PRE Additional Taxes and Interest

When a Principal Residence Exemption (PRE) denial notice is issued by the county, local unit assessor or the Department of Treasury (Department), the assessor shall remove the exemption for the denied tax years (except when there has been a bona fide purchaser) and the tax collecting unit (county or local unit) in possession of the tax roll shall issue a corrected tax bill for any additional taxes, plus interest at the rate of 1.25% per month or fraction of a month and penalties computed from the date the taxes were last payable without interest or penalty. Interest must be charged for the use of the money but should not be considered punitive.

The one situation where the PRE is not removed from the tax roll by the assessor following a denial notice is when the property is sold to a bona fide purchaser before the additional taxes are billed to the seller. In this case, the taxes, interest and penalties shall not be a lien on the property and shall not be billed to the bona fide purchaser in accordance with Subsections 6, 8, and 11 of MCL 211.7cc. A bona fide purchaser is one who purchases in good faith for valuable consideration. If there is a bona fide purchase before the additional taxes are billed, the tax collecting unit in possession of the tax roll notifies the Department of the bona fide purchase by submitting a Request to Bill Seller Following a Principal Residence Exemption (PRE) Denial, Form 4816. The frequently asked questions sheet entitled Principal Residence Exemption "Tax Due" Letters from the Department of Treasury provides additional information regarding bills issued by the Department in a bona fide purchaser situation.

Interest resulting from a denied PRE cannot be waived by county officials, local unit officials, Boards of Review or the Michigan Tax Tribunal. However, MCL 211.7cc(8) gives the Department the exclusive authority to consider waiving the interest under certain circumstances. The Department may waive interest for the current tax year and the immediately preceding 3 tax years if the PRE was on the property because of an assessor's classification error, an assessor's failure to rescind the exemption after the owner requested in writing that the exemption be rescinded and other assessor's error. In order for the Department to consider this waiver, the corrected or supplemental tax bill must have been issued and the assessor must thoroughly complete and sign the Assessor's Affidavit to Waive Principal Residence Exemption (PRE) Denial Interest, Form 4813 (Assessor's Affidavit). The Assessor's Affidavit requires a significant amount of supporting documentation, all of which must be included when submitting the form to the Department. The Department subsequently advises the assessor and taxpayer of the decision in writing.