STATE OF MICHIGAN

JENNIFER M. GRANHOLM, ATTORNEY GENERAL

Real property acquired for neighborhood or economic revitalization by a nonprofit organization possessing federal tax-exempt status under 26 USC 501(c)(3) is not, on those grounds alone, exempt from property tax under the state General Property Tax Act during the period of its rehabilitation and renovation.

Opinion No. 7089

August 28, 2001

You have asked whether real property acquired for neighborhood or economic revitalization by a nonprofit organization possessing federal tax-exempt status under 26 United States Code 501(c)(3) is exempt from property tax under the state General Property Tax Act during the period of its rehabilitation and renovation.

Under the state General Property Tax Act (GPTA), 1893 PA 206, MCL 211.1 et seq, all land, buildings, fixtures, and appurtenances¹ thereto are subject to annual property taxes, unless "expressly exempted." Section 2(1). The applicable rule stated in 2 Cooley on Taxation (4th ed), pp 1403-1404, has often been quoted with approval by Michigan appellate courts: "Exemptions from taxation 'must be expressed in clear and unmistakable terms . . . Exemptions are never presumed, the burden is on the claimant to establish clearly his right to exemption, and an alleged grant of exemption will be strictly construed and cannot be made out by inference or implication but must be beyond reasonable doubt.'" Detroit v Detroit Commercial College, 322 Mich 142, 149; 33 NW2d 737 (1948); Evanston YMCA Camp v State Tax Comm, 369 Mich 1, 8; 118 NW2d 818 (1962); American Concrete Institute v State Tax Comm, 12 Mich App 595, 606-607; 163 NW2d 508 (1968).

The GPTA provides several exemptions from taxation for property owned and operated by nonprofit organizations and for certain other structures and facilities. See generally, sections 7-7ff². A review of the GPTA, however, discloses no provision expressly or even impliedly exempting a nonprofit organization's lands and structures based solely on the fact that the property is being rehabilitated or renovated for neighborhood or economic revitalization.

Moreover, none of the GPTA's exemptions are conditioned upon the owner, who claims the exemption, possessing federal income tax-exempt status under 26 USC 501(c)(3)³. Indeed, the Michigan Court of Appeals has ruled that exemption from property taxes is not determinable by a tax-exempt status under 26 USC 501(c)(3). American Concrete Institute, supra. There the court stated that: "The Institute's exemption from Michigan ad valorem tax is not determinable by its qualification as an organization exempt from [federal] income tax under section 501(c)(3) of the internal revenue code of 1954, but by the much more strict provisions of the Michigan general property tax act . . . ." 12 Mich App at 606.

It is my opinion, therefore, that real property acquired for neighborhood or economic revitalization by a nonprofit organization possessing federal tax-exempt status under 26 USC 501(c)(3) is not, on those grounds alone, exempt from property tax under the state General Property Tax Act during the period of its rehabilitation and renovation.

The Legislature is, of course, free to amend the GPTA if it determines that a nonprofit organization's lands and structures should be eligible for a tax exemption while undergoing rehabilitation and renovation.

JENNIFER M.GRANHOLM
Attorney General