DATE: December 10, 2002
TO: Assessors Personal Property, Equalization Directors
FROM: State Tax Commission (STC)

RE: ALTERNATIVE ENERGY PERSONAL PROPERTY

Enclosed is a copy of Public Act (PA) 549 of 2002 which was signed by Governor Engler on July 25, 2002 with an effective date of July 26, 2002.

PA 549 of 2002 provides that, FOR ASSESSMENT YEARS 2003 through 2012, Alternative Energy Personal Property is exempt from the collection of taxes. There are provisions in the law for local school districts and local tax collecting units to adopt resolutions to NOT exempt Alternative Energy Personal Property from certain millages. This will be discussed later in this bulletin.

1. Alternative Energy Personal Property

Alternative Energy Personal Property is personal property which has been certified to the assessor by the Michigan Next Energy Authority as qualifying for this exemption.

The Michigan Next Energy Authority was created by PA 593 of 2002 which was signed by Governor Engler on October 17, 2002 with an effective date of October 17, 2002. A copy of PA 593 of 2002 is also enclosed with this bulletin.

The Michigan Next Energy Authority is located within the Department of Management and Budget.

The following are the types of personal property which may be certified to the assessor by the Michigan Next Energy Authority and are then exempt from taxation:

1. Alternative energy systems
2. Alternative energy vehicles
3. Tangible personal property of a business that is an alternative energy technology business. In order to become an alternative energy technology business, a business must be certified as such by the Michigan Next Energy Authority. Proof of certification must be sent to the local assessor.
4. Tangible personal property of a business that is NOT an alternative energy technology business that is used solely for the purpose of researching, developing, or manufacturing an alternative energy technology.

NOTE: The terms shown in bold print in items 1 through 4 above are defined by PA 593 of 2002 (copy enclosed).

If the Michigan Next Energy Authority certifies that personal property qualifies for exemption as Alternative Energy Personal Property AND if the Michigan Next Energy Authority provides proof of certification to the assessor, the assessor shall exempt the property from taxation up to and including the 2012 assessment. The Michigan Next Energy Authority shall forward copies of the certification to the secretary of the local school district and the treasurer of the local tax collecting unit.

NOTE: The Alternative Energy Personal Property Exemption does NOT exempt property from the collection of specific taxes. The Alternative Energy Personal Property Exemption does NOT exempt property from the collection of special assessments since special assessments are levied upon real property only.

2. Opting Out of the Alternative Energy Personal Property Exemption

PA 549 of 2002 contains provisions for local school districts and local tax collecting units to adopt Resolutions to NOT Exempt Alternative Energy Personal Property from certain taxes. This is sometimes referred to in this bulletin as opting out of the exemption. The following are the provisions for opting out of the exemption:

1. The school board of a LOCAL SCHOOL DISTRICT may adopt a Resolution to NOT Exempt Alternative Energy Personal Property from the following taxes:

1. Tax authorized by MCL 380.1212 for the purpose of creating a sinking fund.
2. Tax authorized by MCL 380.1 to 380.1852 to retire outstanding bonded indebtedness.

The Resolution to NOT Exempt must be adopted by the local school district within 60 days after receiving the certification of exemption from the Michigan Next Energy Authority. ALSO, the resolution must have the written concurrence of the superintendent of the local school district.

If the Resolution to NOT Exempt is adopted by the local school district, a copy of the resolution shall be forwarded to the Michigan Next Energy Authority, the treasurer of the local tax collecting unit, and the State Treasurer.

If the Resolution to NOT Exempt fails, the alternative energy personal property is exempt from these taxes.

2. The governing body of a LOCAL TAX COLLECTING UNIT may adopt a Resolution to NOT Exempt Alternative Energy Personal Property from certain taxes collected in that local tax collecting unit. Townships and cities are generally considered to be local tax collecting units. The following are examples of taxes collected in local tax collecting units which local tax collecting units can opt out of:

1. County Taxes
2. Intermediate School District taxes
3. Community College taxes
4. Taxes levied by authorities such as DDA’s, district libraries, transit authorities, etc.
5. City taxes
6. Township taxes

A LOCAL TAX COLLECTING UNIT CANNOT opt out of the following taxes:

1. taxes collected under the authority of MCL 380.1211 (local school operating millage)
2. taxes collected under the authority of MCL 380.1212 (local school sinking fund)
3. taxes collected under the authority of MCL 380.1 to 380.1852 (for the retirement of local school bonded indebtedness)
4. the State Education Tax (SET)

The Resolution to NOT Exempt must be adopted by the local tax collecting unit within 60 days after receiving the certification of exemption from the Michigan Next Energy Authority; otherwise, the alternative energy personal property is exempt from the taxes which the local tax collecting unit could have opted out of.

The clerk of the local tax collecting unit shall notify in writing the assessor of the local tax collecting unit in which the Alternative Energy Personal Property is located and the legislative body of each taxing unit that levies ad valorem property taxes in the local tax collecting unit in which the Alternative Energy Personal Property is located. Notice of the meeting at which the resolution will be considered shall be provided as required under the Open Meetings Act. Before acting on the resolution, the governing body of the local tax collecting unit shall afford the assessor and a representative of the affected taxing units an opportunity for a hearing.

If the Resolution to NOT Exempt is adopted by the local tax collecting unit, a copy of the resolution shall be forwarded to the Michigan Next Energy Authority and to the State Treasurer.

Note: Even if the local school district and the local tax collecting unit opt out of all of the taxes possible, the alternative energy personal property will still be exempt from the SET and local school district operating millages.

3. The Alternative Energy Exemption is Sometimes a Millage Rate Exemption Only

Since LOCAL SCHOOLS and LOCAL TAX COLLECTING UNITS can opt out of the Alternative Energy Exemption for certain millages, this exemption will sometimes be a millage rate exemption only, rather than a full assessed value and taxable value exemption. This is true because, when a local school district or a local tax collecting unit opts out, it is necessary to have a taxable value against which to levy the millage. The State Tax Commission therefore recommends that the assessor assess Alternative Energy Personal Property under a separate parcel ID number and at a separate place on the assessment roll when a local school district or a local tax collecting unit has opted out of the exemption. In this situation, Alternative Energy Personal Property is subject to the assessment and equalization process.

4. Real and Personal Property Owned by the Michigan Next Energy Authority

Under Section 6 of PA 593 of 2002, real and personal property belonging to the Michigan Next Energy Authority is also exempt from taxation if it is used for a public purpose. This act states that property of the Michigan Next Energy Authority is public property devoted to an essential public and governmental function and purpose.

Note: This exemption is a standard exemption of taxable and assessed values. It is not a millage rate exemption. Local school districts and local tax collecting units cannot opt out of this exemption.