You may think that you’re out of luck if you failed to appeal your company’s 2011 real property tax valuation to the Board of Review in March.
Not necessarily so. If the real estate in question is classified as “commercial,” “industrial” or “developmental” (look at the top of your 2011 Notice of Assessment for the classification), you can skip the Board of Review and appeal directly to the State Tax Tribunal in Lansing. The deadline to appeal is May 31, 2011.
So, now that you know it is not necessarily too late to appeal, it might be worth reacquainting yourself with how property tax values are calculated in Michigan.
Michigan imposes an ad valorem (meaning “according to value”) tax on all real property in the state, exception for property that is expressly exempt from taxation. Since value is the basis for the tax, assessors must accurately and uniformly determine the true cash value of real property. The valuation date, also known as tax day, is December 31 of the prior year. So, tax day for 2011 is December 31, 2010.
The assessed value (AV) is 50 percent of the true cash value, as determined by the assessor. The state equalized value (SEV) is 50 percent of the true cash value, as determined by the State Tax Commission once all properties throughout the state have been uniformly assessed. If the local assessor has done his or her job properly, the AV will ultimately be adopted as the SEV.
Up until 1994, property taxes were based on a property’s SEV. That’s when voters approved Proposal A, which created the concept of taxable value. In the year immediately following a transfer of ownership, the taxable value of the property is the same as the SEV (i.e., 50 percent of the true cash value of the property on December 31 of the prior year).
Thereafter, until ownership in the property is transferred again, the taxable value of the property is the lower of either the SEV for that year or the taxable value for the prior year increased by the lesser of 5 percent or the rate of inflation. In this way, a taxpayer enjoys some tax protection in a rising real estate market and still receives a tax break in a falling market.
Generally, true cash value means the usual selling price or fair market value of property as determined by any method recognized as accurate and reasonably related to market value. The assessor usually uses the cost approach, modified by the application of an economic condition factor, and processed through a computerized mass appraisal.
