Opinion ID: 824712
Heading Depth: 3
Heading Rank: 1

Heading: taxable values in proposal a and the gpta

Text: The specific issue before us in Mich Props is whether the failure of a taxing authority’s assessor to adjust the taxable value of real property in the year immediately following a transfer of the property, in accordance with MCL 211.27a(3), precludes a March board of review from adjusting the taxable value in a subsequent year. Resolving this issue requires an analysis of the GPTA, which sets forth the parameters for determining taxable values of real property. These parameters are a direct response from the Legislature to the limitations on taxable values established in Proposal A of 1994, which amended article 9, § 3 of Michigan’s Constitution. 11 In Klooster, we 11 Proposal A amended Const 1963, art 9, § 3 to read as follows: The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law except for taxes levied for school operating purposes. The legislature shall provide for the determination of true cash value of such property; the proportion of true cash value at which such property shall be uniformly assessed, which shall not, after January 1, 1966, exceed 50 percent; and for a system of equalization of assessments. For taxes levied in 1995 and each year thereafter, the legislature shall provide that the taxable value of each parcel of property adjusted for additions and losses, shall not increase each year by more than the increase in the immediately preceding year in the general price level, as defined in [Const 1963, art 9, § 33], or 5 percent, whichever is less until ownership of the parcel of property is transferred. When ownership of the parcel of property is transferred as defined by law, the parcel shall be assessed at the applicable proportion of current true cash value. The legislature may provide for alternative means of taxation of designated real and tangible personal property in lieu of general ad valorem 7 stated that “[t]he purpose of Proposal A was to limit tax increases on property as long as it remains owned by the same party, even though the actual market value of the property may have risen at a greater rate.” 12 Proposal A places a cap on the taxable value of a property so that, based on the previous year’s taxable value, any yearly increase in taxable value is limited to either the rate of inflation or 5 percent, whichever is less. 13 That cap on taxable value applies only to the current owner of the property, and the property’s taxable value is uncapped when the property is transferred. The uncapped taxable value for the year after the transfer sets a new baseline value that is subject to a new cap. The GPTA is the enabling legislation that carries out the edicts of Proposal A. 14 The GPTA provides a comprehensive system for the assessment of property for ad valorem tax purposes and the collection of those taxes. It also provides for the administration of the system. When read in conjunction, MCL 211.27a(2) and (3) provide the statutory framework to implement the capping and uncapping mechanisms taxation. Every tax other than the general ad valorem property tax shall be uniform upon the class or classes on which it operates. A law that increases the statutory limits in effect as of February 1, 1994 on the maximum amount of ad valorem property taxes that may be levied for school district operating purposes requires the approval of 3/4 of the members elected to and serving in the Senate and in the House of Representatives. 12 Klooster, 488 Mich at 296. 13 Also, the valuation must be adjusted when there are additions or losses to the property that affect the property’s value. 14 Id. at 296-297. 8 required by Proposal A. To establish taxable values of property, MCL 211.27a contains parameters that comply with the requirements of Proposal A. Unless a property’s ownership has been transferred in the previous year, the calculation for the current taxable value is set forth in MCL 211.27a(2), which provides: Except as otherwise provided in [MCL 211.27a(3)], for taxes levied in 1995 and for each year after 1995, the taxable value of each parcel of property is the lesser of the following: (a) The property’s taxable value in the immediately preceding year minus any losses, multiplied by the lesser of 1.05 or the inflation rate, plus all additions. For taxes levied in 1995, the property’s taxable value in the immediately preceding year is the property’s state equalized valuation in 1994. (b) The property’s current state equalized valuation. In short, MCL 211.27a(2) establishes that, except as otherwise provided in MCL 211.27a(3), the taxable value of property for each year after 1995 is the value reached after applying the formula in MCL 211.27a(2)(a) or the current state equalized value, whichever is less. Under MCL 211.27a(2), the current year’s taxable value is directly predicated on the immediately preceding year’s taxable value unless the current state equalized valuation is lower. MCL 211.27a(3) sets forth an exception to the MCL 211.27a(2) calculation. It provides: Upon a transfer of ownership of property after 1994, the property’s taxable value for the calendar year following the year of the transfer is the property’s state equalized valuation for the calendar year following the transfer. This language requires that when a property has been transferred, it must be valued at the state equalized valuation for the calendar year following the transfer. Accordingly, once 9 the property is transferred, its taxable value is no longer predicated on the previous year’s taxable value; rather, it is “uncapped.” This uncapping event sets a base valuation on which future taxable values will be determined. 15 Because MCL 211.27a(2)(a) is predicated on the previous year’s taxable value, any error in the uncapping valuation carries the resulting erroneous taxable value over into future years. The provisions establishing taxable values in MCL 211.27a(2) and MCL 211.27a(3) are both mandatory and automatic. Both subsections unambiguously provide that the taxable value for a property falling under each respective subsection “is” the value that results from the parameters contained in the applicable subsection. 16 Therefore, if the mandates from the applicable subsection were not followed when placing a property’s assessment on the tax rolls for a given tax year, the resulting taxable value from that year would not be in compliance with the GPTA and would thus be erroneous as a matter of law. 15 Valuations after uncapping will again be based on MCL 211.27a(2), until the next time that the property’s ownership is transferred. MCL 211.27a(4). 16 The pertinent language in MCL 211.27a(3) states that “the property’s taxable value for the calendar year following the year of the transfer is the property’s state equalized valuation . . . .” (Emphasis added.) The Court of Appeals’ analysis implies that the phrase “calendar year following the year of the transfer” establishes a period of limitations during which MCL 211.27a(3) can be applied and that it cannot be applied to adjust a taxable value in years subsequent to the year immediately following a transfer. However, MCL 211.27a(3) does not contain a period of limitations. Rather, it sets forth that the state equalized value during the designated period of time—the year immediately following a transfer—is the basis for the uncapped taxable value. Thus, the purpose of MCL 211.27a(3) is to override the limitation in MCL 211.27a(2) when a property is transferred and allow the property’s taxable value to “catch up” with the value of the property. 10 In Mich Props, Meridian’s assessor failed to update the tax rolls to reflect the uncapped taxable values of Michigan Properties’ recently purchased properties for tax year 2005. Because of this failure to uncap the taxable value, the taxable value as entered on the tax rolls for 2005 violated the automatic requirement in MCL 211.27a(3) that the taxable value for the year following the transfer “is” the uncapped value. As a result, the 2005 taxable values of the three properties at issue were erroneous. 17