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Opinion No. 5277

March 13, 1978


Authority of municipalities to grant a credit against property taxes


Authority to grant a credit against property taxes

A municipality may not adopt an ordinance granting an exemption from property taxes or a tax credit against property taxes.

Honorable Louis K. Cramton

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion regarding the legality of a proposed Midland city ordinance which would give a credit against property taxes for ten years to properties on which sidewalks have been installed by special assessment.

Municipalities do not have power to grant tax exemptions; this power is reserved to the legislature.

As stated in 2 Cooley, The Law of Taxation (4th ed), Sec. 670, p 1398:

'Pertaining as it does to the sovereign power to tax, the municipalities of a state have not the exempting power except as they are expressly authorized by the state. . . . However, the legislature may delegate to a municipality the power to make particular exemptions; but power delegated to a municipal corporation to tax does not include the power to exempt. . . . And it has been held that it is not competent to confer a general power to make exemptions, since that would be nothing short of a general power to establish inequality.'

See also OAG 1933-1934, p 456 (March 14, 1934); OAG 1935-1936, No 109, p 290 (October 1, 1935).

This rule is consistent with a provision in the charter of the City of Midland which provides that the city may not create an exemption from taxation, except where expressly permitted by state law. Midland Charter, Ch 12, Sec. 12.3.

A tax credit has the same operations effect as an exemption. Therefore, since a municipality cannot create a tax exemption, it cannot grant a tax credit unless authorized to do so by the legislature.

In State ex rel Richards v Armstrong, 17 Utah 166, 53 P 981, 982 (1898), the court distinguished an abatement of taxes from an exemption, stating:

'. . . counsel for the defendants maintains that an abatement of taxes . . . is not an exemption . . . that 'abatement' does not mean the same thing as 'exemption,' and that, therefore, the statute is not in excess of legislative authority, and is valid. It is true that the terms 'exemption' and 'abatement' in their literal sense, have different shades of meaning . . . for an exemption prevents any assessment or levy of tax in the first instance, and in that way relieves the property from the burden of taxation, while in the case of an abatement the property is relieved of its share of the burdens of taxation after the assessment has been made and the tax levied. The difference in the sense of these terms therefore relates to the method, rather than the effect; for the ultimate result, whether by exemption or abatement, is precisely the same. In either case the property is relieved from the burden of taxation.'

Therefore, it is my opinion that the City of Midland may not adopt a proposed municipal ordinance granting an exemption from property taxes or a tax credit against property taxes.

Frank J. Kelley

Attorney General