The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6826

December 20, 1994

CITIES:

Imposing a city income tax on residents and persons who work in an area that has been conditionally transferred to a city

TAXATION:

Imposing a city income tax on residents and persons who work in an area that has been conditionally transferred to a city

The City of Ionia may impose its income tax on residents and non-residents who live or work in the area that was conditionally transferred from Berlin Township to the City of Ionia.

Honorable Gary L. Randall

State Representative

The Capitol

Lansing, MI

You have asked if the City of Ionia, under a contract for the conditional transfer of property, may impose its income tax on residents and non-residents who live or work in the area that was conditionally transferred from Berlin Township to the City of Ionia. With your letter, you enclosed a copy of a contract dated June 16, 1990, for conditional transfer of property to the City of Ionia from Berlin Township.

Section 2 of 1984 PA 425, MCL 124.21 et seq; MSA 5.4087(21) et seq, permits units of local government to conditionally transfer property for the purposes of an economic development project where the transfer is controlled by a written contract between the affected local units. An economic development project is defined, by section 1(a) of 1984 PA 425, to include projects for industrial or commercial enterprises, housing developments, or for the protection of the environment, including groundwater or surface water.

The contract for a conditional transfer must be approved by the governing bodies of each affected local unit of government. See section 4(2) of 1984 PA 425. Under certain circumstances outlined in section 5 of the same statute, a referendum may be required prior to the adoption of the agreement.

Section 8 of 1984 PA 425 provides:

Unless the contract specifically provides otherwise, property which is conditionally transferred ... is, for the term of the contract and for all purposes, under the jurisdiction of the local unit to which the property is transferred. [ Emphasis added.]

Section 3 of the contract specifically provides:

The City shall ... have full jurisdiction over the transferred area, exercising all rights, privileges, and powers as granted to home rule cities.... These powers shall include ... taxation (except as specifically provided herein) ... subject only to the provisions of other sections of this Contract. [ Emphasis added.]

Section 4H of the contract provides:

If the proposed City Income Tax is not approved by the voters, the City and Township agree that the term of this Contract be extended by 8 years....

Cities are authorized to impose a city income tax pursuant to the provisions of the City Income Tax Act, 1964 PA 284, MCL 141.501 et seq; MSA 5.3194(1) et seq. Under sections 12 and 13 of Chapter 2 of that act, respectively, a city income tax may be imposed on city residents and on non-residents who work in the city.

According to a member of your staff, the city income tax referred to in section 4H of the contract was approved by the voters of Ionia in February 1994. It is our understanding that the residents of the area conditionally transferred to Ionia by the contract under 1984 PA 425 voted in the referendum which approved the city income tax.

It is my opinion, therefore, that based on 1984 PA 425 and the terms of this particular conditional transfer contract, the City of Ionia may impose its income tax on residents and non-residents who live or work in the area that was conditionally transferred from Berlin Township to the City of Ionia.

Frank J. Kelley

Attorney General