Beginning January 1, 2014, all businesses in Michigan with a “true cash value” of taxable assets of less than $80,000, within each taxing jurisdiction, are exempt from personal property tax.
The only other requirement to qualify for the exemption is that the business must file an affidavit (Form 5076) claiming the exemption by February 10th of each year.
The good news is, that in addition to the above exemption, beginning in 2016 certain manufacturers with “true cash value” in excess of $80,000 will also be able to claim an exemption for “Eligible Manufacturing Personal Property (EMPP).” EMPP means all personal property located on occupied real property if the total personal property at the location is predominantly (greater than 50%) used in industrial processing or direct integrated support.
For qualified taxpayers, this exemption will apply to all “qualified new personal property”, which is property initially placed in service after December 31, 2012. It will also apply to “qualified previously existing personal property” which is personal property that has been in service the immediately preceding 10 years. This will result in a gradual exemption of all personal property tax on EMPP by the year 2023 for qualified taxpayers.
The bad news is that for businesses claiming the exemption noted above for EMPP, they will be subject to a new tax beginning in 2016 called the “Statewide Essential Services Assessment (SESA).”
The new tax will be based on the fair market value of the personal property at the time of acquisition. For property acquired 1-5 years before the tax year, the tax rate will be 2.4 mills. For property acquired 6-10 years before the tax year, it will be 1.25 mills. For property acquired more than 10 years before the tax year, the rate will be .9 mills.
Overall, this will result in reduced personal property taxes for these qualified manufacturers but not a full exemption due to the new SESA.
If you would like to discuss how this applies to your specific situation, please contact our office to meet with a professional. Request a complimentary accounting consultation or contact us at (616) 642-9467.