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1994-10 State Education Tax (SET) Local Unit Treasurers Collection and Reporting Procedures

July 8, 1994

TO:  LAFD Staff

FROM:  Richard L. Baldermann, CPA
             Local Audit and Finance Division

RE:   State Education Tax (SET)
         Collection and Reporting Procedures

For your information and guidance, following is a copy of information mailed to County, City and Township Treasurers.

If you have any questions, please call (517) 373-3227 or write our office at Michigan Department of Treasury, Local Audit and Finance Division, P.O. Box 30728, Lansing, Michigan 48909-8228.

June 24, 1994

Local Assessor/Treasurer:

Pursuant to 1993 PA 331, being Michigan Compiled Laws (MCL) 211.905(2), this document CERTIFIES THE LEVY and AUTHORIZES THE COLLECTION of the State Education Tax (SET) at a total rate of 6 mills for the 1994 tax year (MCL 211.901 et seq). SET collections and distributions shall be in accordance with the provisions of the General Property Tax Act, 1893 PA 206. Local unit treasurers shall distribute the SET collections to the county treasurer (MCL 211.42).

June 22, 1994 (Revision of May 5, 1994 letter)

TO:  County, City and Township Treasurers

FROM:  Local Property Service Division and Local Audit & Finance Division

SUBJECT:  Collection and Distribution of State Education Tax (SET)

The adoption of Proposal A by the electorate on March 15, 1994, resulted in a State Education Tax (SET) of six mills for school operating purposes on all property not exempt by law from ad valorem property taxes.

1) Each local tax collecting unit shall collect and distribute the SET in the same manner and at the same time as other property taxes levied by the school district or local unit for operating purposes. Fees, penalties and interest will be charged on the SET the same as other taxes. Interest includes the late payment interest assessment for late summer tax payments and the interest earned on the deposit of tax collections. Procedures for deferments of senior citizens, disabled and agricultural property that apply to summer tax levies will apply to SET summer collections.

2) Many cities now collect summer school taxes with their city taxes. Individual City ordinance or charter dates and penalties that apply to your local and summer school tax collection/distributions procedures will apply to the SET. Cities will collect the SET at the same time local school operating taxes are collected. If one-half of the local school operating taxes are collected in the summer, one-half of the SET is collected in the summer. If 100% of the local school operating taxes are collected in the summer, 100% of the SET is collected in the summer. See section 5 of PA 331 of 1993. [MCL 211.905(1)] SET not collected in the summer, are collected on the winter tax roll. Enrolled SB 1123 (PA 187 of 1994) was signed June 19, 1994 and filed June 20, 1994 with immediate effect. Public Act 187 of 1994 provides that:

A local tax collecting unit SHALL collect one-half of the SET (3 mills) in the summer, within the boundaries of a school district located in the local tax collection unit, where all the following apply:

a) the local school district levied a 1993 summer operating tax in the tax collection district; and

b) the local school district does not levy a 1994 or subsequent years summer operating tax within the local tax collection district, BUT;

c) the local tax collecting district is collecting a local or any other tax in the summer of 1994 and subsequent years.

3) City and township treasurers will distribute the SET in accordance with current distribution agreements or the required statutory provisions of MCL 211.43(3), whichever distribution dates occur first. A city or township shall retain the interest earned on the deposits of SET collections while in the possession of the city or township treasurer. (See section 211.43c added by Enrolled HB 5345)

4) Local units will deposit with the county treasurer, the 1% per month interest collected on the late payment of the summer levy of the SET as provided by local charter, ordinance or sections 1611(4) and 1612(2) of the School Code. [MCL 380.1611(4) and 380.1612(2)]

5) City and township treasurers will deposit the SET collections with the county treasurer. See MCL 211.42. Enrolled HB 5018 provides that the county treasurer will remit, to the State Treasurer, the SET collections and the 1% per month interest levied on the late summer tax collections. Distributions shall be by the fifteenth of the month for the collections on hand on or before the last day of the preceding month and by the first of the month for the collections on hand on or before the fifteenth day of the immediately preceding month. The county (credit to the general fund) will retain the interest earned on the deposit of SET collections while in the possession of the county treasurer.

6) Delinquent SET will be returned to the county treasurer the same as all other taxes. [General Property Tax Act (MCL 211.87b)] Counties will pay the State Treasurer the SET from the delinquent tax revolving fund. Local units that by City Charter collect all delinquent property taxes are required (provision added by MCL 211.89a) (PA 189 of 1994--Enrolled SB 882) to return the delinquent SET to the county treasurer. The county will pay the delinquent SET from the delinquent tax revolving fund to the State Treasurer in the same manner as other delinquent real property taxes.

7) If the SET becomes uncollectible after the county treasurer has paid the State from the county delinquent tax revolving fund, the county treasurer may offset uncollectible delinquent taxes against collections of the State Education Tax received by the county and owed to the state. (See MCL 211.87b as amended by PA 189 of 1994--Enrolled SB 882)

8) City and Township treasurers must have a surety bond for the collection of SET as required by section 43(1) of the General Property Tax Act. Surety bond coverage may consist of:

a) A surety bond purchased by the city or township, payable to the county, for the total amount of the tax levy, including the SET; or

b) The township treasurer's surety bond recorded by the township clerk and on file with the township supervisor, when the supervisor and county treasurer determine that this surety bond is adequate and sufficient to safeguard the proper accounting of the state, county and school taxes; or

c) A corporate surety bond approved and purchased by the county treasurer from a surety company authorized to transact business under the laws of this state. This bond is sufficient when the coverage equals 40% of the state, county and school taxes to be collected. The premium for this bond is paid by the county treasurer from the general fund of the county. The county has the option of billing each district school board afforded protection by the bond. This statue does not authorize charging a portion of the premium to the township or state for protection of the township or state taxes.

9) County treasurers may mail or use a method of electronic transfer for remitting SET to the State Treasurer. County treasurers shall use account number 228.01 titled "Due State of Michigan--State Education Tax" to account for the collection and remittance of SET.

10) Sections MCL 211.7cc, 211.7dd and 211.7ee are added to the General Property Tax Act by Enrolled HB 5345. These sections specify the eligibility for and procedures for filing a homestead or qualified agricultural property affidavit, defines various words and phrases, and the denial and appeal procedures. The State Tax Commission will be issuing a bulletin in the near future addressing these issues.

Questions or suggestions may be directed to (517) 334-8911 or (517) 373-3227.