Michigan has a somewhat unique real estate taxing system. For each tax parcel, there is the State Equalized Value (SEV) and the Taxable Value (TV) of the parcel. In 1994, the entire state of Michigan was reassessed. In 1995, following the reassessment the concept of TV was introduced; and, at that time, the SEV equaled the TV.
Each year, it is the job of the Township/City Assessor to raise or lower the SEV for a particular parcel of real estate based upon the “current market value” of the parcel as of December 31. This determination of current market value by the Township/City Assessor is based upon real estate sales occurring within the Township/City during the year ending December 31. The SEV must reflect 50% of the property’s true cash value. Unless there is an uncapping of the TV of the parcel due to: 1) a transfer of title to the parcel or 2) new construction or remodeling that took place on the parcel during the calendar year ending December 31, the newly established TV cannot be increased by more than the rate of inflation (ROI) or five percent (5%), whichever sum is less, over the TV for the prior year.
If a sale of the parcel took place during the calendar year ending December 31, then the assessed valued of the property will become uncapped making the TV and the SEV the same number.
In February of each year, the Township/City Assessor will mail to each property owner located within their township/city a Notice of Assessment Change (NOAC) which is similar to the image above. The NOAC shows the increase/ decrease in the TV and the SEV for the current year. The TV appearing on the NOAC is the only number that the taxpayer needs to be concerned about. Unless there is new construction or remodeling of the property, the TV appearing on the NOAC is supposed to be an objective number that can only increase/decrease due to the ROI as determined by the Township/City Assessor; however, this number shall not increase more than five percent (5%) over the prior year TV.
As a property owner, if you disagree with the TV appearing on the NOAC, then you must appeal your assessment. The NOAC will contain time deadlines within which you must file your real estate tax appeal to the local Township/City Board of Review (BOR). Typically, the time deadline for a taxpayer to file an appeal to the BOR is no more than three (3) weeks from the date of issuance of the NOAC. The BOR conducts public hearings where the taxpayer or his representative can appear and present oral arguments supporting their appeal of the NOAC to the BOR; or, alternatively, the taxpayer can file a petition to the BOR by mail together with documentation supporting the taxpayer’s claimed valuation. Any real estate tax appeal filed by a taxpayer to the BOR should contain supporting documentation and evidence supporting the appeal.
PREPARING YOUR APPEAL AND THE BOR HEARING
You must have independent evidence to support the valuation of your property as set forth in your appeal to the BOR. The following approach as part of preparing your real estate tax appeal should be considered.
- Obtain a copy of your appraisal card for your property from the Township/City Assessor. Review the appraisal card to determine if the appraisal card correctly describes your property in terms of square footage, numbers of bedrooms and bathrooms, brick vs. frame construction, fireplaces, etc. Summarize any inconsistencies in the appraisal card vs. your actual property. Calculate the value of these discrepancies. Make sure the dimensions of your lot matches the lot dimensions as set forth on the appraisal card.
- Consider obtaining a real estate appraisal of your property that is conducted by a licensed Michigan real estate appraiser as of December 31 of the prior year end, establishing the value of your property. Taxpayers would be cautioned not to use real estate appraisals obtained as part of the financing or refinancing of the property as the BOR may feel these appraisals do not have the same level of objectivity in valuation as an independent appraisal secured for non-financing purposes.
- Assemble copies of closing statements if you purchased the property during the prior year (presuming, the purchase by the taxpayer was from an unrelated third party in an arms length transaction).
- If the property was purchased in the prior year and was on the market for sale for an extended period of time, then this fact should be made known to the BOR.
- Attend or submit your appeal to the BOR either directly or have your attorney prepare and file the appeal to the BOR on your behalf.
TIMING OF THE ISSUANCE OF THE BOR DECISION AND REMEDIES AVAILABLE IF YOU DO NOT LIKE THE BOR DECISION
The decision of the BOR on a taxpayer appeal is usually made by the BOR within four (4) weeks of the BOR hearing date. As a taxpayer, if you are not satisfied with the decision of the BOR, then you may appeal the BOR decision to the Michigan Tax Tribunal. An appeal of a BOR decision to the Tax Tribunal must be filed by May 31 for commercial and industrial properties or by July 31 for residential properties, following the issuance of the decision of the BOR. After the appeal is filed to the Tax Tribunal, a hearing date will be established by the Tax Tribunal and an Administrative Law Judge will be assigned to hear your case. Typically Tax Tribunal hearings occur within twelve (12) months of the date of filing the appeal and the hearings are conducted in the city where the county seat is located. At the Tax Tribunal hearing, both the taxpayer and the Township/City Assessor are typically given a total of one (1) hour to present evidence in support of their respective positions as to valuation of the taxpayer’s property.
When making an appeal of a BOR decision to the Tax Tribunal, it is important for the taxpayer to also file an appeal to the BOR of the TV for the year following the original appeal to the BOR and Tax Tribunal, in order to preserve the benefits of a positive result from the Tax Tribunal hearing for that second tax year.
THE ANNUITY LIKE EFFECT OF A CORRECT REAL ESTATE TAX ASSESSMENT FOLLOWING A SUCCESSFUL APPEAL
As described herein, once the TV of the taxpayer’s property is correctly established, the annual increases in the TV in each subsequent year cannot exceed the ROI or five percent (5%), whichever is less. The importance to the taxpayer of having a correct TV creates an annuity like compounding effect in subsequent years of property ownership. Assume that a taxpayer, as a result of filing a real estate tax appeal to the BOR or Tax Tribunal, obtains a corrected TV that results in $1,000 in annual real estate tax savings. Assuming a ROI factor of 3% or the statutory maximum 5% annual increase in TV assessed by the Township/City Assessor, the taxpayer would save the following sums of money over the following time periods:
|Time Period||3% ROI||5% Maximum Annual Increase|
|5 years||$ 6,510||$ 6,840|
|10 years||$ 12,900||$ 14,300|
|15 years||$ 20,300||$ 23,830|
|20 years||$ 28,900||$ 35,980|
As can be seen from the above table, making sure that your Michigan property is properly assessed can have significant financial benefits to the taxpayer. The greater the TV, the more important it becomes to have a correct TV.
If you should have any questions regarding your Michigan Real Estate Tax Assessment and the tax appeal process, please contact John Wojcik or Liz Rettig of our office.
John M. Wojcik
Elizabeth A. Rettig
Telephone Number 269.469.0300