ESA Topic: Direct Integrated Support

Effective December 31, 2015, for the 2016 assessment year, Qualified New Personal Property and Qualified Previously Existing Personal Property is exempt from taxation.  Key to the definition of both Qualified New and Qualified Previously existing Personal Property is that the personal property must be Eligible Manufacturing Personal Property.

Eligible Manufacturing Personal Property (EMPP) is defined as all personal property located on occupied real property if that personal property is predominantly used in Industrial Processing or Direct Integrated Support.  For personal property that is construction in progress and part of a new facility not in operation, EMPP means all personal property that is part of that new facility if that personal property will be predominantly used in industrial processing when the facility becomes operational.  Personal property that is not owned, leased or used by the person who owns or leases occupied real property where the personal property is located is not EMPP unless the personal property is located on the occupied real property to carry on a current on-site business activity.  Personal property that is placed on occupied real property solely to qualify the personal property for an exemption under 9m or 9n is not EMPP.

This ESA topic will focus on what is Direct Integrated Support.  Direct Integrated Support is defined in MCL 211.9M as any of the following: 

 (i) Research and development related to goods produced in industrial processing and conducted in furtherance of that industrial processing.

(ii) Testing and quality control functions related to goods produced in industrial processing and conducted in furtherance of that industrial processing.

(iii) Engineering related to goods produced in industrial processing and conducted in furtherance of that industrial processing.

(iv) Receiving or storing equipment, materials, supplies, parts, or components for industrial processing, or scrap materials or waste resulting from industrial processing, at the industrial processing site or at another site owned or leased by the owner or lessee of the industrial processing site.

(v) Storing of finished goods inventory if the inventory was produced by a business engaged primarily in industrial processing and if the inventory is stored either at the site where it was produced or at another site owned or leased by the business that produced the inventory.

(vi) Sorting, distributing, or sequencing functions that optimize transportation and just-in-time inventory management and material handling for inputs to industrial processing.

These activities do not have to occur on the same site as the industrial processing, nor do they have to be conducted by a related entity. 

For additional ESA information, links to statutes, forms, and to sign up for the ESA List Serv, please visit the ESA website.

This information constitutes an interpretation of one or more statutes administered by the Bureau of Local Government and School Services and not legal advice.  As the interpretation reached in these examples are limited to the facts provided, any variation in those facts might result in a different interpretation being reached.   Therefore, a taxpayer may wish to consult counsel before proceeding in this matter.