STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5206

August 4, 1977

TAXATION:

Diversion to counties, cities, villages and townships of a portion of the single business tax receipts.

Payments under the Single Business Tax Act diversion chapter to counties, cities, villages and townships are based upon property taxes levied for the preceding year.

Only property tax rates levied as ad valorem property taxes may be considered in calculating such payments; special assessments are excluded.

The Department of Treasury is authorized to determine the property tax rate of a local governmental unit by dividing the unit's state equalized value into the total ad valorem taxes levied by the unit.

The Department of Treasury may not delay payments due to cities and villages under the Single Business Tax diversion chapter beyond the date required by the act.

Honorable Patrick H. McCollough

State Senate

Capitol Building

Lansing, Michigan

You have raised several questions pertaining to 1975 PA 228; MCLA 208.131 et seq; MSA 7.558(131) et seq. Your questions specifically relate of Chapter 6 of the Single Business Tax Act. That chapter is concerned mainly with diversion of a portion of the revenue generated by the single business tax and its distribution to cities, villages, townships and counties to compensate such units for tax revenue lost by the exemption of certain personal property inventories from ad valorem property taxation. Your questions will be answered seriatim.

You have noted that the Department of Treasury based the 1976 payment to cities, villages and townships upon their 1975 property tax or millage rates and have expressed the opinion that these distributions should have been based upon 1976 property tax or millage rates.

1975 PA 228, supra, Sec. 134, provides in part:

1975 PA 228, supra, Sec. 132 commands local assessors to report the stae equalized value of inventory as defined by 1975 PA 228, supra, Sec. 131. 1975 PA 228, supra, Sec. 138, provides for the method of such reporting. The latter section also contains the following language:

The underscored language evidences a clear legislative intent that the 1976 payments to cities, villages, townships and counties are to be based upon property tax or millage rates for 1975, the preceding calendar year. More specifically, the amount due to cities and villages between July 1 and October 2 of each year [Section 134] is to be based upon the city and village property tax or millage rates actually levied in the preceding year. Further, the payments to townships [Section 134] and to counties [Section 135] on or before February 1, 1977 are to be calculated on their 1975 property tax or millage rates. ⁽¹⁾

By the same token, payments to cities and villages between July 2, and October 2, 1977 are based upon 1976 millages of cities and villages which are reported to the Department of Management and Budget by May 15, 1977, as required by 1975 PA 228, Sec. 138, supra. Payments to townships and counties on or before February 1, 1978, likewise, are based on 1976 property tax or millage rates.

The foregoing scheme utilizes the existing administrative machinery, namely, annual reports of millage levies by local units of government to the State Board of Assessors, which are due on December 1 [Section 138]. For example, on December 1, 1976, local units of government report their total millage levies to the State Board of Assessors. On or before May 15, 1977 the Department of Treasury reports 1976 property tax levies to the Department of Management and Budget. Between July 1 and October 2, 1977 payments based upon these 1976 property tax rates are made to cities and villages, and on or before February 1, 1978 payments to townships and counties are calculated on the same data.

It is therefore my opinion that payments for the calendar year 1976 to cities, villages and townships under 1975 PA 228, Secs. 134 and 135, supra, are based upon property tax rates levied for the preceding year.

It must first be noted that our constitutional tax uniformity clause, Const 1963, art 9, Sec. 3, requires the spread of identical millage under 1893 PA 206, the General Property Tax Act, MCLA 211.1 et seq; MSA 7.1 et seq. Different rates upon taxable real property and taxable tangible personal property under the general ad valorem property tax are proscribed.

Your question implies that special assessments levied for police and fire protection on real property pursuant to 1951 PA 33, as amended, MCLA 41.801 et seq; MSA 5.2640(1) et seq, and 1961 PA 181, as amended, MCLA 340.561 et seq; MSA 15.3561 et seq, are considered part of the general property tax. Utilizing the example noted in your letter, a township levies a uniform general property tax upon real and personal property. It also levies special assessments for police and fire protection on real property only.

Payments to local units pursuant to 1975 PA 228, ch 6, supra, are, in part, upon the local property tax rates. 'Property taxes' are defined by 1975 PA 228, supra, Sec. 131 as 'general ad valorem property taxes levied under Act No. 206 of the Public Acts of 1893, as amended.'

Therefore, it is my opinion that only property tax rates or millages levied as ad valorem property taxes under the General Property Tax Act may be considered in calculating the payments and any special assessment rates or millages must be excluded.

Your letter further recites that a number of local units levied 1975 property taxes upon a base other than state equalized value, i.e., upon assessed or county equalized value. By way of example, you indicate that local units in a county levied authorized millages against the county equalized value established by the county board of commissioners which were considerably lower than state equalized values. The Department of Treasury recalculated the millage rates reported. By dividing the total property taxes levied by these local units by their state equalized value, the Department determined a property tax or millage rate other than that reported. ⁽²⁾

1975 PA 228, Sec. 138, supra, provides inter alia:

Moreover, the legislature has imposed upon the Department of Treasury the duty to calculate the amount of payment to be made to a city, village, or township pursuant to 1975 PA 228, Sec. 134, supra, and to a county under 1975 PA 228, Sec. 135, supra, 'by multiplying the amount of state equalized value of tax exempt property as certified by the department of treasury under section 132 times the property tax rate for each taxing unit as certified each year to the department of treasury for purposes of this act.' 1975 PA 228, Sec. 134, supra. Thus, the statute neither authorizes nor requires a local taxing unit to report its tax rate. It only provides for reporting of the aggregate amount of local property taxes levied by each unit and the local assessor is required to report the state equalized value of the tax exempt inventory. In order for the Department of Treasury to perform this duty, it must make a determination of the property tax or millage rate for each local unit. This is accomplished by dividing a local unit's state equalized value into the total ad valorem taxes as reported. The state equalized value of tax exempt inventory reported by each local unit is then multiplied by the property tax rate for each taxing unit, and the resulting sum of money is paid to the local units as reimbursement for tax inventories lost due to the statutory exemption of inventories. However, no payments may be made until the Department of Management and Budget makes the distribution as set forth in 1975 PA 228, supra, Sec. 138(2).

Therefore, it is my opinion that the Department of Treasury has authority to determine the local unit's property tax or millage rate by dividing the unit's state equalized value into the total ad valorem taxes levied by the unit. It is not required to use the property tax rate which may be reported by the local unit.

Both 1975 PA 228, Secs. 132 and 138, supra, provide for utilization of the total value of the local property taxes and the total state equalized value of local units of government. These sections do not differentiate between the state equalized value of real and personal property respectively. There is no need for such differentiation since constitutional tax uniformity, mandated by Const 1963, art 9, Sec. 3, requires that the state equalized value of every type of property be an identical proportion of its true cash value, which, under present law, is 50 percent of fair market value. MCLA 211.27; MSA 7.27. Local units are required to follow the constitutional mandate for tax uniformity, both as to rate and base of the property tax so that an identical property tax or millage rate is levied against an identical standard (which is state equalized value, the equivalent of 50 percent of true cash value). Consequently, division of personal property tax revenue by the state equalized value of personal property would result in the identical property tax or millage rate as division of the total tax levy by the state equalized value of all taxable property. A different result could occur only if local units assessed real and personal property upon a different standard of value in violation of Const 1963, art 9, Sec. 3.

It is therefore my opinion that the Department of Treasury must determine the local unit property tax or millage rate by dividing the total ad valorem taxes levied on all taxable property under 1893 PA 206, supra, by the state equalized value of all such taxable property.

Your letter advises that the first payments to cities and villages were not made until November 19, 1976.

Distribution of single business tax payments to cities and villages are mandated by the legislature in 1975 PA 228, supra, Sec. 134 so that '(t)he amount due under this section shall be paid to the cities and villages between July 1 and October 2 of each year beginning in 1976.' This statutory directive is clear and unambiguous. The amount due any city or village pursuant to 1975 PA 228, supra, Sec. 134, must be paid to the city or village no later than October 2 of each year. The legislature has not conferred specific authority upon the Department of Treasury to delay such payments.

It is therefore my opinion that the Department of Treasury does not have specific authority to delay payments due cities and villages under 1975 PA 228, supra, Sec. 134.

Frank J. Kelley