Replacing the PPT on industry: up to voters
Lt. Gov. Brian Calley was in a manufacturing plant in Grand Rapids last week to sign long-debated legislation that would replace funding lost by the phase-out of the industrial personal property tax — if enough Michigan voters say yes to the August ballot proposal.
The signing was staged at Van’s Pattern Inc. because the industrial personal property tax has long been blamed for discouraging industrial business expansion in Michigan.
Calley, signing the legislation on behalf of Gov. Rick Snyder who was on a trade mission in Europe, had an appreciative audience made up of dozens of elected and appointed city, county and township officials. They were invited to the signing ceremony because a portion of the PPT revenue had been key annual funding for local governments throughout Michigan, and the threatened shortfall facing them stalled PPT reform while the state sought a replacement for the lost funding.
“This is a big win for business, but not at the expense of the individual taxpayer,” said Grand Rapids Mayor George Heartwell, the first of several speakers at Calley’s event. “It’s also a win for local government, but not at the expense of the individual taxpayer.”
In late March, Snyder signed the first of a series of bipartisan bills described as providing more stable local government revenue for essential services, including police and fire protection.
There had been a proposal to include a separate Essential Services Assessment on businesses in the package of legislation, but it was dropped near the end.
Calley worked with local government representatives around the state as the legislation was being drafted. Wyoming City Manager Curtis Holt was part of a Grand Rapids-area group involved in it, and he said there were problems with the ESA proposal: One was the possibility of a business being assessed separately by county, township and village boards.
“These pieces of legislation are extremely complicated,” said Holt, “not like a slam dunk.”
Scott Smith, an attorney with Dickinson Wright in Grand Rapids and also a member of the group Holt was with, said it was feared there would be legal challenges to the ESA regarding whether the level of assessment was going to be an amount proportional to the benefit the business received.
The legislation that was signed into law will provide the August ballot language on the proposed formulas for funneling some of the state use tax back to the local governments. The use tax, which is 6 percent like the sales tax and will not increase, is charged on goods, equipment and property bought or leased out of state by Michigan individuals and businesses and which is not subject to the state sales tax. The use tax includes purchases made over the Internet and hotel room and car rentals out of state.
Supporters of the legislation, intended to return 100 percent funding to local governments, say the state will realize a revenue windfall as tax credits given as incentives to businesses in recent years begin to expire.
In an announcement March 28, Snyder said the proposals on the ballot are supported by a broad coalition of local governments, schools and business organizations, and would provide an estimated 100 percent reimbursement to municipalities for lost personal property tax revenue. The legislation requiring voter approval will offer “more financial stability to municipalities as they provide services that enhance the quality of life for all Michiganders,” according to the announcement from the governor’s office.
The Michigan Chamber of Commerce on March 28 commended the Snyder administration and the state legislature for “displaying overwhelming bi-partisan support to begin phase-out of Michigan’s burdensome business personal property tax while protecting local communities with full reimbursement revenue.”
Phase-in of the elimination of the business PPT over the next few years started this year with an exemption for small businesses that have total personal property with actual value of $80,000 or less. There will still be a PPT on larger businesses that are not engaged in manufacturing — firms ranging from lawyers and accountants to major retailers.
Curtis Ruppal, state and local tax partner at Plante Moran in Grand Rapids, told the Business Journal the August ballot will ask voters to agree with the state plan for using a portion of the use tax revenues to fund local units of government.
If it does not pass, “all the personal property tax reform goes by the wayside,” said Ruppal, which means the small business exemption will not be repeated after 2014, and the provision exempting manufacturing companies will not happen.