Overview
This section explores taxes and interest owed as a result of a denial of a principal residence exemption under MCL 211.7cc and MCL 211.7dd(a). It examines statutory definitions, case law interpretations, and practical implications for property owners, assessors, and legal practitioners.
MCL 211.7cc mandates that when a principal residence exemption is denied, the assessor must remove the exemption and amend the tax roll for the affected years. For each year denied, a corrected tax bill must be then issued, including the school operating millage previously exempted and interest at 1.25% per month or fraction of a month and penalties computed from the date the taxes were last payable without interest or penalty. Additional interest resumes sixty days after the original corrected tax bills are issued. Interest is not punitive in nature but charged for the use of the money.
Responsibility for issuing the corrected bill lies with the local treasurer if the tax roll is locally held, or the county treasurer if the roll is in county possession. If the property was sold to a bona fide purchaser before billing, the taxes, interest, and penalties do not become a lien on the property; instead, the Michigan Department of Treasury assesses the former owner. A bona fide purchaser is one who purchases a property in good faith for valuable consideration. Collected taxes and penalties are deposited into the state school aid fund, while interest is distributed according to statutory allocation rules.
Michigan law imposes strict enforcement measures when taxes resulting from a principal residence exemption denial remain unpaid. If the local or county treasurer issued the corrective tax bill, under MCL 211.7cc, the taxes become a lien on the property and are returned as delinquent on March 1 of the following year. Continued nonpayment subjects the property to forfeiture under Michigan’s tax foreclosure process, potentially resulting in loss of ownership. If the Michigan Department of Treasury issued the bill, the account is referred to its Collection Division, which initiates formal collection actions, including additional interest and penalties, and issues a “Bill for Taxes/Intent to Assess” notice.
MCL 211.7cc does provide a limited waiver interest mechanism. Specifically, MCL 211.7cc allows the Michigan Department of Treasury to waive interest when a denial of a principal residence exemption results from an assessor’s error. To obtain the waiver, the assessor must complete the Assessor’s Affidavit to Waive Principal Residence Exemption Denial Interest (Form 4813) and include all of the required documentation.
Tax And Interest Owed from a Denial of a Principal Residence Exemption: Frequently Asked Questions
- Why did the local or county treasurer issue a corrective tax bill after the denial of the Principal Residence Exemption?
The treasurer who is in control of the tax roll is required to issue a corrected tax bill within 30 days from the date of the denial to recover the additional taxes, plus interest owed resulting from a denial.
- Why did the Michigan Department of Treasury issue a corrective tax bill after the denial of the Principal Residence Exemption?
The Michigan Department of Treasury is required to issue a correct tax bill to recover the additional taxes, plus interest owed resulting from a denial when the property was sold to a bona fide purchaser.
- What is a bona fide purchaser?
A bona fide purchaser is one who purchases a property in good faith for valuable consideration. A person or entity who receives property through an inheritance, foreclosure, or a quit claim without valuable consideration, would not be considered a bona fide purchaser.
- Is the former owner liable for taxes and interest after selling to a bona fide purchaser?
Yes. The Michigan Department of Treasury bills the former owner for taxes and interest resulting from the denial if the property was sold to a bona fide purchaser.
- How does the Michigan Department of Treasury get notified to bill the former owner when the property was sold to a bona fide purchaser?
The local or county treasurer must submit the Request to Bill Seller Following a Principal Residence Exemption Denial (Form 4816), along with all required documents. A separate form is needed for each property tax ID.
- What happens if the Michigan Department of Treasury determines the new owner is not a bona fide purchaser after reviewing a Request to Bill Seller Following a Principal Residence Exemption Denial (Form 4816)?
The Michigan Department of Treasury will notify the assessor and treasurer to add the taxes back to the tax roll, making them a lien on the property.
- Are payments plans allowed?
Contact the county treasurer or local treasurer to inquire about the availability of payment plans. The Michigan Department of Treasury does allow payment plans.
- Can the amounts that are owed on the corrective bill be disputed?
Yes. Please contact the authority who issued the corrective tax bill (e.g., county treasurer, local treasurer, or Michigan Department of Treasury) to determine if the correct amount of taxes and interest were billed as a result of the denial of the principal residence exemption.
- Can taxes owed from a principal residence exemption denial be waived or reduced?
No. Michigan law prohibits compromising a property tax roll; once taxes are assessed, they must be collected.
- Why is interest charged after a principal residence exemption denial?
MCL 211.7cc requires interest to be charged, not as a penalty, but as compensation for the use of the money.
- What interest rate must be charged?
The Interest 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 must be charged. If not paid within 60 days, interest shall again begin to accrue at the rate of 1.25% per month or fraction of a month.
- Can interest owed from a principal residence exemption denial be waived?
Yes. The Michigan Department of Treasury may waive interest in circumstances involving an error as detailed in Subsection (8) of MCL 211.7cc. The assessor must complete an Assessor’s Affidavit to Waive Principal Residence Exemption Denial Interest (Form 4813) and include all the required documentation.
- Can the Michigan Department of Treasury waive penalties, administration fees or other fees?
No. The Michigan Department of Treasury only has the authority to waive the interest that is being charged, and does not have the authority to waive penalties, administration fees, or other fees that are being charged as a result of the denial of the principal residence exemption.
- Can a principal residence exemption denial that led to a corrected tax bill be disputed?
Yes. If a local assessor or county official issued the denial, the taxpayer may file an appeal with the Michigan Tax Tribunal within thirty-five days from the date of the denial. If the denial was issued by the Michigan Department of Treasury, the taxpayer may file an appeal to the Department within thirty-five days from the date of receipt of the denial notice.
- Must the corrective tax bill be paid before appealing a principal residence exemption denial?
No. An owner may appeal the denial without prepaying the taxes. However, interest continues to accrue during the appeal process at a statutory rate of 1.25% per month. The Michigan Department of Treasury recommends payment of the corrected tax bill to halt interest accrual, and if the appeal succeeds, a refund of taxes and interest will be issued.
- The owner missed the 35-day deadline to appeal a denial of the principal residence exemption. What recourse does an owner have upon receiving the local/county principal residence exemption tax bills?
Michigan law provides strict timelines for appealing a principal residence exemption denial. Under MCL 211.7cc, an owner has 35 days from the date of the denial notice to file an appeal with the Michigan Tax Tribunal or the Department of Treasury, depending on the issuing authority. If this deadline is missed, the local treasurer, county treasurer, and Michigan Department of Treasury remain obligated to continue billing for the taxes and interest owed resulting from the denial. The only potential recourse for the owner is to contact the Michigan Tax Tribunal or the Michigan Department of Treasury to explain the reason for the late filing.
- What happens if an owner does not appeal a principal residence exemption denial and refuses to pay the corrected tax bill?
If the local or county treasurer issued the corrective tax bill, under MCL 211.7cc, the taxes become a lien on the property and are returned as delinquent on March 1 of the following year. Continued nonpayment subjects the property to forfeiture under Michigan’s tax foreclosure process, potentially resulting in loss of ownership. If the Michigan Department of Treasury issued the bill, the account is referred to its Collection Division, which initiates formal collection actions, including additional interest and penalties, and issues a “Bill for Taxes/Intent to Assess” notice.
- If an appeal is successful, will an owner get refunded for the taxes and interest that are paid as a result of the denial?
Yes. Michigan law provides that when an appeal of a Principal Residence Exemption denial is successful, the taxpayer is entitled to a full refund of all taxes, interest, and penalties paid resulting from the denial. The refund must be issued within thirty days of receipt of the notice of reversal and does not accrue interest. The refund will come from the authority who issued the bill and collected the taxes and interest (e.g. local treasurer, county treasurer, or Michigan Department of Treasury).
