By KEVIN WALKER
LANSING, Mich. — A package of bills to repeal the personal property tax (PPT) in Michigan passed the state legislature Friday morning and was headed to the governor’s desk for his signature. Gov. Rick Snyder is on record as supporting the tax changes.
The bills will repeal the tax on some business equipment and guarantee replacement of most of the revenue to be lost to local governments. It would also mandate a statewide vote to determine if an amended use tax would be used to help replace lost revenue.
Under the plan, a local government could decide to impose a special assessment on some companies to help recoup lost revenue, as well. In a last-minute development, the Michigan Municipal League (MML) said the legislature and lieutenant governor agreed to a significant concession in that they agreed to tie-bar repeal of the PPT to approval of the statewide vote.
The Michigan Agri-Business Assoc. (MABA) came out in favor of the changes in a statement earlier this month.
“The personal property tax is a burden on Michigan’s businesses that puts us at a competitive disadvantage and stifles economic growth,” said MABA President Jim Byrum. “Many surrounding states have already eliminated their personal property taxes for businesses. The lieutenant governor’s plan would level the playing field and ensure that Michigan businesses can compete and grow.
“The personal property tax slows the growth of Michigan’s agriculture sector by discouraging agribusinesses from investing in new equipment or expanding their operations. As agriculture becomes more high-tech and demand for food and other agricultural products skyrocket, it is essential that Michigan foster a business environment that encourages new investment.”
The package of bills includes state House bills 6022, 6024, 6025 and 6026. It also includes Senate bills 1065, 1072, 1066, 1068, 1069, 1070 and 1071.
According to a House Fiscal Agency analysis, “manufacturing personal property” will be exempt from the PPT if it’s used more than 50 percent of the time in “industrial processing” or “direct integrated support.” Eligibility will be based on actual use rather than classification and could include both commercial personal property as well as industrial personal property.
The exemption, starting Dec. 31, 2013, will apply where the combined taxable value of the property in question is less than $40,000. If the property is worth more than that, it will not be exempt from the tax. Reimbursement for local revenue losses was always a bone of contention.
“It’s a pretty fluid situation,” said Jeremy Nagel, a spokesman for the Michigan Farm Bureau (MFB). “Note that most core farming equipment – tractors, plows, combines – are already exempt just by being agricultural. Marginal items – baggers, processing and handling equipment, forklifts – are currently subject to PPT.
“MFB policy technically supports the repeal of PPT, but since a lot of our members are involved with township government, it’s not exactly unanimous. Townships rely on that revenue.”
That was also the concern of the MML, but as of Friday morning the League changed its position from opposing the legislation to “neutral.”
“The League participated in many negotiations with Lieutenant Governor Brian Calley and key House and Senate leaders and other local government organizations on this issue in the past several weeks,” read the statement on the MML’s website, which was posted early Friday morning by Samantha Harkins, its director of state affairs.
“Late-Thursday additional changes to the bills were proposed in exchange for a neutral position from the League. We are optimistic that our existing concerns over the bills approved Thursday can be addressed by the Legislature in 2013.”
She went on to write the MML contracted with independent analysts who “ran the numbers” and concluded the formulas spelled out in the final version of the legislation will work for local governments to replace all lost revenue.
“The plan requires a statewide vote of the people in order to divert the use tax for local government use, and in a significant compromise by the lieutenant governor and legislature, the entire repeal of personal property tax is tie-barred to the statewide use tax vote.
“Simply put, if the statewide vote fails, PPT as we know it remains in effect,” the post states. “This represents a more substantial guarantee from the original proposal.”