Property Tax Advanced Seminar

Transcription

1 Property Tax Advanced Seminar February 27, 2013 MELG Building Webinar 1 Need Help? o Click on link to check your system o If you are experiencing trouble, please call technical support at: , option #2, #4, #1 or online at o Using telephone for audio call , passcode # 2 1

2 Overview of Blackboard Collaborate Top Toolbar Whiteboard Screens Participant Window Whiteboard Tools Chat Room Audio Controls (mic/speaker level) 3 Speakers Phil Boone Michigan Department of Education Robert Dwan Michigan School Business Officials Howard Heideman Michigan Department of Treasury Andrew Lockwood Michigan Department of Treasury Sharon Raschke Dexter Community Schools 4 2

3 Agenda 8:45 am Blackboard Collaborate Overview Debbie Kopkau, MSBO 8:50 Overview of School Property Tax Robert Dwan, MSBO 9:15 Terminology, Personal Property Tax, Ad Valorem Property Tax Millage Levies, K12 and ISD Howard Heideman and Andrew Lockwood, Michigan Department of Treasury 10:15 Break 10:30 Millage Rates, Millage Reduction Fractions, and Tax Rate Requests Howard Heideman and Andrew Lockwood, Michigan Department of Treasury 11:30 Tax Rate Request L-4029 Sharon Raschke, Dexter Community Schools 12:00 pm Lunch 5 Agenda (Cont) 12:45 How Property Taxes Fit into State Aid Phil Boone, Michigan Department of Education 1:25 Specific Tax Programs, Renaissance Zones, Tax Increment Financing and Board of Review Howard Heideman and Andrew Lockwood, Michigan Department of Treasury 2:25 Break 2:40 County Settlement & Reconciliation of Property Tax Receivable Sharon Raschke, Dexter Community Schools 3:40 Current Topics, Michigan State Tax Commission, Other Issues, Wrap-Up Robert Dwan, MSBO and all speakers 4:00 Adjourn 6 3

4 Property Tax Advanced School Property Tax Overview Presenter: Robert Dwan, MSBO 7 Property Tax Process A S S E S S M E N T Township & City Assessors Taxable Value Information (DS-4410) County Equalization Director Tax Increment Financing Authorities Updated in May and at least annually thereafter 8 4

5 Property Tax Process A S S E S S M E N T County Equalization Director Taxable Value Information (DS-4410A) School District Consolidates information for each school district Submitted online by County Treasurer to MDE 9 Property Tax Process T A X L E V Y School District Tax Levy (Form L-4029) Townships & Cities School District prepares L-4029 for each township/city Board approves after Truth In Taxation 10 5

6 Property Tax Flowchart T A X B I L L I N Townships / Cities Property Tax Bills Property Owners G 11 Property Tax Flowchart C O L L E C T I O N NO Settlement Process with the County Property Owners Pay Bill? (by Feb 28) YES Check Township / City Treasurer 12 6

7 Property Tax Flowchart C O L L E C T I O N Tax Breakdown Township / City Treasurer School District Check 13 Property Tax Flowchart C O L L E C T I O N Property Tax Receivables Worksheet School District Deposits Check in Bank 14 7

8 Property Tax Process S E T T L E M E N T Township & City Treasurer Settlement County Townships & Cities verify to the County parcel by parcel tax collections Taxes receivable As of March 1 15 Property Tax Process D E L I N Q U E N T County Treasurer Tax Breakdown School District Check C O L L E C T I O N 16 8

9 Property Tax Flowchart County DELINQUENT PAYOFF Delinquent Personal Property Taxes Delinquent Real Property Taxes Check (Issues debt until collected) No Action School District Township/City collects delinquent personal property taxes County collects delinquent real property taxes (bills back if uncollectible) 17 Property Tax Process D E L I N Q U E N T School District Property Tax Receivables Worksheet Used to calculate taxes receivable Deposits Check in Bank P A Y O F F 18 9

10 Glossary of Terms 19 Property Tax Advanced Terminology Presenters: Howard Heideman & Andrew Lockwood Michigan Department of Treasury 20 10

11 Terminology: Real & Personal Property Real Property is land plus buildings and fixtures on the land. Personal Property is machinery, tools, computers, furniture or generally property not permanently affixed to a structure. Household personal property is not subject to the ad valorem property tax 21 Terminology: Homestead Property Homestead property is property used as a property owner s principal residence or qualified agricultural property or qualified forest property. Homestead property is not subject to the local school operating millage. See MCL 211.7dd 22 11

12 Terminology: Nonhomestead Property Nonhomestead property is considered to be second homes, business property, and rental housing. Nonhomestead property is subject to the local school operating millage, except for industrial personal property that is exempt and except for commercial personal property that is exempt from the first 12 mills. 23 Terminology: Real Property Classifications Residential Agricultural Commercial Industrial Timber-Cutover Developmental See MCL c for in depth descriptions

13 Terminology: Personal Property Classifications Commercial Industrial Utility See MCL c for in depth descriptions. 25 Terminology: State Equalized Valuation DETERMINATION OF STATE EQUALIZED VALUATION TRUE CASH VALUE = Market Value ASSESSED VALUE = 50% of True Cash Value SEV = ASSESSED VALUE times SEV FACTOR 26 13

14 Terminology: Capped Valuation DETERMINATION OF CAPPED VALUATION MCL a(2)(a) CAPPED = [(Prior Year Taxable Value minus VALUE LOSSES ) times the lesser of 5% or the Inflation Rate] plus ADDITIONS Inflation Rate for use in 2013 = 2.4% This rate is used for both capped value calculations and Headlee MRF s 27 Terminology: Taxable Value DETERMINATION OF TAXABLE VALUE MCL a(2) Sec 27a(2): for taxes levied in 1995 and for each year after, the taxable value of each parcel of property is the lesser of the following: a) The property s calculated capped value or b) The property s current state equalized valuation

15 Property Tax Advanced Personal Property Tax Reform Presenter: Howard Heideman Michigan Department of Treasury 29 PERSONAL PROPERTY TAX REFORM Small Taxpayer Exemption Beginning in 2014, all of a taxpayer s industrial and commercial personal property within a local tax collecting unit will be exempt, so long as the combined taxable value of such property within the unit is less than $40,000. Exemption for New Personal Property Beginning in 2016, Eligible Manufacturing Personal Property (EMPP) first placed in service after 2012 will be 100% exempt. Existing Personal Property Exemptions Starting in 2016, EMPP first placed in service in 2005 or earlier will be 100% exempt. In each subsequent year, one additional year would be added until all existing EMPP would be exempt in

16 PERSONAL PROPERTY TAX REFORM Eligible Manufacturing Personal Property (EMPP) All industrial and commercial personal property (PP) located on a parcel of real property if the PP is used more than 50% of the time in industrial processing or direct integrated support. Existing Property Tax Abatements Beginning in 2014, existing PA 198, tech park and enterprise zone PPT abatements would be extended until, or terminate on, the date the property qualifies for the new exemptions PA 328 exemptions will continue until the later of that date or the original exemption expiration date. Exemptions tied to approval of Local Use Tax Legislation at August 2014 Statewide Election 31 PPT Plan Reimbursement In FY 2014 & FY 2015, requirement to reimburse for loss of debt taxes Beginning in FY 2016, Use Tax and SAF reimbursement would begin. SET and basic school operating mills would be made from payment from state use tax to the SAF through appropriation. ISD Operating and Debt Loss would be 100% reimbursed by the Use Tax through the Metropolitan Authority. Sinking fund and recreational mills would be reimbursed at an estimated 80% by the Use Tax through the Metropolitan Authority. Hold Harmless and Out of Formula School Districts would be 100% reimbursed by the Use Tax through 32 the Metropolitan Authority 16

17 PPT Plan Revenue Sources Use Tax Portion of State use tax currently going to the State s General Fund would be levied by the Metropolitan Authority to reimburse local units and schools for their PPT revenue loss Certificated Credit Savings Savings from the decrease in Certificated Credits from the Michigan Business Tax would offset the loss of use tax revenue and SAF reimbursement costs. Essential Services Assessments For local units of government to replace PPT revenue lost for essential services. Assessments are not used to replace any school revenue. 33 PPT Plan Basics School debt will be reimbursed for obligations approved by voters before Jan 1, 2013 School districts & ISDs will need to know how much personal property is located within the district in 2013 to provide a baseline to calculate revenue loss PA 407 of 2012 provides the framework of how reimbursement will work 34 17

18 PPT Plan Basics Reimbursement Table Local Government Reimbursements Funding Source Type of Service/Cost Rate of Reimbursement Special Assessment for Essential Services Up to 100% of lost PPT revenue essential services (local option) (police,fire,ambulance, and jail Portion of state use tax is K-12 operating costs 100% of lost PPT revenue dedicated to school aid fund ISD operating costs and existing 100% of lost PPT revenue K-12 and ISD school bond debt Portion of 6% use tax is levied by Sinking fund and recreational mills Estimated 80% of lost PPT revenue Statewide Metropolitan Authority Non-essential services Estimated 80% of lost PPT revenue to all (all services except police, fire, jail, community colleges and other municipalities and ambulance) losing over 2.3% of taxable value to PPT exemptions 35 Property Tax Advanced Ad Valorem Property Tax Millage Levies, K12 Presenters: Howard Heideman & Andrew Lockwood Michigan Department of Treasury 36 18

19 Ad Valorem Property Tax Millage Levies K General Operating Levy 2. Hold Harmless Levy 3. Building & Site Sinking Fund Levy 4. Debt Levy 5. Recreational Levy 37 Ad Valorem Property Tax Millage Levies, K-12 Millage General Operating Taxable Value Base Non-Homestead & Non-Qualified Agricultural/Forest Property Truth Headlee in Tax YES YES General Operating Levy cannot exceed 18 mills or 1993 levy, whichever is less

20 Ad Valorem Property Tax Millage Levies, K-12 Industrial Personal Property Beginning in 2008, industrial personal property is exempt from the State Education Tax and 18 mill local school operating tax. Prior to FY12, School Aid Fund revenues were reimbursed through the Michigan Business Tax. 39 Ad Valorem Property Tax Millage Levies, K-12 Commercial Personal Property Also beginning in 2008, commercial personal property is exempt from 12 mills of the local school operating tax. Prior to FY12, School Aid Fund revenues were reimbursed through the Michigan Business Tax

21 Ad Valorem Property Tax Millage Levies, K-12 Millage Supplemental Hold Harmless Taxable Value Base PRE and Qual. Ag./Forest in the local school district Truth Headlee in Tax YES YES Lesser of Annual School Code Limit Millage and the 1994 Certified Millage, as permanently reduced, times the current year millage reduction fraction for all property. (Letter ) 41 Exemption & Specific Taxation Programs Hold Harmless School Districts Because industrial and commercial personal property are treated like PRE and Ag property, hold harmless millage rates are levied on industrial and commercial personal property. Commercial personal property is only exempt from 12 school operating mills. It is only subjected to the first 12 hold harmless mills

22 Hold-Harmless Mills Section 1211 of school code, MCL (3): Hold-Harmless Districts must reduce mills to limit increase in combined state and local revenue per pupil to lesser of: $ increase in foundation allowance % increase in general price level 43 Hold-Harmless Mills When foundation allowance increases by more than inflation, hold-harmless districts must reduce their millage rate to limit state/local increase to inflation. To allow hold-harmless districts to receive full dollar increase in foundation allowance, their foundation increases were limited to inflation, with rest of increase paid under Sec.20j

23 Ad Valorem Property Tax Millage Levies, K-12 Millage Sinking Fund Taxable Value Base All properties within the local school district Headlee Yes Truth in Tax No See Attorney General Opinion Ad Valorem Property Tax Millage Levies, K-12 Millage Debt Taxable Value Base All properties within the local school district Headlee No Truth in Tax No 46 23

24 Ad Valorem Property Tax Millage Levies, K-12 Millage Recreational Taxable Value Base All properties within the local school district Headlee Yes Truth in Tax Yes 47 Property Tax Advanced Ad Valorem Property Tax Millage Levies, ISD Presenters: Howard Heideman & Andrew Lockwood Michigan Department of Treasury 48 24

25 Ad Valorem Property Tax Millage Levies, ISD 1. Allocated Operating Levy 2. Special Education 3. Vocational Education 4. Enhancement 49 Ad Valorem Property Tax Millage Levies, ISD ISD Millage Allocated Operating Taxable Value Base All properties within the intermediate school district Truth Maximum Headlee in Tax 150% of what Yes Yes was authorized in 1993 Allocated through voter-approved fixed allocation or by county allocation board

26 Ad Valorem Property Tax Millage Levies, ISD ISD Millage Special Education Taxable Value Base All properties within the intermediate school district Truth Maximum Headlee in Tax 175% of what Yes Yes was authorized in Ad Valorem Property Tax Millage Levies, ISD ISD Millage Taxable Value Base Vocational All properties within Education the intermediate school district Truth Maximum Headlee in Tax 150% of what was Yes Yes authorized in If not authorized, 1 mill is the limit 52 26

27 Ad Valorem Property Tax Millage Levies, ISD ISD Millage Enhancement Taxable Value Base All properties within the intermediate school district Truth Maximum Headlee in Tax Not to exceed Yes Yes 3 mills 53 Ad Valorem Property Tax Millage Levies NOT SUBJECT TO HEADLEE NOT SUBJECT TO TRUTH IN TAXATION STATE EDUCATION TAX NOT TO BE REPORTED BY THE LOCAL SCHOOL DISTRICT or ISD ON THE L TAX RATE REQUEST 54 27

28 Break 55 Property Tax Advanced Millage Rates/Millage Reduction Fractions Presenters: Howard Heideman & Andrew Lockwood Michigan Department of Treasury 56 28

29 Terminology: Millage Rate(s) BRIEFLY EXPLAIN THE DIFFERENCE BETWEEN A. AUTHORIZED OPERATING MILLAGE RATE B. PERMANENTLY REDUCED OPERATING MILLAGE RATE C. MAXIMUM ALLOWABLE OPERATING MILLAGE RATE 57 Terminology: Millage Rate(s) AUTHORIZED MILLAGE RATE: Millage rate or levy authorized by specific statute, charter or vote of the electorate

30 Terminology: Millage Rate(s) PERMANENTLY REDUCED MILLAGE RATE: Beginning in 1994, if an authorized millage was subject to a Headlee rollback, the resulting reduced millage was carried forward to serve as the beginning levy for the following year s calculation. 59 Terminology: Millage Rate(s) MAXIMUM ALLOWABLE MILLAGE RATE: Prior year permanently reduced millage rate as factored by the applicable current year millage reduction fractions for Headlee limitation, Truth in Equalization* and/or Truth in Assessing*. *K-12 & ISD operating levies are not subject to Truth in Equalization or Truth in Assessing Rollbacks 60 30

31 Millage Reduction Fractions Headlee Millage Reduction Fraction MCL d Inflation MRF = (Prior Year Taxable Value - LOSSES ) X Rate (Current Year Taxable Value - ADDITIONS Inflation rate to be utilized for calculation of 2013 MRF is 2.4% (expressed as 1.024) 61 Millage Reduction Fractions Headlee Millage Reduction Fraction MCL d For K-12 General Operating, the Headlee MRF is calculated using 100% non-homestead & 100% nonqualified agricultural (Real & Utility Personal) properties located within the local school district only. Effective date set by local assessing officer. For: K-12 Hold Harmless, Sinking Fund, and Recreation; & ISD levies, the Headlee MRF is calculated using ALL properties (Real & Personal) located within the specific district

32 Millage Reduction Fractions Base Tax Rate Fraction - Truth in Taxation MCL e BTRF = (Prior Year Taxable - LOSSES (Current Year Taxable - ADDITIONS 63 Millage Reduction Fractions CALCULATION OF BASE TAX RATE BTR = Prior Year Operating Levy times BTRF Note: A tax authority may forego the requirements of Truth in Taxation if it meets the optional requirements of Truth in Budgeting 64 32

33 Millage Reduction Fractions LOSSES MCL d(1)(h) Property Destroyed Property Removed Exempt Property Decrease in Occupancy Environmental Contamination LOSSES NOT: Platting, Splits, Combinations, Zoning Changes 65 Millage Reduction Fractions ADDITIONS MCL d(1)(b) Omitted Real Property Omitted Personal Property New Construction Previously Exempt Property Replacement Construction Remediation of Environmental Contamination Increase in Occupancy (Ruled unconstitutional, WpW) Public Services (Ruled unconstitutional, Toll Northville) 66 33

34 Millage Reduction Fractions ADDITIONS NOT: Platting, Splits, Combinations Zoning Changes Transfers of Ownership

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45 Property Tax Advanced L-4029 Presenter: Sharon Raschke, Dexter Community Schools 90 45

46 L-4029 Tax Rate Request 91 This form can be obtained from Michigan Treasury s website at Form must be completed and submitted to local municipal and county Treasurers on or before September 30 of each year. If a summer levy is requested, the form must be submitted earlier. Tax Rate Requests must be approved in accordance with Truth in Taxation Hearing requirements

47 Completing the L-4029 A separate L-4029 is prepared for each municipality Report TV for all school district properties and non-primary residency exemption (Non-PRE) properties within the municipality (from DS-4410) 93 Completing the L-4029 Enter the source for each millage. This includes charter, extra-voted, non- PRE 94 47

48 Completing the L-4029 Enter the purpose of the millage. Examples are operating, debt service, special ed, voc ed, and sinking fund millage. 95 Completing the L-4029 Record the election date and year for each millage authorized by district voter approval

49 Completing the L-4029 List the millage rate for each rate authorized by voters, charter, or debt service. This is the originally authorized rate before any millage reductions. 97 Completing the L-4029 Look at last year s Column 7 This is the permanently reduced rate recorded in column 7 of last year s L Enter the full millage rate approved by voters if it was approved after April 30 of this year. Current year approvals are NOT subject to reduction this year

50 Completing the L-4029 List the Millage Reduction Fraction (MRF) certified by the county treasurer for the current year. The MRF shall be recorded with four decimal places. Current year MRF in Column 6 shall not exceed This prevents roll up of millage rates. Enter for current year approved millage (after April 30). Enter for debt, as debt millage is not subject to MRF. 99 Completing the L-4029 Calculation Column Multiply rate in Column 5 by the MRF in Column 6. Round DOWN to fourth decimal place x = rounds to

51 Completing the L-4029 This column is always for school districts, since schools are not subject to Truth in Assessing or Equalization millage rollback fractions. 101 Completing the L-4029 Calculation Column Multiply rate in Column 7 by the rollback fraction in Column 8. Round DOWN to fourth decimal place. Since Column 8 is always for schools, Column 9 always Column 7 for schools

52 Completing the L-4029 Enter the tax rate approved by the board of education for summer and winter levies The sum of the rates cannot exceed the maximum allowable levy in Column 9. All school taxes are on winter tax roll in this example. 103 Completing the L-4029 Record the millage expiration date. This is always a 12/31 date with the year of millage expiration

53 Completing the L-4029 Don t forget the certification section! Be sure to complete the prepared by section, so the county officials know who to contact with any questions. Board president and secretary must sign the L-4029 as approved by the board. 105 Completing the L-4029 L-4029 for District Levying Hold Harmless Mills Assume a district is levying 18 mills on Nonhomestead property and 5 Hold-Harmless mills. This is reported on the L-4029 as 5 mills levied on all property and 13 (Additional) mills levied on nonhomestead property. See Annual STC Millage Rollback Bulletin (2010-2)

54 Completing the L-4029 Report millage levy for: Principal Residence, Qualified Ag, Qualified Forest and Industrial Personal Commercial Personal All Other. 107 L-4029 Random Thoughts Consider having your county equalization department or treasurer s office review L-4029 before finalizing. Don t forget that a separate report must be completed for each municipality within the school district. Forward a copy of the executed L-4029 to your bond counsel for their records

55 L Tax Rate Request 109 Lunch 12:00 12:45 pm