Michigan Property Taxes Go Up While Property Values Go Down

February and March are important months for Michigan property owners. Michigan property owners will soon receive a Notice of Assessment in the mail from the local assessor’s office. The large letters in the top right corner will read: THIS IS NOT A TAX BILL, and thus, many property owners take a cursory glance, pleased to see that the number in the Assessed Value and State Equalized Value columns have decreased, and toss it away. When the summer property tax bill arrives several months later, the property owners realize that the property tax due has increased from the amount they paid last year. The Notice of Assessment is one of the most important documents property owners receive. It provides the various valuations used in the formula that determines the property taxes on that particular parcel of property.

Proposal A, passed in 1994, placed limits on the Taxable Value of Michigan property. Prior to Proposal A, property taxes were based on the State Equalized Value. The Michigan Constitution limits the annual increases of Taxable Value to 5% or the rate of inflation, whichever is less, and the Taxable Value cannot be greater than the State Equalized Value, which is 50% of the True Cash Value of the property. This means that the Taxable Value of your property can increase while the market value of your property decreases. The increase for 2009 property tax purposes is 4.4 percent.

The Michigan Department of Treasury website explains: “For the first decade or more after the passage of Proposal A, most property owners experienced significant and sometimes double-digit "property value" increases while their actual property taxes would increase by between 1 percent and 3 percent (rate of inflation as calculated). In fact, a Department of Treasury analysis shows that since Proposal A went into effect in 1995, home values in Michigan have increased 98.4 percent, while property taxes have only increased 42.9 percent. Unfortunately, due to various economic factors, the opposite has occurred over the last several years and will occur again in 2009. Property values may be declining (or remaining flat) while property taxes for many taxpayers will increase by 4.4 % (as long as a property's taxable value does not exceed its state equalized value) as mandated by Proposal A.”

However, due to the fact that the Taxable Value cannot be greater than the State Equalized Value, a property owner may want to contest the Assessed Value, which multiplied by the equalization factor equals the State Equalized Value, as provided on the Notice of Assessment. The taxpayer must appeal to the March Board of Review that meets on the second Monday in March to hear and determine taxpayer complaints relating to their property valuations. The Notice of Assessment may provide a different date if the locality has set a special date for the Board of Review meeting than that provided under the state statute. A taxpayer's appeal to the local board of review at this time is mandatory before any appeal to the Tax Tribunal.

If you have any questions or concerns related to your Notice of Assessment, or simply want an explanation of your Notice of Assessment, please contact our office.

This link provides Michigan property owners with a helpful 4 1/2 minute video and slide explanation regarding Michigan property taxes:

1]The Notice of Assessment Form may be found at http://www.michigan.gov/documents/1019_fillable_77355_7.pdf.

Heather Brenneman Miles, Attorney