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State Payment of Property Taxes for Senior Citizen and Disabled Housing Facilities

State Payment of Property Taxes for Senior Citizen and Disabled Housing Facilities

Table of Contents:

Office of Accounting Services

Forms

State Tax Commission

What’s New

The Department of Treasury will be implementing Public Act 78 of 2016 for tax year 2016. This replaces PA 66 of 2012. For facilities planning to submit an application for exemption to begin December 31, the deadline has changed. Applications for NEW exemptions are required to be simultaneously submitted to both the local tax collecting unit AND Department of Treasury by October 31, 2016. The local assessor has 60 days in which to approve or deny the application and then submit to Treasury by December 31 for final review. A payment in lieu of taxes will be the amount of taxes in the first year after an application for exemption is approved excluding, millage rates of up to 18 mills for school operating, hold harmless rates and 6 mills for State Education Tax. These taxes are to be excluded from billing. This amount becomes a fixed payment. Once the payment amount is determined, no further forms or tax bills need to be submitted annually to the State of Michigan for reimbursement unless changes occur with the property. Special assessments continue to be the responsibility of the facility and local tax collecting units need to notify the owners of their responsibility. These properties are tax exempt; therefore, administration fees should not be charged. For facilities currently enrolled in the program, payment in lieu of taxes will continue to be made under the guidelines of MCL 211.7d.

Public Act 78 of 2016 was signed by the governor on April 12, 2016 effective as of July 11, 2016. A facility owner of a property may claim an exemption under Section 211.7d by filing form 4719, Request for Senior Citizen &/or Disabled Housing Tax Exemption, with the local assessor AND Department of Treasury on or before October 31 of a given year. This form is needed only for new exemption requests, not facilities already in the program.

General Information

The Department of Treasury, Office of Accounting Services, is responsible for administering and issuing payment in lieu of taxes for senior citizen and/or disabled housing facilities under Section 211.7d of the Michigan Compiled Laws.  

Public Act 78 of 2016

Public Act 78 of 2016 (PA 78) was signed by the governor on April 12, 2016, with an effective date of July 11, 2016, replacing Public Act 66 of 2012.   PA 78 allows local municipalities to be reimbursed for real and personal property taxes lost due to the exemption for eligible senior citizen and disabled housing facilities under MCL 211.7d.  Under §7d, municipalities receive a payment in lieu of taxes (PILT) from the Michigan Department of Treasury.

For facilities enrolled in the program before January 1, 2009, the payment in lieu of taxes will equal the amount of taxes paid on the property in the 2008 tax year and will remain frozen for the duration of the exemption.  For facilities enrolled in the program January 1, 2009 and after, the payment in lieu of taxes will be based on the tax liability in the first tax year the exemption is approved and will remain frozen for the duration of the exemption.

In both cases described above, the state will only pay real and personal property taxes, not millage rates of up to 18 mills for school operating, hold harmless rates, 6 mills for state education tax, administrative fees, special assessments, penalties, and interest fees.  (Refer to MCL 211.7d (3) (a) and (b)).

The payments as calculated are fixed PILTs for the duration of the exemption.  Special assessments and some fee related charges continue to be the responsibility of the facility and local tax authorities need to notify the owners of their responsibility. These properties are tax exempt; therefore, administration fees should not be charged.

 

Requesting Approval, Denial and Notification

For new facilities seeking to enter the program, the owners must submit the following initial application documents to their local assessor and Department of Treasury:

  1. A copy of the owner's Articles of Incorporation, showing nonprofit or limited dividend housing corporation status.
  2. A copy of the HUD Mortgage, or other mortgage documentation, showing the facility was built, financed, or qualified under §§ 202, 236 or 811 of the National Housing Act.
  3. Documentation showing the facility contains at least eight units.
  4. A copy of the Occupancy Permit, along with a documentation (copy of lease) indicating the date the first resident moved into the facility.
  5. Documentation showing new or rehabilitated structures (fully constructed/rehabbed).
  6. General information regarding the facility, including its name, address and phone number and the name, address and phone number of its management company.
  7. A completed form 4719, Request for New Senior Citizen &/or Disabled Housing Tax Exemption.

There are three deadline dates that must be met in order for Department of Treasury to finally approve the exemption and make the first payment in lieu of taxes. Facility owners and local units of government are strongly encouraged to contact Treasury to ensure paperwork has been timely received. Failure to timely submit paperwork may delay entry into the program by one full year, resulting in a property tax liability for the facility owners.

Deadline one: By October 31 of the year immediately preceding the year for which the exemption first applies (year one), the facility owner must submit its initial application documentation listed above to both the local unit and Department of Treasury (Refer to MCL 211.7d § 2).

The October 31 deadline date provides the local unit assessors a reasonable amount of time to fully assess new construction and renovated buildings. The dual submission to the Department of Treasury and the local unit allows Treasury to monitor for receipt of the approved application prior to the next deadline.

 

Deadline two: By December 31 of the year immediately preceding the year for which the exemption first applies (year one), Treasury must receive from the local assessor or municipality an approved (or denied) application and the facility’s initial application documents listed above (Refer to MCL 211.7d § 2).

The policy behind requiring receipt of documentation is sufficient time for Treasury to inform the Legislature of the amount of funds needed to be appropriated for the upcoming year’s PILT payments to local authorities.

Even if Treasury receives an approved application and documents by the December 31 deadline date, an applicant may still receive a denial, deferment decision, or conditional acceptance letter from the Michigan Department of Treasury if copies of current tax bills and Form 4736 are not received by Treasury as explained below.  

 

Deadline three: By December 1 of the year in which Treasury will issue the first payment in lieu of tax (year 2), Treasury must receive from the following local tax collecting unit:

  1. A completed form 4736, Payment in Lieu of Taxes for Senior Citizen and/or Disabled Housing.
  2. A copy of the tax bills for the year in which a claim for exemption is made.

The policy behind requiring this documentation on or before the December 1 is to allow Treasury time to review the submitted bills for accuracy and ensure the proper amount of PILT is timely paid to the local unit of government by December 15. Forms and tax bills received after December 1 may result in the local authority receiving a prorated amount based upon the remaining available funds (Refer to MCL 211.7d § 6).

 

Notification

The local assessor and/or local treasurer must send all the following documentation concerning approval or denial of the facility for exemption to the Office of Accounting Services, Michigan Department of Treasury, P.O. Box 30722, Lansing, MI 48922:

  1. Completed form 4719, Request for New Senior Citizen &/or Disabled Housing Tax Exemption.  The parcel number and taxable value are defined.  The local assessor indicates approval or disapproval of the facility. 
  2. For new exemption requests, the taxable value of the property should be the value on the assessment roll in the year in which a claim for exemption is made.  For new construction, the property's taxable value should be the value on the assessment roll in the year in which construction is completed and a certificate of occupancy issued. Form 4719 and the above information is due with the approved application and documentation, by December 31 (year one).
  3. Completed form 4736, Payment in Lieu of Taxes for Senior Citizen and/or Disabled Housing.  A breakdown of millage rates must be supplied or they may not be paid timely; millage rates can be on a separate sheet, if necessary. Please note millage rates of up to 18 mills for school operating, hold harmless rates and 6 mills for State Education Tax should not be billed or assessed, these taxes are excluded from billing. (Refer to MCL 211.7d section (3) (a) and (b)).  Fees excluded from State of Michigan reimbursement: special assessments, penalties, interest, administrative, or other fee related charges.  Form 4736 and tax statements are due December 1 (year two).

These properties are exempt therefore administration fee should not be charged. Special assessments, fee related charges (other than administrative, interest, and penalties), and utility charges continue to be the responsibility of the facility owners. Examples of these fees are yearly inspection fee, annual rental unit fee, flat rate recycling/trash fees, and water or sewerage charges.

The local assessor or municipality is to notify the facility and the Department of Treasury in writing of the facility’s exemption approval or disapproval.  The local assessor and local treasurer are responsible for ensuring all required documentation is provided to Treasury by the deadlines identified above. The Department of Treasury strongly encourages facilities to contact Treasury to ensure receipt of documents from the local unit. Per PA 78, the Department of Treasury has the right to review and deny an exemption.

 

Payment In Lieu of Tax Statement (PILT)

After the facility is determined to be exempt under MCL 211.7d and entered into the program, the Department of Treasury will issue the payment in lieu of tax to the appropriate local tax collecting unit by December 15 of each year the facility is exempt.  The procedure for submitting payment in lieu of tax statements to Treasury for payment is as follows for the first year the facility is exempt:

  1. The payment becomes a fixed PILT payment and remains at the first year's amount.  No further forms or tax bills need to be submitted annually to the State of Michigan for reimbursement.   If a facility is determined no longer exempt, the owners of property exempt under this section shall notify the local tax collecting unit in which the property is located and the Department of Treasury before 12/31/XX of the year in which the facility is determined no longer exempt.
  2. An initial application with dual submission to Treasury and the local unit of government must be filed by October 31 (year 1) of any given year. This deadline provides the local assessor a reasonable amount of time to perform any necessary evaluations of new construction or renovations and report the fully assessed taxable value.
  3. An assessor approved Form 4719, Request for New Senior Citizen &/or Disabled Housing Tax Exemption and the required documentation under the heading “Requesting Approval, Denial and Notification” (above) must be received by Treasury by December 31 of the year immediately preceding the year for which the exemption would first apply (year 1). Form 4736, Payment in Lieu of Taxes for Senior Citizen and/or Disabled Housing and copies of the tax bills must be received by December 1 of the year in which the first PILT payment is expected to be made (year 2). The facility has to have been occupied on the initial December 31 deadline date (year 1).  The State continues payment of property taxes as long as eligibility requirements are met.
  4. If a previously exempt facility changes ownership to a type which now qualifies under MCL 211.7d(1) and (2)(e) and (g), the new owner must submit a new application for entry into the program and must meet the statutory requirements under MCL 211.7d. All forms, documentation, approvals, and deadline dates set forth above must be met for PILT payments to be made. It is the responsibility of the facility owners and/or the local authorities to inform Treasury of any changes in ownership of enrolled facilities.

 

Updating Vendor File Payment Information

In order to comply with the law, Treasury is requesting local authorities establish an address ID in the Sigma Vendor Self-Service (VSS) system with the Department of Technology, Management & Budget for depositing, via Electronic Funds Transfer, of the PILT payment. Please visit the Sigma VSS page for more information.

 

Property Tax Credit for Residence:

Since the State of Michigan is making payments in lieu of taxes on behalf of the facility, its residents are not eligible for a Property Tax Credit when filing their state income tax return.

Program Contact Information:

Questions regarding eligibility and all application requests for Senior Citizen and/or Disabled Housing Tax Exemptions should be mailed to:

Office of Accounting Services
Michigan Department of Treasury
P.O. Box 30722
Lansing, MI 48909
(517) 335-7483

 

Frequently Asked Questions

Q: What type of housing qualifies for this program?

A:This program is for HUD Section 202, 236, and 811 approved nonprofit or limited dividend housing facilities with at least 8 units (Refer to MCL 211.7d § (9 d), (9 e), and (9 g).

 

Q: What portion of the property taxes will be paid by Treasury?

A:The state will only pay real and personal property taxes. Our payment in lieu of taxes will not include millage rates of up to 18 mills for school operating, hold harmless rates, 6 mills for State Education Tax, administrative fees, special assessments, penalty and interest fees, other fee related charges, or utility charges.

                     

Q: Why do I receive a delinquent tax bill after the PILT payment was processed?

A:Because  the PILT does not include millage rates of up to 18 mills for school operating, hold harmless rates, 6 mills for State Education Tax, administrative fees, special assessments or penalty and interest fees. Contact your local treasurer and/or assessor to ensure the property is correctly classified if you are receiving past due notices.

 

Q: Since the PILT payment does not cover special assessments, fee related charges, or utility charges can the local authorities bill the facility?

A:Yes. Special assessments, some fee related charges, and utility charges continue to be the responsibility of the facility and locals need to notify the owners of their responsibility (see above question).

 

Q: When are taxes paid to the local authorities?

A:Payment will be made by December 15 of each tax year for both summer and winter taxes.

 

Q: A facility met all requirements and submitted all documentation to the local assessor/local treasurer by October 31 (year one).  The assessor approved and submitted Form 4719, Request for New Senior Citizen and/or Disabled Housing Tax Exemption and the initial application documents to Treasury by December 31 (year one).  When will the first PILT payment occur?

A:The local tax collecting unit must submit a completed form 4736, Payment in Lieu of Taxes for Senior Citizen & Disabled Housing and current tax bills, to Treasury by December 1, (year two).  Treasury will pay year two taxes by December 15 (year two).

 

Q: I submitted the paperwork and application to my local assessor by October 31 (year one) and discovered he/she never submitted it to the State until after December 31 (year one). When would I be accepted into the program?

A:Facilities are strongly encouraged to contact Department of Treasury before the December 31 (year one) deadline date to ensure it has been timely filed. Situations similar to this would be handled on a case-by-case basis and Department of Treasury would contact the local unit to determine why the application was not timely filed. (i.e. for profit owners, incomplete construction, no longer used by disabled or seniors, etc.)

 

Q: Do I have to submit a tax bill and Forms 4736 and 4719 every tax year?

A:No, only the first time when applying to enter the program or when there is change in ownership.  A change of ownership requires a new application and the new owners must meet the statutory requirements under MCL 211.7d.

 

Q: My company just acquired facility X which was eligible for the program. Does this mean we are still eligible?

A:In order to eligible, the new owner must meet the statutory requirements, (MCL 211.7d), and must submit the necessary documents in the name of the new owner. It is the responsibility of the facility owners and/or the local authorities to notify Treasury of any changes in ownership of enrolled facilities. Failure to notify Treasury of a change in ownership not meeting the statutory requirements under MCL 211.7d may result in a claim for reimbursement from the local unit for any payments made on behalf of the non-qualified owners.