Legislative Update

Written by Forrest Wall, CAE, Staff Vice President and Industry Relations

State Budget Completed … Without Change in Property Tax Formula for Rental Property

As you now know, the state legislature and Governor completed work on Michigan’s 2010-11 Budget and avoided a government shutdown. One of the items of concern for AAM in this process was a proposed change in the property tax formula for rental property, which Governor Granholm had included in her list of so-called “tax loopholes.”

For the past 6 years AAM has worked in concert with other rental property groups on legislation stemming from a 2002 Michigan Supreme Court decision regarding commercial rental property tax valuation. Under the General Property Tax Act the terms “losses” and “additions” include decreases and increases in a property’s occupancy rate. In WPW Acquisition v. City of Troy, the Michigan Supreme Court held that an increase in taxable value attributable to an increase in a property’s occupancy was unconstitutional. Because the decision did not address decreases in taxable value due to occupancy declines, there was an attempt to provide a legislative solution to clarify the issue.

Initially, the legislative proposal was to simply eliminate occupancy as a part of the formula. An alternative idea was then proposed to exempt commercial rental property from general ad valorem property taxes and create a specific tax for commercial rental property which would include occupancy in the tax formula. The discussion on these proposals resurfaced in the 2009-10 session with the introduction of House Bills 4456 and 4457. There was no new movement in these bills as the budget was completed, and AAM will continue to monitor this issue in the post-election lame duck period.

Reminder: Apartment Owners Can Take Advantage of Worker Tax Credit

Enacted into law in March, the Hiring Incentives to Restore Employment Act establishes temporary tax incentives for employers who hire and retain workers. The following are two tax benefits of interest to apartment owners:

• Through December 31, 2010, employers who hire workers who have been jobless for 60 days or more qualify for an exemption from the employer share of Social Security taxes paid (6.2 percent of covered wages). IRS Form W-11 should be used to certify new hires’ eligibility.

• For each unemployed worker who is hired under the program and then retained for at least a 12-month period, businesses can claim up to a $1,000 tax credit when they file their 2011 income tax return.

More information can be found at www.irs.gov.

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