Memorial Day is a federal holiday where we remember those brave men or women that gave the ultimate sacrifice to defend their country. While we remember the fallen, it is also important not to forget the living who are currently serving on active duty or have been honorably discharged but live with life-changing injuries. While not every soldier gives up their life, it is true that all soldiers have sacrificed health, family time or other lucrative opportunities to defend our freedom.
Michigan active-duty residents and disabled veterans enjoy several provisions under state and federal law that provide relief on their property tax obligations:
PRINCIPAL RESIDENCE EXEMPTION FOR ACTIVE-DUTY SERVICEPERSONS
The Principal Residence Exemption (PRE) is a provision of Michigan’s General Property Tax Act (MCL 211.7cc) that allows the owner to exempt a principal residence from the tax levied by the local school district up to the amount provided in MCL 380.1211 (currently 18 mills). “Principal residence” means the 1 place where an owner of the property has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return and that shall continue as a principal residence until another principal residence is established. MCL 211.7dd(c). A person on active duty who expects to be away for months, if not years, will still be liable for the mortgage, taxes and home insurance on the residence. It is tempting to simply rent or lease the residence while away, but this would have caused the principal residence exemption to be forfeited under old Michigan law and significantly increase the property tax burden on the serviceperson.
In September 2008, Governor Jennifer Granholm signed Public Act 243 into law which amended MCL 211.7dd(c) to provide relief to active-duty military members. “Property that qualified as a principal residence shall continue to qualify as a principal residence for 3 years after all or any portion of the dwelling or unit included in or constituting the principal residence is rented or leased to another person as a residence if all of the following conditions are satisfied:”
- (i) The owner of the dwelling or unit is absent while on active duty in the armed forces of the United States.
- (ii) The dwelling or unit would otherwise qualify as the owner’s principal residence.
- (iii) [T]he owner files an affidavit with the assessor of the local tax collecting unit on or before May 1 attesting that it is his or her intent to occupy the dwelling or unit as a principal residence upon completion of active duty in the armed forces of the United States. A copy of an affidavit filed under this subparagraph shall be forwarded to the department of treasury pursuant to a schedule prescribed by the department of treasury.
PROPERTY TAX RELIEF DURING ACTIVE MILITARY SERVICE
The Servicemembers Civil Relief Act (SCRA) is a federal law that protects active duty members of the Armed Forces from several adverse legal effects such as default judgments, foreclosures and repossessions that can take place while away from home. With respect to property taxes, “[a] servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the servicemember by reason of being absent or present in any tax jurisdiction of the United States solely in compliance with military orders.” 50 U.S.C. §4001. In addition, if property taxes are delinquent during active duty, the interest charged on the tax obligation will be capped at 6%, rather than the higher rates allowed by law, during the tour of duty and for one year afterwards. 50 U.S.C. §3937(a)(1).
Michigan servicepersons need to file Form 2700 with their local township, village or city tax authority claiming relief from property taxes either before or during their active duty service. However, a court can allow the local tax collector to sell the property due to delinquent taxes if it can prove with competent evidence that the ability to pay taxes is not affected by the military service.
100% TAX EXEMPTION FOR TOTALLY DISABLED VETERANS
In 2013, Governor Rick Snyder signed into law the Dannie Lee Barnes Disabled Veteran Property Tax Relief Act. Under this new law, “[r]eal property used and owned as a homestead by a disabled veteran who was discharged from the armed forces of the United States under honorable conditions… is exempt from the collection of taxes under this act.” MCL 211.7b(1). “Disabled veteran” means a person who is a resident of this state and meets one of the following criteria:
- Has been determined by the United States Department of Veterans Affairs to be permanently and totally disabled as a result of military service and entitled to veterans’ benefits at the 100% rate. MCL 211.7b(3)(a).
- Has a certificate from the United States Veterans’ Administration, or its successors, certifying that he or she is receiving or has received pecuniary assistance due to disability for specially adapted housing. MCL 211.7b(3)(b).
- Has been rated by the United States Department of Veterans Affairs as individually unemployable. MCL 211.7b(3)(c).
“To obtain the exemption, an affidavit showing the facts required by this section and a description of the real property shall be filed by the property owner or his or her legal designee with the supervisor or other assessing officer during the period beginning with the tax day for each year and ending at the time of the final adjournment of the local board of review. The affidavit when filed shall be open to inspection. The county treasurer shall cancel taxes subject to collection under this act for any year in which a disabled veteran eligible for the exemption under this section has acquired title to real property exempt under this section.” MCL 211.7b(1).
“If a disabled veteran who is otherwise eligible for the exemption under this section dies, either before or after the exemption under this section is granted, the exemption shall remain available to or shall continue for his or her unremarried surviving spouse. The surviving spouse shall comply with the requirements of [this act] and shall indicate on the affidavit that he or she is the surviving spouse of a disabled veteran entitled to the exemption under this section. The exemption shall continue as long as the surviving spouse remains unremarried.” MCL 211.7b(2).
This act is not retroactive to tax years prior to 2013. Disabled veterans must submit affidavits to the local taxing authority before December 10th for the board of review to consider approval.
If you have additional questions about any aspect of Michigan taxation, do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC. We wish everyone a safe and enjoyable Memorial Day!