DATE: December 7, 2004

TO: County Treasurers, Administrators, Controllers, Managers, and Clerks

FROM:    Suzanne K. Schafer, Administrator
                Local Audit and Finance Division
                Bureau of Local Government Services

SUBJECT: Accounting Treatment for Imposition of Summer Property Tax Levy by Counties

OVERVIEW OF LAW

Public Act 357 of 2004 provides a funding mechanism to serve as a substitute to county revenue sharing payments. This substitute funding mechanism involves a gradual shift of county property tax millage from a winter tax levy to a summer tax levy and additionally, requires the establishment of a restricted fund to be known as the Revenue Sharing Reserve Fund.

• Tax levy shift - The gradual shift from a winter tax levy to a summer tax levy will occur as follows:

- In 2005, 1/3 of the county's allocated mills will be levied in the summer
- In 2006, 2/3 of the county's allocated mills will be levied in the summer
- In 2007, and each year after, all of the county's allocated mills will be levied in the summer

• Reserve fund establishment - Each county must establish a restricted fund to be known as the Revenue Sharing Reserve Fund using account number 285. Three payments, the sum total of which equals the county's December 2004 property tax levy, must be placed in the fund from the following:

- 1/3 from the county's December 2004 property tax levy
- 1/3 from the county's December 2005 property tax levy
- 1/3 from the county's December 2006 property tax levy

REVENUE SHARING RESERVE FUND ACCOUNTING TREATMENT

Note: Below, is an illustration of one method for booking the necessary entries. However, other equally proper methods are permissible. County officials should evaluate the method that works best for their respective county.

All winter tax levy entries are to be booked as they have been in the past except for the guidance as illustrated. The summer levies should be booked in a similar fashion, using the same accounts as past December levies.

Counties with a fiscal year ending on SEPTEMBER 30 should book entries to the "214-Due To the Revenue Sharing Reserve Fund" in the General Fund with a corresponding entry to the "999-Transfers Out" account. Concurrently, a "084-Due From the General Fund" and a "699-Transfers In" should be booked in the new 285-Revenue Sharing Reserve Fund. The entries should be in an amount equal to 1/3 of the county's 2004 December tax levy. These two entries are in addition to the regular tax levy entries that have always been made in the General Fund.

Illustration of additional entries if the total county levy is $90,000 (September Year-End Counties):

General Fund
 

Account #	Account Name	Debit	Credit
214	Due to Other Funds--Revenue Sharing Reserve		30,000
999	Transfers Out--Revenue Sharing Reserve	30,000

Revenue Sharing Reserve Fund
 

Account #	Account Name	Debit	Credit
084	Due From Other Funds--General Fund	30,000
699	Transfers In--General Fund		30,000

Counties with a fiscal year ending on DECEMBER 31 should book, by the end of each fiscal year, entries in the Revenue Sharing Reserve Fund by debiting "018-Taxes Receivable" and crediting "402-Tax Revenues." After the fiscal year ends, the county should book entries to the "214-Due To the Revenue Sharing Reserve Fund" in the General Fund with a corresponding entry to the "402-Tax Revenues" account. Concurrently, a "084-Due From the General Fund" and a "018-Taxes Receivable" should be booked in the new 285-Revenue Sharing Reserve Fund. The entries should be in an amount equal to 1/3 of the county's 2004 December tax levy. These entries are in addition to the regular tax levy entries that have always been made in the General Fund.

Illustration of additional entries if the total county levy is $90,000 (December Year-End Counties):

Revenue Sharing Reserve Fund
 

Account #	Account Name	Debit	Credit	Date
018	Taxes Receivable	30,000		12/04, 05, 06
402	Tax Revenues		30,000	12/04, 05, 06

Revenue Sharing Reserve Fund
 

Account #	Account Name	Debit	Credit	Date
084	Due From Other Funds--General Fund	30,000		1/05, 06, 07
018	Taxes Receivable		30,000	1/05, 06, 07

General Fund
 

Account #	Account Name	Debit	Credit	Date
214	Due to Other Funds--Revenue Sharing Reserve		30,000	1/05, 06, 07
402	Tax Revenues	30,000		1/05, 06, 07

REVENUE SHARING RESERVE FUND USE

Annually, each county may make use of the Revenue Sharing Reserve Fund in amounts equal to its October 1, 2003 through September 30, 2004 Revenue Sharing payments adjusted for inflation. The inflation rate is defined by MCL 211.34d(1)(l). A list of preliminary spending amounts available to local units may be obtained from www.michigan.gov/Treasury under the heading of Local Government-Revenue Sharing

The collection of county millage as a summer levy is addressed in a Property Tax Division (now the Assessment And Certification Division) memorandum issued on October 26, 2004. This memorandum may be obtained from www.michigan.gov/Treasury.

If you have any questions, please call (517) 373-3227 or write our office at the following address:

Michigan Department of Treasury
Local Audit and Finance Division
P.O. Box 30728
Lansing, Michigan 48909-8228