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| | Commerical Rehabilitation Act | | | |
The Commercial Rehabilitation Act would allow certain rehabilitated commercial property to receive a reduction in property taxes. The law applies only to a multifamily housing building or group of contiguous buildings of commercial property 15 years old or older that are located in a commercial rehabilitation district of at least 3 acres in size as established by the local unit of government. An exemption is provided to the 3 acre requirement, though, if the business is located in a downtown as determined by the local government. An exemption is also provided to the 15 year requirement if the property has been allocated a federal New Markets Tax Credit. A local unit would first have to create a rehabilitation district, then could entertain applications for tax exemptions. The tax exemption would require approval by the local unit of government. A "qualified facility" would be exempt from standard property taxes (although not the land or personal property). Instead, the facility would be subject to a newly created specific tax that would base the tax liability of the facility on its value prior to rehabilitation. The property tax exemption would last for one to ten years, as determined by the local unit of government. For a facility to be eligible for an exemption, the rehabilitation could not begin more than six months before the applicant files the application for the exemption certificate. The abatement would not apply to local school operating taxes or the State Education Tax, and counties are eligible to optout of their taxes being captured. The tax exemption would also require the approval of the State Tax Commission. Property eligible for this program would be facilities devoted to such commercial activities as retail sales, office, engineering, research and development, warehousing, and parts distribution, and would include buildings previously used for industrial purposes that are to be converted to commercial business operations. Casino property and professional sports stadiums would not be eligible. A new exemption could not be granted under the act after December 31, 2015, but an exemption then in effect could continue until it expired. This act contains provisions very similar to those contained in Public Act 146 of 2000, known as the Obsolete Property Rehabilitation Act, which applies to blighted, functionally obsolete, and contaminated properties in core cities. This law was originally created by PA 210 of 2005, but at that time was limited to the Summit Place Mall in Waterford. PA 554 of 2006 removed the limitation, and instead created the 3 acre
Creation of a Commercial Rehabilitation District
The legislative body of a city, village, or township could create one or more districts. A district could be established by the local legislative body on its own initiative or upon the written request of property owners with more than 50 percent of the taxable value of the property within a proposed district. Before adopting a resolution establishing a district, the local legislative body would have to give written notice by certified mail to the owners of all real property within the proposed district and afford an opportunity for a hearing at which property owners and other residents and taxpayers could appear and be heard. Notice of the hearing would have to be provided not less than ten days or more than 30 days before the hearing.
Commercial Rehabilitation Exemption Certificate
The owner of qualified property within a district could file an application for an exemption certificate with the local clerk. The application would have to contain or be accompanied by a general description of the facility and the proposed use of the rehabilitated facility, the general nature and extent of rehabilitation to be undertaken, a descriptive list of the fixed building equipment that was to be part of the rehabilitation, a time schedule for the proposed work and its completion, and a statement of the economic advantages expected from the exemption, including the number of jobs to be retained or created as a result of rehabilitation, as well as the construction jobs involved. Upon receipt of an application, the local clerk would have to notify in writing the assessor of the local tax collecting unit and the legislative body of each taxing unit levying ad valorem taxes where the facility was located. Before acting on the application, the local legislative body would have to hold a public hearing and give public notice to the assessor, representatives of affected taxing units, and the general public.
Action by Local Legislative Body/ State Tax Commission
The local legislative body would have to approve or disapprove the application for an exemption certificate, by resolution, within 60 days after its receipt by the clerk. Within 60 days of receiving the resolution from the local unit, the state tax commission would have to approve or disapprove the resolution. If approved, the exemption certificate would be issued to the applicant containing, among other things, the period of time authorized by the legislative body in which the rehabilitation must be completed. If the certificate was for less than 10 years, it would have to contain the factors, criteria, and objectives for extending the period of time, if any. The effective date of an exemption certificate would be the December 31 immediately following its issuance. An exemption certificate could be transferred and assigned by its holder to a new owner of the rehabilitated facility with the approval of the local unit.
Approval Criteria
An exemption certificate could not be approved unless, among other things, the rehabilitation of the facility began no earlier than six months before the applicant filed the application for the certificate; the completion of the rehabilitation was likely to increase commercial activity, create employment, retain employment, prevent a loss of employment, revitalize urban areas, or increase the number of residents in the community in which the facility was situated; the applicant stated in writing that the rehabilitation would not be undertaken without the exemption certificate; and the applicant was not delinquent in the payment of any taxes related to the facility.
Override of Taxable Value Limit
If the taxable value of the property proposed for an exemption, considered together with exemptions previously granted, exceeded five percent of the taxable value of the local unit, the legislative body would have to make a separate finding and include a statement in its resolution that exceeding that amount would not have the effect of substantially impeding the operation of the local unit or impairing the financial soundness of an affected taxing unit.
Commercial Rehabilitation Tax
The owner of a qualified facility that had received an exemption certificate would pay a new specific tax instead of standard property taxes. The act contains the formula for determining tax liability. Generallyspeaking, it freezes the taxable value of the buildings at the level prior to rehabilitation. The taxable value of land and personal property would remain unchanged. The new specific tax would be an annual tax paid in the same manner as the property tax and, generally speaking, disbursed in the same manner. |
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| Commerical Rehabilitation Act |
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