This Michigan Property Tax Uncapping Update is shared with us by Estate Planning Attorney, Adam Russell, Tuesley Hall Konopa,LLP. We ask that you contact him directly with questions regarding the latest updates in Michigan Property Tax Law. (Call (269) 445-1818 or email firstname.lastname@example.org.)
Owners of real property in Michigan have “enjoyed” having a cap imposed on the amount their property taxes can increase in any given year since 1995. A reasonable taxpayer might expect that, by the twentieth anniversary, the guidelines for when property taxes uncap would be well established and consistently applied. However, the uncapping laws continue to evolve, with a series of significant changes having taken place over the past five or so years.
As frustrating as a constantly changing tax landscape can be for Michigan property owners, the changes have, by and large, been on the side of increasing flexibility and planning opportunities. The uncapping statute defines what constitutes a “transfer of ownership” resulting in an uncapping of the taxes, and what does not. For purposes of planning – and by planning here, we generally mean seeking to preserve the property tax cap as long as possible, or to reduce uncapping incidence within a family – we are primarily concerned with the exceptions to the uncapping rules. Or, more clearly, what sorts of transfers will NOT serve to uncap the taxes?
As a brief review of the uncapping rules, a transfer of ownership, as defined by statute, effectively resets the property tax cap, setting the new owner’s taxable value to equal the current state equalized value (SEV, Michigan’s term for the current assessed value, purported to represent one-half of the market value, in the assessor’s opinion). The property taxes are then capped for the new owner until another transfer of ownership occurs.