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This week’s legislative update: Personal Property Tax elimination debated, deregulation moving forward

April 20, 2012

This week the Michigan Senate conducted its first hearing on the eight-bill package that would ultimately eliminate the Personal Property Tax (PPT) on manufacturing equipment and remove the Personal Property Tax on industrial and commercial property with a taxable value of $40,000 or less. The total elimination of the tax on manufacturing would be phased in over several years, while immediate tax relief would be offered for commercial property. The result, once fully implemented, would amount to $470 million per year in tax relief for business.

The elimination of the state’s PPT has been debated for years and has been a top priority for the Snyder Administration and the Legislature. Three hearings are slated for next week, as Senate leadership has expressed it intent to provide tax relief in short order. 

Lt. Governor Brian Calley kicked off the testimony by highlighting the competitive disadvantage the state experiences as a result of being one of the only Midwestern states that still imposes such a tax. Calley also testified to the fact that the PPT has long been an impediment for business expansion, indicating that it punishes companies for making capital investments in the state. Additionally, the tax has always carried a high cost of compliance and imposes burdensome administrative costs on small businesses and local units of government.

Local units of government have relied on the revenue generated through the PPT. Policy makers have developed a statutory mechanism to ensure adequate funding levels. However, representatives from local governments testified in opposition, stating a need for a constitutional guarantee for revenue replacement.

Specifically, the small business personal property tax exemption begins Dec. 31, 2012, and exempts all industrial and commercial personal property with a taxable value of less than $40,000. The $40,000 exemption is applied in each local jurisdiction in which a business taxpayer owns property, so a single firm with multiple small locations, such as a chain restaurant, could receive multiple $40,000 exemptions. 

According to Department of Treasury estimates, the small business personal property tax exemption on commercial and industrial personal property with a taxable value of less than $40,000 will mean roughly $70 million in tax relief each year, with roughly $65 million attributable to commercial personal property. 

The $40,000 taxable value exemption will eliminate the PPT and tax return filing requirement for roughly 75 percent to 80 percent of all industrial and commercial taxpayers, according to Senate Republicans. 

Eligible manufacturing property personal property acquired prior to Dec. 31, 2011, is exempt after it becomes 10 years old. On Dec. 31, 2015, all property acquired prior to Dec. 31, 2005, will immediately become exempt. Thereafter, one year of acquisitions will become exempt each year until Dec. 31, 2021, at which point all eligible manufacturing property will be exempt.

Deregulation Initiative Gaining Momentum

Businesses in a variety of state licensed professions could soon see less regulation from the state. The state Office of Regulatory Reinvention (ORR) announced this week it is recommending the deregulation of 18 occupations and elimination of nine boards as part of its plan presented to Gov. Snyder.

ORR’s plan includes 63 recommendations for “improving Michigan’s occupational licensing regulations and rescinding all or parts of 23 occupational rules and changes to other rules.” Gov. Snyder has reviewed the recommendations and the ORR and the Department of Licensing and Regulatory Affairs (LARA) will now work toward implementing them. SBAM has been working closing with the ORR, LARA and the administration in their efforts to reductions in bureaucratic red tape and elimination of nonsensical and overly burdensome regulation. 

The 18 occupations recommended for deregulation are acupuncturists, auctioneers, community planners, consumer finance services, dieticians and nutritionists, forensic polygraph examiners, foresters, immigration clerical assistants, insurance solicitors, interior designers, landscape architects, ocularists, professional employer organizations, proprietary school solicitors, respiratory care, security alarm contractors, speech pathologist, and vehicle protection product warrantors. 

The nine occupational boards recommended for elimination are the Board of Acupuncture, Board of Auctioneers, Board of Carnivals & Amusement Rides, Board of Dietetics & Nutrition, Board of Occupational Therapy, Board of Respiratory Care, Board of Speech Language Pathology, Osteopathic Medicine Advisory Board, and the Ski Area Safety Board. 

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