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

JENNIFER M. GRANHOLM, ATTORNEY GENERAL


CONSTITUTIONAL LAW:

SCHOOLS AND SCHOOL DISTRICTS:

TAX EXEMPTION:

Homestead tax exemption as violating equal protection of law under state and federal constitutions

Section 1211(1) of the Revised School Code, which authorizes school districts to levy a maximum of 18 mills for school operating purposes but exempts homestead property from those levies, does not violate equal protection of law as guaranteed by Const 1963, art 1,  2, and US Const, Am XIV, when applied to owners of non-homestead, income-producing real property.


Opinion No. 7078

March 20, 2001


Honorable Thaddeus G. McCotter
State Senator
The Capitol
Lansing, MI 48909-7536


You have asked if section 1211(1) of the Revised School Code, which authorizes school districts to levy a maximum of 18 mills tax for school operating purposes but exempts homestead property from these levies, violates equal protection of law as guaranteed by Const 1963, art 1, 2, and US Const, Am XIV, when applied to owners of nonhomestead income-producing real property. One of your constituents has questioned why he pays substantially more property tax on his rental residence than on his own home, even though they are of similar value.

Until 1994, Const 1963, art 9, 3, commanded that "[t]he legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law." This uniformity requirement, earlier expressed in Const 1908, art 10, 3, meant that both the rate of taxation and the method of assessment had to be uniform within the territory to which the tax applied.
Huron-Clinton Metropolitan Authority v Bds of Supervisors of Five Counties, 304 Mich 328, 335-336; 8 NW2d 84 (1943).

In 1994, as part of a major change in financing public education, Michigan voters adopted Proposal A. That proposal, among other things, modified the first sentence of Const 1963, art 9, 3 (quoted above), by adding language that excepted from the uniformity requirement those taxes levied for school operating purposes.

The legislature shall provide for the uniform general ad valorem taxation of real and tangible personal property not exempt by law except for taxes levied for school operating purposes. [Emphasis added.]

The Legislature implemented this change in Const 1963, art 9, 3, by requiring the levy of a 6 mill state education tax on all property and by authorizing an additional levy of not more than 18 mills for school operating purposes, but only on nonhomestead property. See, respectively, section 3 of the State Education Tax Act, 1993 PA 331, MCL 211.901 et seq; MSA 7.557(31) et seq, and section 1211 of the Revised School Code, MCL 380.1 et seq; MSA 15.4001 et seq. See also OAG, 1995-1996, No 6911, pp 191, 193, n 3 (August 7, 1996).

In section 1211(1) of the Revised School Code, the Legislature authorized the levy of not more than 18 mills for school operating purposes on nonhomestead property as follows:

[T]he board of a school district shall levy not more than 18 mills for school operating purposes or the number of mills levied in 1993 for school operating purposes, whichever is less. A homestead and qualified agricultural property are exempt from the mills levied under this subsection except for the number of mills by which that exemption is reduced under this subsection. [Emphasis added.]

The term "homestead" is defined by section 1211d(a) of the Revised School Code, and by section 7dd of the General Property Tax Act, 1893 PA 206, MCL 211.1 et seq; MSA 7.1 et seq, as follows:

(a) "Homestead" means that portion of a dwelling or unit in a multiple-unit dwelling that is subject to ad valorem taxes and is owned and occupied as a principal residence by an owner of the dwelling or unit.

In Citizens for Uniform Taxation v Northport Public School Dist, 239 Mich App 284; 608 NW2d 480, lv den 462 Mich 899 (2000); cert den 121 S Ct 484; 148 L Ed 2d 457 (November 13, 2000), a group of Michigan citizens owning nonexempt property challenged the constitutionality of the homestead exemption on grounds, among others,1 that it violated the Equal Protection Clause of both the state and federal constitutions. Both the trial court and the Michigan Court of Appeals rejected these challenges. At p 290, the court upheld the homestead exemption found in section 1211(1) of the Revised School Code as follows:

We find that the distinction between homestead and nonhomestead property in 1211 is supported by a rational basis. We agree with the trial court that the Legislature’s interest in granting an exemption to homestead property is to protect and promote homestead property, see House Legislative Analysis, HB 5111 et al, March 1, 1994, which is a legitimate state interest. Moreover, decreasing the burden of property taxes on homesteads by granting an exemption from the property tax mills authorized under 1211 is certainly rationally related to that legitimate state interest. See Rubin, supra at 309, 416 A2d 382. The trial court properly found no equal protection violation.

This decision compels the conclusion that the homestead exemption from certain property taxes for school operating purposes, as authorized by Const 1963, art 9, 3, and implemented by section 1211(1) of the Revised School Code, is constitutional.

It is my opinion, therefore, that section 1211(1) of the Revised School Code, which authorizes school districts to levy a maximum of 18 mills for school operating purposes but exempts homestead property from those levies, does not violate equal protection of law as guaranteed by Const 1963, art 1, 2, and US Const, Am XIV, when applied to owners of nonhomestead, income-producing real property.




JENNIFER M. GRANHOLM
Attorney General

1 The Court of Appeals rejected plaintiff's claim that the homestead exemption violated the Privileges and Immunities Clause of the United States Constitution, US Const, art IV, 2, because the statutory exemption "does not distinguish between residents and nonresidents." Citizens for Uniform Taxation v Northport Public School Dist, supra, 239 Mich App at p 288.