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PROPOSAL A INFORMATIONBeginning in 1995 a new value was introduced to the property tax system. This value was termed taxable value. Prior to 1995 property taxes were based on the state equalized value (S.E.V.), which represented the assessor’s estimate of 50% of a property’s market value. As of 1995, the taxable value is now the basis for the calculation of property taxes. Before the implementation of Proposal A, a property tax bill would increase or decrease in direct proportion to the change of the state equalized value. For example, if a property’s state equalized value increased 10%, one could expect that the next tax bill would be 10% greater than the previous year’s amount. Now, the taxable value has replaced the S.E.V. in property tax computation. The annual increase of tax is limited due to the method by which the taxable value is calculated. Proposal A mandates that the taxable value is to be determined as follows: TV = Previous year’s taxable value - losses x CPI + additions TV = Taxable Value CPI = Consumer Price Index The taxable value calculation is made annually, independent to the change of the state equalized value. Proposal A implicitly requires that the Consumer Price Index shall not exceed 5% in any one year, and the taxable value shall not exceed the state equalized value. These restrictions effectively place a "cap" or limit to the annual increase of property taxes. The determination of the taxable value will only vary in the year following a property transfer (see property transfer below) or if new construction has occurred. Past Consumer Price Indexes are as follows:
Year C.P.I.
2011 1.7% 2010 0.997% 2009 4.4% 2008
2.3% 2006 3.3% 2005 2.3% 2004 2.3% 2003 1.5% 2002 3.2% 2001 3.2% 2000 1.9%
State Equalized Value The annual determination of a property's state equalized value follows the same procedure as that prior to Proposal A. County and state equalization continues to follow the previous methods of measuring a local unit’s level of assessments. The assessor must still estimate each property’s market value and use 50% of that amount as the assessed/ state equalized values. There is no cap or limit to the amount that the S.E.V. can change in any year. As long as a property remains in the same ownership, the S.E.V. is irrelevant when property tax bills are calculated with the exception of ad-valorem based special assessments. Property Transfer The year following a sale or transfer of ownership of real estate, the
transferred property’s state equalized value becomes relevant. When a transfer
of ownership occurs statutes require the removing of the value cap and
the adjustment of the taxable value to that of the following year’s state
equalized value. This means that the taxable value will equal the state
equalized value in the year following the transfer of ownership. It is
important to note that the assessor does not utilize 50% of the property’s
selling price as the new SEV. This is the most common misconception regarding
the uncapping of taxable values. The following year’s SEV is determined
by the same method as if it had not transferred.
Property owners may declare their principal residence as a homestead
and exempt the property from 18 mills of school operating tax. In
order to qualify as a homestead property, the property must be occupied
as a homestead by May 1 of the first year claimed. Partial homestead
exemptions are also available for multi-family dwellings. The 18 mill school
operating tax exemption also extends to agricultural classed property.
Non-agricultural classed property devoted primarily to agricultural uses
may also be eligible for the exemption. Please contact the assessors
office for additional information regarding homestead and qualified agricultural
exemptions..
Homestead and agricultural property is exempt from 18 mills of school operating tax. The Michigan sales tax was increased from 4% to 6%. The State of Michigan now levies 6 mills (state education tax). In all cases the SEV and taxable value are equal for personal property. Purchasers of real estate must file additional forms with the assessor. The Michigan Department of Treasury administers the homestead program, including audits. Local participation is needed for proper administration. |
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