MICHIGAN MUNICIPAL LEAGUE 2015 CAPITAL CONFERENCE

Transcription

1 MICHIGAN MUNICIPAL LEAGUE 2015 CAPITAL CONFERENCE Moving Forward in the Wake of PPT Reform Scott Smith, Member

2 General outline Policy conference, so policy, not generally nuts & bolts, is focus. Want to address questions, so feel free to ask. 3 basic aspects: How did we get here? Where is here? What is the policy? How generally does it work? What are we experiencing? What is coming? What additional legislation is contemplated? What is contemplated for implementation?

3 Definitions Acronyms: PP = personal property PPT = personal property tax TV = taxable value TCV = true cash value EMPP = eligible manufacturing personal property LCSS = local community stabilization share LSSA = local community stabilization authority SESA = state essential services assessment

4 Legislation as of December 2012 PPT exemptions: Beginning in 2014 for taxpayers with cumulated industrial & commercial PP in a tax collecting jurisdiction $40,000 TV. Beginning in 2016 for EMPP: (i) acquired after December 31, 2012, or (ii) 10 or more years old. Replacement revenues to local governments (± 80% if over 2.1% threshold): Authority (MMAMAA) to distribute portion of use tax revenues for non-essential services. Local governments to levy essential services special assessment. Multiple LESAs possible Business caps, community caps, IFT complications, etc. Tie-barred to August 2014 ballot proposal approving use tax set aside.

5 Additional Legislation To address: Eligibility requirements, procedures for claiming, & consequences for improper claims of exemptions. Tax increment entities (not dealt with in 2012 legislation). Legality of & procedures for local essential services assessment. Timing for distributions, local assessments, exemption claims, etc. Lt. Governor Calley convened group early in Fall of 2013, PA 153 and PA 154 addressed exemption issues PAs 80, 81, & addressed replacement revenues. Ballot proposal passed in August 2014.

6 Small Taxpayer Exemption Applies where TCV of eligible personal property located within a local tax collecting unit that is owned by, leased to, or in the possession of an owner or related entity on December 31 of the preceding year is less than $80,000. Looks at all PP used by a business within a city or township. PP owner pays taxes, but eligibility determined by possession or control. Requires an annual affidavit due on February 10.

7 New & Previously Existing EMPP Exemptions Begin in Apply to EMPP initially placed in service after December 31, EMPP in service for at least 10 years. EMPP first placed in service in remains taxable.

8 Difference in Exemption Concepts Small taxpayer exemption eligibility is based on PP value. Value changes so annual filing is needed. EMPP exemption eligibility is based on PP use. Use doesn t change, so one-time filing works.

9 Reimbursement policy Generally, reimbursement is to make whole for PPT loss from TV as of December 31, Essentially focuses on PPT levied in Not intended to reimburse for PPT losses due to PP additions after 2012 (except for some TIF projects). Intended to make up for losses due to new exemptions. Debt loss reimbursement intended to address loss of PPT from millage levied to pay debt. Better than alternative mid-afternoon, Dec. 13, 2012.

10 Experience so far... small taxpayers Now 2 years with small taxpayer exemption A number of non-filers filed for exemption % of small taxpayers failed to claim exemption. For some, a many deliquencies would qualify. Some who filed affidavit in 2014, failed to do so in Some non-claimers filed PP stmts. showing TCV $80K. Some non-qualifiers filed affidavits. Feb. 10 and 20 confusion. Misunderstandings & confusion among taxpayers remains. Allow assessor to grant exemption based on PP stmts?

11 Experience so far... EMPP reports EMPP exemptions disclosure. Fraction of businesses filed correctly completed 5201 form. Most failed to file. Others improperly completed the form. Some have said it is not entirely clear filing was required. Some restaurants, car dealers & office bldg. owners filed. Again, lack of full understanding.

12 Experience so far... reimbursement Seemed to be some confusion with the reimbursement form. Some are disappointed with amounts, but consistent with policy. Available funds seems amply large enough. Dynamic aspect of reimbursement begins in FY for non-essential services reimbursement.

13 Reimbursement basis A. FY and = 100% of debt loss for all and TIF loss. B. Cities for FY & = 100% of small taxpayer loss for non-debt mills, paid in October C. Beginning for 2016, payments are prioritized: 1 st priority: 100% of local school losses not reimbursed by state school aid. 100% of ISD loss. 100% of essential services (ambulance, fire, jail & police) losses. 100% of small taxpayer loss. For TIF entities = 100% of loss. D. 2 nd priority: remaining funds distributed for losses not reimbursed. Estimated sufficient dollars for 100% reimbursement. E. For A & B for 2014, for C, and initially for D, loss is calculated using difference between current year & 2013 TV of commercial and industrial PP. F. Beginning for 2019, 5% (increases 5%/year) of revenues not distributed under C will be distributed by proportionate share of acquisition cost of exempt EMPP & lowest millage rate.

14 SESA State Essential Services Assessment (SESA). Paid only by those with exempt eligible manufacturing PP. Based generally on acquisition cost. 3 millage rates based on years since acquisition: 1-5 = 2.4 mills 6-10 = 1.25 mills 10+ = 0.9 mills Adjustments for existing tax abatements & exemptions. MSF can grant exemptions & abatements from the SESA. Single return and single payment for all PP in the state.

15 SESA abatements & exemptions The MSF board may adopt a resolution to abate (50%) or exempt PP from the SESA for a stated period, unless State Treasurer votes against resolution. MSF to provide application, approval, & compliance process & contract that: Requires certain investments in EMPP. Includes business plan or demonstratration of $25M minimum investment in add l EMPP during contract term. Provides conditions, including specific time frames, to receive exemption or abatement. Provides for revocation & repayment if fail to comply with agreement. Allows verification audit. May charge administration fees.

16 New legislation... why? Relatively easy policy goals are complicated to address. Goals easy to state: Provide PPT relief to small taxpayers & manufacturers Provide guaranteed replacement revenues for affected taxing units. Make implementation as easy as possible. Complications include, but are not limited to: Defining & limiting eligibility; ensuring compliance. Act 198, Act 328, Ren. Zones, etc. TIFAs. Consistency with other tax laws. Appropriate process for taxpayers & assessors. Distribution methodology. Replacing state revenues. Ensuring businesses are not adversely affected.

17 New legislation... what? Amend TIFA statutes to allow exclusion of PP from base while retaining base tax year. Amend SESA Act to address procedural & other issues. Amendments to provide appropriate relationships among Act 198, Act 328 & the SESA. Ensure definition of debt loss includes obligations incurred or approved by voters before Provide methodology for calculations of increased value from expired tax exemptions. Provide methodology for calculating increased PP value resulting increases in PP related to specific TIF projects. Ensure process for lessors to know when EMPP exemption has been claimed. Increase the local share of use tax to provide operational funds for LCSA.

18 Your thoughts? What PPT issues do you think policy makers should address? What are you hearing from businesses? What are you hearing from assessors, treasurers, equalization staff, and finance directors? What questions do you have?