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Personal Property Tax exemption is good for small business

March 21, 2014

Small Business Association of Michigan member Lewis & Knopf CPAs has saved several of their small business clients thousands of dollars thanks to the Michigan Personal Property Tax (PPT) legislation passed in 2013. “Through the use of the PPT Exemption, we were able to save 400 of our 450 small business customers from having to pay 2013 Personal Property Tax,” says Dena Howlett, Accounting Associate, Lewis & Knopf, CPA, PC. “This resulted in one customer saving as much $30,000 in PPT.”

Lewis & Knopf CPAs was proactive in investigating the PPT Exemption for their small business clients. The firm started back in November 2013 identifying small business clients that were possible exemption candidates. The firm reviewed all PPT returns for the 2012 year and sent out notices to all of their small business clients who paid PPT the past year. Lewis & Knopf immediately started working on Michigan PPT exemptions for these clients and the results were astounding. They found that many clients didn’t realize they qualified for the exemption. There was much education that needed to be done to help small business clients understand the PPT Exemption $80,000 true cash value qualification threshold.

True cash value determines eligibility

The PPT Exemption is based on the combined true cash value of all industrial personal property and commercial personal property owned by, leased by or in the possession of the owner or a related entity that is claiming the exemption is less than $80,000. True cash value is where the confusion lies – many businesses have large depreciation that puts them under the $80,000 true cash value. The cost on your balance sheet of fixed assets does not determine whether you are eligible or not for the PPT Exemption. Howlett suggests that small businesses look closely at their State Equalized Value (SEV). They can figure out their cash value by doubling their SEV – this is the business’ true cash value.  

Be sure and ask your CPA if you qualify – you may get a pleasant surprise!

Howlett helped one small business client that had 12 locations and high depreciation. As they worked through the PPT for all locations, they found that the business was exempt from paying PPT for 2013 and the business saved almost $30,000 in personal property tax that would have been owed prior to the exemption legislation. Howlett advises that small businesses understand their true cash value before they assume the exemption won’t apply to their business. Small business owners should seek the advice of a trusted CPA who can help them better understand their true cash value and what it means in terms of the PPT exemption.

Vote YES on Aug. 5 to keep the PPT exemption

Although it is too late to apply for a 2013 PPT exemption, it isn’t too late to keep the PPT Exemption in Michigan for future tax years. The PPT Exemption will be on the Aug. 5 Michigan Primary Ballot – a YES vote is needed to keep the exemption in place for this year and future years. “This is an important issue for small business in our state. The PPT Exemption prevents small businesses from being eternally taxed on equipment and property they own or lease,” says Howlett. “We encourage a YES vote in August to support small businesses in our community and across the state.”

For more information go to www.sbam.org/advocacy or call SBAM at (800) 362-5461

Lori J. Birman, CAE, Vice President of Membership and Development, Small Business Association of Michigan

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