DATE: November 13, 1997
TO: Equalization Directors; Assessors
FROM: State Tax Commission (STC)

RE: PROCEDURAL CHANGES TO BE IMPLEMENTED STARTING IN THE 1998 ASSESSMENT YEAR

Starting with the 1998 assessment year, there are several procedural changes of which assessment administrators must be aware. The purpose of this bulletin is to provide instruction for the procedural changes in the following four subjects labeled A, B, C and D. Each of these subjects will be treated separately in this bulletin. The four subjects are:

1. The Inflation Rate Used in the Calculation of 1998 Capped Value
2. The 1998 Model Notice of Assessment, Taxable Valuation and Property Classification Required by Michigan Compiled Law (MCL) 211.24c
3. The Federal Poverty Income Standards Used for Setting Poverty Exemption Guidelines for 1998
4. The Exemption of Water Conditioning Systems Which Are Personal Property

1. Inflation Rate Used in the 1998 Capped Value Formula

The inflation rate, expressed as a multiplier, to be used in the 1998 Capped Value formula is 1.027. (The inflation rate for 1997 calculations was 1.028.)

The 1998 Capped Value Formula is as follows:

1998 CAPPED VALUE = (1997 Taxable Value - LOSSES) X 1.027 + ADDITIONS

The preceding formula does not include 1.05 because the inflation rate of 1.027 is lower than 1.05. The preceding formula does not contain the Value Change Multiplier (VCM) because the VCM was eliminated from the law by Public Act 476 of 1996.

2. Model Notice of Assessment, Taxable Valuation, and Property Classification (MCL 211.24c) for 1998.

Attached to this bulletin is a copy of STC (revised) Form L-4400 which is the 1998 Notice of Assessment, Taxable Valuation, and Property Classification. There are several changes to the language of the form. Some are merely changes required when going from one year to the next. Others are changes to make the notice more understandable to taxpayers.

At the request of many assessors, an optional Notice of Assessment Change form for PERSONAL PROPERTY ONLY has been developed by the State Tax Commission. This optional personal property notice form will be mailed to all Equalization Directors as soon as it is updated for 1998.

3. Federal Poverty Income Standards Used for Setting Poverty Exemption Guidelines for 1998.

MCL 211.7u, which deals with poverty exemptions, was significantly altered by PA 390 of 1994. These changes were explained to assessors in STC Bulletin No. 5 of 1995.

One of the provisions of PA 390 of 1994 is that local governing bodies are required to set income levels for their poverty exemption guidelines and that those income levels SHALL NOT BE SET LOWER by a city or township than the federal poverty income standards as defined and determined annually by the United States Office of Management and Budget. This means, for example, that the income level for a household of 3 persons SHALL NOT be set lower than the $12,516 shown on the following page for 3 persons. The income level for 3 persons may be set higher than $12,516.

FEDERAL POVERTY INCOME STANDARDS FOR 1998 ASSESSMENTS

The following are the federal poverty income standards as of 12-3 1-97 for use in setting poverty exemption guidelines for 1998 assessments. Please see STC Bulletin No. 5 of 1995 for additional information regarding the use of these standards.

IMPORTANT NOTE: PA 390 of 1994 states that the poverty exemption guidelines established by the governing body of the local assessing unit SHALL also include an asset level test.

4. The Exemption of Water Conditioning Systems Which Are Personal Property

Public Act 582 of 1996 exempts water conditioning systems USED FOR A RESIDENTIAL DWELLING which are personal property. It does NOT exempt water conditioning systems which are not used for a residential dwelling.

The exemption for water conditioning systems used for a residential dwelling applies for the first time on the 1998 assessment roll. This exemption applies only to RESIDENTIAL water conditioning systems which are PERSONAL PROPERTY. Leased water conditioning systems are typically personal property. This exemption does NOT apply to water conditioning systems which are owned by the home owner and are therefore real property.