ESA Topic: Eligible Manufacturing Personal Property Exemption

In December of 2012, initial legislation was passed that significantly changed the taxation of personal property in the State of Michigan.  The Acts, as amended, exempt approximately one-half of personal property from taxation through two main provisions: 1) the Small Business Taxpayer Exemption (MCL 211.9o) and 2) the Eligible Manufacturing Personal Property Exemption (MCL 211.9m and MCL 211.9n).

The Acts also identified a replacement specific tax on exempted manufacturing personal property (Essential Services Assessment) and established reimbursement for revenue lost by local units.

These two exemptions are administered separately. This ESA Topic will address the Eligible Manufacturing Personal Property (EMPP) exemption exclusively.  Information regarding the Small Business Taxpayer Exemption (MCL 211.9o) may be found on the State Tax Commission website.

Exemptions under MCL 211.9m and MCL 211.9n

The exemption of Eligible Manufacturing Personal Property (EMPP) is authorized under two separate sections of the General Property Tax Act, MCL 211.9m and MCL 211.9n. Both exempt EMPP under separate conditions, dependent upon when the personal property was first placed in service.

Eligible Manufacturing Personal Property that was first placed in service – inside the State of Michigan or elsewhere – after 2012 is exempt under MCL 211.9m. EMPP that was first placed in service more than ten years prior to the current year is exempt under MCL 211.9n

Eligible Manufacturing Personal Property

Eligible Manufacturing Personal Property (EMPP) is defined under MCL 211.9m 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 that is not yet in operation, statute defines EMPP as “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.”

Of significance in these definitions are the following:

1. The personal property must be located on “occupied real property” or, in the case of construction in progress, be part of a new facility that is not yet in operation,
2. The predominant use of all the personal property located on the occupied real property must be:
   1. Industrial processing and/or
   2. Direct integrated support

Occupied Real Property

Statute defines “Occupied Real Property” as any of the following:

1. A parcel of real property that is entirely owned, leased, or otherwise occupied by a person claiming the EMPP exemption.
2. Contiguous parcels of real property that are entirely owned, leased, or otherwise occupied by a person claiming the EMPP exemption and that host a single, integrated business operation engaged primarily in industrial processing, direct integrated support, or both.
3. The portion of a parcel of real property that is owned, leased, or otherwise occupied by a person claiming the EMPP exemption or by an affiliated person.

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.