STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6909

July 25, 1996

ENVIRONMENTAL PROTECTION:

Water pollution control tax exemption for a type II solid waste landfill

TAXATION:

Water pollution control tax exemption for a type II solid waste landfill

Type II solid waste landfills do not qualify for tax exemptions under Part 37 of the Natural Resources and Environmental Protection Act. However, a specific component part or system contained within a type II landfill may be eligible for a tax exemption if the component part or system is used primarily for the purpose of reducing water pollution resulting from industrial waste and otherwise meets the criteria set forth in Part 37; the question of whether a specific component part or system of a landfill meets these requirements is a question of fact that must be determined on a case-by-case basis through the administrative application and hearing process provided for in Part 37 of the Natural Resources and Environmental Protection Act.

Honorable Paul Tesanovich

State Representative

The Capitol

Lansing, Michigan

You have asked if a type II solid waste landfill may qualify for a water pollution control tax exemption under Part 37 of the Natural Resources and Environmental Protection Act (NREPA), 1994 PA 451, MCL 324.3701 et seq; MSA 13A.3701 et seq.

Part 37 of the NREPA, formerly 1966 PA 222, provides for the issuance of certificates by the State Tax Commission that exempt water pollution control facilities from certain taxes including real and personal property taxes imposed under the General Property Tax Act, MCL 211.1 et seq; MSA 7.1 et seq. The purpose of Part 37 is to provide incentives for the acquisition and operation of environmentally desirable facilities that control water pollution caused by industrial waste. Before the State Tax Commission issues a tax certificate, the Michigan Department of Environmental Quality (MDEQ) is required to make a determination whether the facility meets the requirements of Part 37. Section 3703 of Part 37 provides:

A "facility" is defined at section 3701(a) of Part 37 as:

Section 3701(d) of Part 37 defines a "disposal system" as follows:

In both section 3703 and 3701(a) of Part 37, the Legislature has required that, to qualify for the tax exemption, the facility must be operated "primarily" for the purpose of controlling water pollution resulting from industrial waste. In Covert Twp v State Tax Comm, 407 Mich 561; 287 NW2d 895 (1980), the Michigan Supreme Court interpreted similar language in the Air Exemption Act limiting the tax exemption to facilities operated for the "primary" purpose of controlling air pollution. The Court found, with regard to that language, as follows:

Covert Twp v State Tax Comm, 407 Mich, at p 581.

The construction and operation of solid waste landfills are regulated by Part 115 of the NREPA, MCL 324.11501 et seq; MSA 13A.11501 et seq, and the implementing administrative rules found at 1993 AACS, R 299. 4101 et seq. In R 299.4104(d), a type II landfill is defined as follows:

Given this definition of a type II solid waste landfill, it is clear that the primary purpose of the landfill is to receive and dispose of solid waste. Thus, a type II solid waste landfill does not meet the definition of a "facility" found in sections 3703 and 3701(a) of Part 37, since it is not operated "primarily" for the purpose of reducing water pollution resulting from industrial waste.

This does not end our inquiry, however. In Covert Twp v State Tax Comm, supra, 407 Mich at pp 579-585, the Michigan Supreme Court considered similar provisions of the Air Exemption Act and concluded that, while the Palisades Nuclear Power Plant as an entity did not qualify for exemption, various component parts and systems of the power plant could qualify as tax exempt facilities under that act. Likewise, while a type II landfill cannot itself meet the definition of a "facility" for purposes of Part 37, it is possible that specific component parts of a type II landfill may meet that definition.

For example, one of the component systems of a modern type II landfill is a leachate collection system that is installed when a landfill unit is constructed. Leachate is defined in administrative rules promulgated under Part 115 of the NREPA, 1993 AACS, R 299.4103(s), as follows:

Thus, that portion of a type II solid waste landfill that is commonly called the leachate collection system may qualify for a tax exemption if it meets the requirements of Part 37 of the NREPA, i.e., it is operated "primarily" for the purpose of reducing water pollution resulting from industrial waste.

Whether a leachate system or other component of a particular type II landfill meets this standard is a question of fact. The role of the Attorney General is to issue opinions on questions of law, not fact. MCL 14.32; MSA 3.185; Michigan Beer & Wine Wholesalers Ass'n v Attorney General, 142 Mich App 294, 300-302; 370 NW2d 328 (1985), cert den 479 US 939; 107 S Ct 420; 93 L Ed 2d 371 (1986). These factual questions must be determined on a case-by-case basis through the administrative application and hearing process provided for by the Legislature in the NREPA. Under section 3702(1) of Part 37 of that act, a type II landfill may file an application with the State Tax Commission for a water pollution control tax exemption for its leachate collection system or other landfill component. Then, under section 3703 of Part 37 quoted above, it is up to the MDEQ to apply the requirements of Part 37 to the facts contained in the application and determine whether the tax exemption application should be granted. Section 3702(2) of Part 37 further provides that:

Finally, under section 3707 of Part 37, any party aggrieved by the decision of the State Tax Commission regarding the issuance of a tax exemption has the right to appeal the finding and order of the Commission in the manner provided by the Administrative Procedures Act of 1969, MCL 24.201 et seq; MSA 3.560(101) et seq.

It is my opinion, therefore, that type II solid waste landfills do not qualify for tax exemptions under Part 37 of the Natural Resources and Environmental Protection Act. It is my further opinion, however, that a specific component part or system contained within a type II landfill may be eligible for a tax exemption if the component part or system is used primarily for the purpose of reducing water pollution resulting from industrial waste and otherwise meets the criteria set forth in Part 37; the question of whether a specific component part or system of a landfill meets these requirements is a question of fact that must be determined on a case-by-case basis through the administrative application and hearing process provided for in Part 37 of the Natural Resources and Environmental Protection Act.

Frank J. Kelley

Attorney General