Waiver of Interest Process

Overview

This section explores the process to waive 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.

The waiver of interest process is governed by MCL 211.7cc(8) and is designed to prevent taxpayers from being penalized for errors attributable to local assessing officials. When a principal residence exemption is denied, the property owner becomes liable for additional taxes and statutory interest calculated from the original due date. However, the Michigan Department of Treasury has exclusive authority to waive this interest under limited circumstances.

The statutory framework provides that interest may be waived for the current tax year and up to three preceding years if the denial resulted from an assessor’s error. Such errors include misclassification of property, failure to rescind the exemption after receiving a written request from the owner, or “other errors” attributable to the assessor. The waiver is not automatic; it requires a formal application initiated by the local assessor.

The process begins when a corrected or supplemental tax bill is issued reflecting the principal residence exemption denial and associated interest. If the assessor determines that the denial was caused by their error, they must complete and submit an Assessor’s Affidavit to Waive Principal Residence Exemption (PRE) Denial Interest (Form 4813) , to the Michigan Department of Treasury. This affidavit must be accompanied by supporting documentation, including the taxpayer’s written request for waiver, a copy of the denial notice, the corrected tax bill, and evidence substantiating the assessor’s error. Upon receipt, the Treasury reviews the submission and issues a written determination to both the assessor and the taxpayer. If approved, the interest is waived; if denied, the interest remains due.

The Assessor’s Affidavit to Waive Principal Residence Exemption (PRE) Denial Interest (Form 4813) 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)).

Waiver of Interest Process: Frequently Asked Questions

1. 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.
2. 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.
3. What happens if an owner 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.
4. 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 of the required documentation.
5. 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.
6. Is the Michigan Department of Treasury required to waive interest?
   No. Under MCL 211.7cc(8), the Department of Treasury may waive interest but is not required to. Interest can be waived for the current tax year and the three preceding years if the assessor submits a sworn affidavit stating the corrected tax bill resulted from an assessor’s classification error, failure to rescind the exemption after a written request from the owner or other error.
7. What is required before the Michigan Department of Treasury can consider waiving interest?
   The Michigan Department of Treasury may only consider waiving interest if the assessor completes, signs, and files an Assessor’s Affidavit to Waive Principal Residence Exemption (PRE) Denial Interest (Form 4813), with the Michigan Department of Treasury. The submission must include the taxpayer’s written request explaining why interest should be waived, a copy of the denial notice, the corrected or supplemental tax bill, a letter from the assessor detailing the error that justifies the waiver, and any supporting documents.
8. Is the Assessor obligated to complete the Assessor’s Affidavit to Waive Principal Residence Exemption (PRE) Denial Interest (Form 4813)?
   No. The assessor only files Form 4813 if an error justifying interest waiver exists under MCL 211.7cc(8).
9. What are the errors justifying waiving interest?
   Interest may be waived only for errors defined in MCL 211.7cc(8), including assessor classification mistakes, failure to rescind the exemption after a written request, or “other errors”.
10. What does “other error” mean under Michigan law?
    The statute does not define “other error,” but the Michigan Tax Tribunal in Hardenbergh v Michigan Department of Treasury held it refers to errors similar to assessor classification mistakes. It does not include ignorance of the law, misinterpretation of the statute, fairness arguments, or reliance on guidance from local officials.
11. Who will review the request to waive interest?
    The Michigan Department of Treasury will review the request to waive interest.
12. How will the Michigan Department of Treasury convey review results?
    The owner, treasurer, and assessor will receive written notice of approval or denial of the request to waive interest by mail.
13. If a request to waive interest is approved, will an owner get refunded for the interest that was paid as a result of the denial?
    Yes. The taxpayer is entitled to a full refund of all interest paid resulting from the denial. 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).
14. Can a denial of a request to waive interest be disputed?
    Yes. An owner may appeal the denial of request to waive interest with the Michigan Tax Tribunal.
15. How can a taxpayer initiate an appeal with the Michigan Tax Tribunal?
    An appeal to the Michigan Tax Tribunal of a denial by an assessor or county or a final decision by the Michigan Department of Treasury can be initiated by the timely filing of a petition form, Petition for Denial of Exemption for Principal Residence/Qualified Agricultural, with the Michigan Tax Tribunal. A $25.00 filing fee may be required. The taxpayer can obtain a petition form online at www.michigan.gov/taxtrib.
16. When must a taxpayer appeal the denial of the request to waive interest to the Michigan Tax Tribunal?
    A taxpayer must appeal a denial or final decision to the Michigan Tax Tribunal’s Residential and Small Claims Division within 35 days of the denial or final decision. (MCL 211.7cc(13)). Late appeals may be dismissed.
17. Where can a taxpayer appeal a Michigan Tax Tribunal decision?
    For a Proposed Opinion and Judgment, file exceptions with the Michigan Tax Tribunal. For a Final Opinion and Judgment, file a Motion for Reconsideration with the Michigan Tax Tribunal or file a claim of appeal with the Michigan Court of Appeals.
18. Where can a taxpayer learn more about the Michigan Tax Tribunal rules and appeal process?
    A taxpayer can obtain more information about the Michigan Tax Tribunal rules and appeal process online at www.michigan.gov/taxtrib or may call the Michigan Tax Tribunal at 517-335-9760.
19. The Michigan Department of Treasury denied the principal residence exemption on a contiguous property because it was classified as commercial. The Assessor submitted Form 4813 requesting interest be waived, stating the property was misclassified and should have been residential. Does this error justify waiving interest?
    Yes, if the Assessor mistakenly classified the property, interest can be waived. However, if the owner requested the commercial classification, it is not an Assessor error, and interest will not be waived.
20. Treasury denied the principal residence exemption because the owner no longer occupied the property. The Assessor requested interest be waived, citing a timely rescission form that was not processed. Does this error justify waiving interest?
    Yes, if the Assessor failed to act on a timely written rescission request, interest can be waived. However, if the request to rescind was not timely, interest would not be waived.
21. Treasury denied the principal residence exemption because the owner no longer occupied the property. The Assessor requested interest be waived because the taxpayer verbally told the county treasurer the property was no longer the owner’s principal residence. Does this justify waiving interest?
    No. Under MCL 211.7cc(5), the taxpayer must file a rescission with the assessor within 90 days using Form 2602. Communication with the county treasurer does not meet this requirement, and no form was filed.