the exemption remained valid until the end of the tax year due to legislative intent for uniformity in tax administration. The case was granted leave for further review to assess whether the Court of Appeals correctly interpreted the relevant statute regarding the continuation of the PRE. The review process emphasizes a limited scope for appeals from the Tax Tribunal, focusing on interpretations of law rather than factual disputes, with statutory interpretation undergoing de novo review. The General Property Tax Act mandates that all properties not explicitly exempt are subject to taxation, and the courts strive to uphold the Legislature's intent as expressed in statutory language.
The Michigan Principal Residence Exemption (PRE) is established under MCL 211.7cc, which outlines the conditions under which a qualifying principal residence is exempt from local school district taxes. The burden of proof for claiming this tax exemption lies with the claimant, as established in Detroit v Detroit Commercial College. To qualify as a principal residence, the property must be the owner's true, fixed, and permanent home, to which they intend to return.
Key provisions include:
1. **Claiming Exemption**: A principal residence is exempt from school operating taxes when the owner properly claims the exemption as per MCL 211.7cc(1).
2. **Definition of Principal Residence**: Defined as the owner's primary home where they intend to return.
3. **Exemption Limitations**: Individuals cannot claim the PRE if they have claimed a similar exemption in another state within the same calendar year. They must file an affidavit confirming they have not claimed such an exemption elsewhere when requested.
4. **Penalties**: A $500 penalty applies if a person claims both the Michigan exemption and a similar one in another state.
5. **Exemption Duration**: The exemption continues until the property is transferred or ceases to be the owner's principal residence, or if the owner no longer qualifies under the specified conditions.
6. **Review Authority**: The Department of Treasury is responsible for determining the validity of the exemption and may review claims for the current and three prior years.
The provisions ensure that the exemption is applied correctly and maintained within the stipulated guidelines.
If the Department of Treasury determines that a property is not the principal residence of the owner claiming an exemption, it must notify both the local tax collecting unit and the property owner of the denial, including the reason for denial and the appeal rights. Upon notification, the assessor must remove the exemption and, if applicable, amend the tax roll to reflect this change. The local treasurer is then required to issue a corrected tax bill within 30 days, which includes additional taxes, interest at 1.25% per month, and penalties. If the tax roll is with the county treasurer, a supplemental tax bill must be prepared and submitted under the same conditions.
The statute stipulates that property tax exemptions are only available if expressly provided by the Legislature. Specifically, under MCL 211.7cc(3)(a), individuals cannot claim an exemption if they have received a similar exemption in another state during the same year. In this case, the petitioner admitted to receiving such an exemption for property in Arizona in 2017, disqualifying him from the Principal Residence Exemption (PRE). Although the Court of Appeals initially supported this conclusion, it later suggested that the petitioner could retain benefits of the PRE for the remainder of 2017. However, the analysis indicates disagreement with this reasoning, emphasizing that the determination of taxable status typically occurs as of December 31 of the previous year, but for PREs, the status is assessed based on the date an exemption affidavit is filed. Subsection (3)(a) necessitates a comprehensive review of tax claims throughout the calendar year to establish eligibility. The Court of Appeals has characterized Subsection (3) as outlining conditions that disqualify otherwise eligible individuals for the PRE, reinforcing that failure to meet the Legislature's conditions for eligibility leads to the same outcome, regardless of the terminology used.
Property owners are not entitled to a Principal Residence Exemption (PRE) if they claim a substantially similar tax benefit in another state. The Court of Appeals misinterpreted Subsection (4) of MCL 211.7cc, which has undergone legislative amendments reflecting a clear legislative intent to prevent simultaneous claims for both the Michigan PRE and similar out-of-state benefits. Notably, the Legislature amended MCL 211.7cc(3) in response to judicial interpretations, explicitly stating that property owners cannot receive a PRE in any calendar year during which they claim such an out-of-state benefit, regardless of whether that benefit is rescinded. This was further clarified by the 2017 amendment, which aimed to rectify misinterpretations from previous tax tribunal decisions. The amendments culminate in a comprehensive system under the General Property Tax Act (GPTA) that governs property assessment, tax collection, and the administration of exemptions, with penalties for wrongful claims. Overall, Subsection (4) does not permit continued benefits from a denied PRE claim after the claim has been rejected.
Subsection (4) of MCL 211.7cc outlines the process for administering property tax exemptions and specifies that if a property owner's Principal Residence Exemption (PRE) claim is denied, the assessor is required to remove the exemption and amend the tax roll accordingly. The Department of Treasury has the authority to independently review and deny PRE claims under MCL 211.7cc(8). If denied, the assessor has no further obligation to exempt the property, and the denial is effective immediately, requiring a corrected tax bill to be issued within 30 days.
The court determined that Subsection (4) does not grant continued exemption for a property owner once the PRE claim is denied. The Court of Appeals was found to have erred in its application of Subsection (4) and its conclusion regarding ongoing exemptions. The court's decision reinstates the Department of Treasury's earlier ruling.
Subsequent amendments to MCL 211.7cc clarify that individuals cannot claim a PRE if they have taken a similar exemption in another state that has not been rescinded. The amendments also redefined Subsection (4) to specify that it does not apply if a claim is denied under this section, reinforcing that property owners are encouraged to rescind their PREs voluntarily to maintain eligibility. The legislative changes were prompted by a 2017 Tax Tribunal decision that allowed individuals to retain PRE despite claiming similar exemptions elsewhere, leading to the current provisions that explicitly prohibit such claims when a similar exemption is active in another state.
The Real Property Law Section of the State Bar of Michigan contends that the phrase “the claim denied under this section” in Subsection (4) pertains solely to a local tax assessor’s initial assessment of new Principal Residence Exemption (PRE) claims filed under Subsection (2). However, a comprehensive review of MCL 211.7cc indicates that Subsection (4) is not limited to new claims, as Subsection (6) explicitly references both "new" and "existing" claims regarding the authority to deny a PRE when the property is not the owner’s principal residence. The Legislature’s choice of distinct terminology suggests different meanings were intended, as supported by case law and legal interpretation principles.
Subsection (4) was amended in 2017 to incorporate language central to the Court of Appeals' analysis, linking terminations of PREs under Subsection (3) to Subsection (4) with a specified end date of December 31. This end date applies when taxpayers voluntarily rescind their PREs, allowing them to retain benefits they would otherwise lose if claims were denied. The language implies that the December 31 date could extend to situations where owners lose their exemption under Subsection (3) but gain a similar exemption in another state. Notably, the Legislature enacted this amendment to clarify its intent following the misinterpretation by the Michigan Tax Tribunal in the Walczak Trust case. The Court of Appeals affirmed that the December 31 language applies to the newly added phrases in Subsection (4) as part of its analysis.
The Court interpreted the statute to terminate the Principal Residence Exemption (PRE) on December 31 of the year a property is transferred. It addressed the ability of owners to voluntarily rescind their PREs, noting that such a rescission would be relevant if a claim is denied under Subsection (3). However, the case at hand did not involve a voluntary rescission; rather, the PRE was denied by the taxing authority. Consequently, Subsection (4), which applies only when a claim is not denied under MCL 211.7cc, is inapplicable here. The claim's denial means the prohibition on claiming an exemption in Subsection (3) is controlling. The Court acknowledged the December 31 deadline's clear application to property transfers and situations where a property is no longer a principal residence, but it left open the question of its applicability when an owner is no longer entitled to an exemption under Subsection (3). This ambiguity regarding the December 31 deadline and voluntary rescission remains unresolved in this case.
