Overview
This section explores the conditional recission under MCL 211.7cc. It examines statutory definitions, case law interpretations, and practical implications for property owners, assessors, and legal practitioners
A conditional recission is the process that allows an owner to claim a principal residence exemption on an owner’s current principal residence and retain a principal residence exemption on the owner’s previous exempt property for up to three years if the previous exempt property is for sale, is not occupied, is not leased, and is not used for any business or commercial purposes. (MCL 211.7cc(5)).
To claim a conditional rescission, the owner must submit a Conditional Rescission of Principal Residence Exemption (PRE) (Form 4640) to the assessor for the city or township in which the property is located on or before June 1 or November 1 of the first year of the claim. The owner must annually submit Form 4640 on or before December 31 to verify to the assessor that the property for which the principal residence exemption is retained is for sale, is not occupied, is not leased, and is not used for any business or commercial purpose. Failure to file or meet filing deadlines will result in a denial of the principal residence exemption.
The conditional rescission can be claimed on property previously exempt which includes property that was owned and occupied as the owner’s principal residence and an owner’s contiguous parcel. (MCL 211.7cc(2) and MCL 211.7cc(5)).
A property qualifies as “not occupied” if it has no human occupants, such as tenants or residents; it does not need to be completely empty. Occupancy is determined based on the facts of each case, and the taxpayer bears the burden of proof, as established in Eldenbrady v City of Albion, 294 Mich App 251 (2012). If the property is leased, the assessor must deny the conditional rescission retroactively, effective December 31 of the year preceding the lease. MCL 211.7cc(5).
The Conditional Rescission of Principal Residence Exemption (PRE) (Form 4640) and related forms can be obtained from closing agents, local assessors or online at www.michigan.gov/PRE . Closing agents are not legally liable if they fail to provide or file these forms. (MCL 211.7cc(18)).
Conditional Rescission Scenarios: Frequently Asked Questions
- Chris’s principal residence was Blue Acre. He passed away and his son Bob inherited the property. Bob doesn’t reside at Blue Acre or claim the principal residence exemption on Blue Acre. Bob places Blue Acre up for sale. Blue Acre is not occupied, leased, or used for business or commercial purposes. Is Bob eligible for the conditional rescission?
No. Bob is not eligible for a conditional rescission because only an owner who previously occupied the property as a principal residence and claimed the exemption can qualify for a conditional rescission. Since Bob never claimed the exemption, Blue Acre was not previously exempt as his principal residence.
- Does an unoccupied parcel, classed residential and contiguous to a former principal residence that had the exemption, qualify for conditional rescission?
Yes. A contiguous parcel can qualify for conditional rescission if it was previously exempt as a principal residence. It must be unoccupied, for sale, not leased, and not used for business. The owner must also file the initial and annual verification using the Conditional Rescission of Principal Residence Exemption (Form 4640).
- Does the statute require the property to be listed with a real estate agent to establish a property is “For Sale” and eligible for a conditional rescission?
No. The statute does not require the property to be listed with a real estate agent. “For Sale” is determined by the totality of circumstances. For example, a “For Sale” by owner sign in the window or lawn may be sufficient as long as the asking sales price is reasonable to the value of the house and the owner is taking active steps to show a true intent to sell.
- If a property is available for lease, does it qualify for a conditional rescission?
Yes. The property may also be available for lease and qualify for the conditional rescission so long as the property is unoccupied, for sale, not leased, and not used for business or commercial purposes. The owner must also file the initial and annual verification using the Conditional Rescission of Principal Residence Exemption (Form 4640). Once the property is leased, it does not qualify. If leased, the assessor must deny the conditional rescission effective on December 31 of the year immediately preceding the year in which the property is leased.
- Chris filed a conditional rescission on May 1, 2021, on Blue Acre, which was for sale, not leased, and not used for business or commercial purposes at the time. On December 28, 2021, he leased Blue Acre. Is Chris eligible for the conditional rescission for the 2021 tax year on Blue Acre?
No. Chris is not eligible for the conditional rescission in 2021 since he leased Blue Acre in 2021. Once leased, the assessor shall deny the conditional recission, making the denial retroactive and effective on December 31 of the year immediately preceding the year in which the property subject to the conditional recission is leased.
- Chris files a conditional rescission on Blue Acre, which previously had an 80% exemption because 20% was used for business. Chris no longer uses the property for business purposes. Can he retain an 80% or 100% of the principal residence exemption based on a conditional rescission?
If Blue Acre was previously exempt, is for sale, not leased, and no longer used for business, Chris qualifies for the conditional rescission. However, he can only retain the 80% exemption he originally claimed.
- Chris files a conditional rescission on Blue Acre, which previously had an 80% exemption because 20% was used for business. Chris continues to use the property for business purposes. Can he retain an 80% of the principal residence exemption based on a conditional rescission?
No. If the property is still used for business, the law does not allow Chris to retain the exemption based on a conditional rescission. Since Chris continued using 20% for business, he cannot keep the 80% exemption or any exemption at all. The property should receive a 0% exemption.
- Chris’s principal residence was Blue Acre. On May 1, 2021, he bought Red Acre in Florida and claimed a homestead exemption there. He also filed a conditional rescission for Blue Acre for the 2021 tax year. At that time, Blue Acre was for sale, unoccupied, not leased, and not used for business. Is Chris eligible for the conditional rescission for the 2021 tax year on Blue Acre?
No. A conditional rescission requires establishing a new Michigan principal residence. Claiming an exemption in another state makes the owner ineligible for the conditional rescission.
- Chris’s principal residence is Blue Acre, but he moved to an assisted living facility on May 1, 2021. He filed a conditional rescission for Blue Acre for the 2021 tax year. Blue Acre was for sale, unoccupied, not leased, and not used commercially. Is he eligible for the conditional rescission?
No. A conditional rescission requires establishing a new Michigan principal residence. Moving to an assisted living facility does not meet this requirement. However, Chris may keep the principal residence exemption on Blue Acre if he meets the eligibility rules for retaining it while in an assisted living facility.
- Chris owned Blue Acre as his principal residence. In 2021, Chris married Sarah and moved into Red Acre, Sarah’s principal residence for which she receives a principal residence exemption. Chris is not an owner of Red Acre. In 2021, Chris filed a conditional rescission for Blue Acre, which was for sale, unoccupied, not leased, and not used commercially. Is he eligible for the conditional rescission?
No. To qualify, Chris must own and claim a new Michigan principal residence exemption. Since he did not own Red Acre or file an exemption for it, he is ineligible. He would qualify only if Sarah deeded him an ownership interest in Red Acre and he filed a Principal Residence Exemption Affidavit (Form 2368).
- Do I need to file the Request to Rescind Principal Residence Exemption (Form 2602) and the Conditional Rescission of Principal Residence Exemption (Form 4640)?
No. If the conditional rescission requirements are met, the Conditional Rescission of Principal Residence Exemption (Form 4640) would take the place of the Request to Rescind Principal Residence Exemption (Form 2602).
- How long is a conditional rescission effective?
Up to three consecutive years, if the owner meets eligibility requirements and timely files Form 4640 initially and annually.
- If an owner missed the initial or annual verification filing deadlines, may that owner still claim and receive the conditional rescission?
No. Missed or later filings are not allowed, and the assessor must deny these conditional rescission claims. (MCL 211.7cc(5)).
- Can the Board of Review grant a conditional rescission if the initial or annual verification filing deadlines are missed?
No. The Board has no authority over conditional rescissions and cannot grant them for missed deadlines. The assessor must deny these conditional rescission claims. (MCL 211.7cc(5)).
- Chris timely filed for a conditional rescission for 2019, but Chris forgot to file for a conditional recission for 2020. The board of review granted the conditional recission for 2020 retroactively. Chris timely filed for the conditional rescission again for 2021. The property was for sale, not occupied, not leased, and not used for business or commercial purposes for all the years. Is Chris eligible for the conditional rescission in 2019, 2020, and 2021?
No. Chris is only eligible for 2019. Missing the 2020 filing makes him ineligible for 2020 and the Board of Review cannot grant late filings under MCL 211.7cc(5). Also, the assessor is required to deny the conditional recission claim for 2020. Chris is not eligible in 2021 since there is no principal residence exemption to retain based on his ineligibility and denial for 2020. Also, the three years must be consecutive.
