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 - http://www.ag.state.mi.us)

STATE OF MICHIGAN

MIKE COX, ATTORNEY GENERAL

A county land bank fast track authority established under the Land Bank Fast Tract Act, 2003 PA 258, MCL 124.751, et seq, may acquire title to property from a private owner and reconvey that property to the same owner making that property exempt from ad valorem property taxes during the period that title is held by the county land bank fast track authority, and for the five-year period after it is reconveyed. For those tax consequences to attach, the county land bank fast track authority must obtain and reconvey actual title, with recognized indicia of ownership.

Opinion No. 7255

December 17, 2010

Honorable Chuck Moss
State Representative
The Capitol
Lansing, Michigan

You have asked whether a county land bank fast track authority (county land bank) acting under the Land Bank Fast Track Act, 2003 PA 258, MCL 124.751 et seq (Land Bank Act), may acquire property from a private owner, hold that property for a period of time, and then reconvey the property to the same owner, making that property exempt from ad valorem property taxes during the period that title is held by the county land bank, and for a five-year period after it is reconveyed.

The Land Bank Act addressed a "need to strengthen and revitalize the economy of this state and local units of government." MCL 124.752. The Legislature found that it was in the best interests of the State and local units of government to empower local units of government to assemble and dispose of property "in a coordinated manner to foster the development of that property and to promote economic growth." MCL 124.752.

To carry out these purposes, the Legislature created the Michigan Land Bank Fast Track Authority (State Authority) as a public body corporate within the Department of Energy, Labor and Economic Growth, and authorized the State Authority to enter into intergovernmental agreements with local units of government to create local land bank fast track authorities. MCL 124.765, MCL 124.773.¹

A local county land bank is a public body corporate, MCL 124.773(6)(a), created through an intergovernmental agreement between a county treasurer, acting as a foreclosing governmental unit under section 78(7)(a)(i) and (ii) of the General Property Tax Act, MCL 211.78(7)(a)(i) and (ii), and the State Authority with the approval of the county board of commissioners. If the county has an elected county executive, the concurrence of the county executive is also required. MCL 124.773(4). Subject to the terms of its intergovernmental agreement, a county land bank is authorized to acquire, assemble, dispose of, and quiet title to property in accordance with the Land Bank Act. MCL 124.754, MCL 124.757(1), and MCL 124.773.

Property purchased or acquired by a county land bank, along with its income and operations, "are exempt from all taxation by this state or any of its political subdivisions." MCL 124.754(5), MCL 124.763, and MCL 211.7gg(1). Because the taxable status of real property is determined on December 31 of the immediately preceding year, MCL 211.2(2), property held by a county land bank on December 31st remains exempt from taxes for the ensuing year,² even if the property is conveyed to a private party during that year. However, any property conveyed is still subject to MCL 211.181(1), which provides:

Except as provided in this section, if real property exempt for any reason from ad valorem property taxation is leased, loaned, or otherwise made available to and used by a private individual, association, or corporation in connection with a business conducted for profit, the lessee or user of the real property is subject to taxation in the same amount and to the same extent as though the lessee or user owned the real property.

Additionally, when a county land bank sells or otherwise conveys property, that property becomes exempt from taxation under the General Property Tax Act, "beginning on December 31 in the year in which the property is sold or otherwise conveyed by the land bank fast track authority until December 31 in the year 5 years after the December 31 on which" that exemption commenced. MCL 211.7gg(2). During that five-year time period, however, the property "is subject to the specific tax levied under the tax reverted property clean title act." MCL 211.7gg(4).

Under the Tax Reverted Clean Title Act, MCL 211.1021 et seq, the alternative tax is the same amount of tax that would have been collected under the General Property Tax Act, payable at the same time, in the same installments, and to the same officers as taxes imposed under the General Property Tax Act. MCL 211.1025(2). During that five-year period, fifty percent of that tax is payable to the local taxing units, and fifty percent is payable to the county land bank, as provided in the Tax Reverted Clean Title Act. MCL 211.1025(4)(a) and (b).

Returning to your question, you ask whether a county land bank may acquire property from a private owner, hold that property for a period of time, and then reconvey the property to the same owner, making that property exempt from ad valorem property taxes during the period that title is held by the county land bank, and for a five-year period after it is reconveyed.

As a county agency, a county land bank draws its legal life from the law authorizing its creation. As a creature of the Legislature, it has no power save that which has been conferred by law. Arrowhead Development Co v Livingston County Rd Comm, 413 Mich 505, 512; 322 NW2d 702 (1982). In construing the statutory powers of such an agency, the primary goal is to determine and give effect to the intent of the Legislature. If the statute is unambiguous, the plain and ordinary meaning of its words reveals the intent of the Legislature. Herald Co v Bay City, 463 Mich 111, 117; 614 NW2d 873 (2000). The Legislature is presumed to have intended the meaning those words plainly express. DiBenedetto v West Shore Hosp, 461 Mich 394, 402; 605 NW2d 300 (2000).

The Legislature has given specific direction for interpreting the powers of a county land bank under the Land Bank Act. Thus, section 14(1), MCL 124.764(1), directs that the Act is to be construed liberally to effectuate legislative intent and all powers granted shall be broadly interpreted to effectuate the intent and purposes:

This act shall be construed liberally to effectuate the legislative intent and the purposes as complete and independent authorization for the performance of each and every act and thing authorized by this act, and all powers granted shall be broadly interpreted to effectuate the intent and purposes and not as a limitation of powers. In the exercise of its powers and duties under this act and its powers relating to property held by the authority, the authority shall have complete control as fully and completely as if it represented a private property owner and shall not be subject to restrictions imposed on the authority by the charter, ordinances, or resolutions of a local unit of government. [Emphasis added.]³

The Land Bank Act expressly authorizes a county land bank to acquire property on terms and conditions that it considers proper for any purpose the land bank considers necessary⁴ to carry out the purposes of the Act:

(1) Except as provided in section 4(8), an authority may acquire by gift, devise, transfer, exchange, foreclosure, purchase, or otherwise on terms and conditions and in a manner the authority considers proper, real or personal property, or rights or interests in real or personal property.

(2) Real property acquired by an authority by purchase may be by purchase contract, lease purchase agreement, installment sales contract, land contract, or otherwise, except as provided in section 4(8). The authority may acquire real property or rights or interests in real property for any purpose the authority considers necessary to carry out the purposes of this act, including, but not limited to, 1 or more of the following purposes:

(a) The use or development of property the authority has otherwise acquired.

(b) To facilitate the assembly of property for sale or lease to any other public or private person, including, but not limited to, a nonprofit or for profit corporation.

(c) To protect or prevent the extinguishing of any lien, including a tax lien, held by the authority or imposed upon property held by the authority. [MCL 124.755(1)-(2); emphasis added.]

Property may be acquired or held by a county land bank from the "state, a foreclosing governmental unit, a local unit of government, an intergovernmental entity . . . or any other public or private person . . . ." MCL 124.755(4).

A county land bank is similarly authorized to dispose of property it has acquired or holds on terms and conditions it considers proper, except as otherwise restricted or provided for by agreement⁵:

Except as an authority otherwise agrees by intergovernmental agreement or otherwise, on terms and conditions, and in a manner and for an amount of consideration an authority considers proper, fair, and valuable, including for no monetary consideration, the authority may convey, sell, transfer, exchange, lease as lessor, or otherwise dispose of property or rights or interests in property in which the authority holds a legal interest to any public or private person for value determined by the authority. [MCL 124.757(1); emphasis added.]

Under section 4 of the Land Bank Act, a county land bank may do all things necessary or convenient to implement the purposes, objectives, and provisions of this act. MCL 124.754. Numerous express powers are specified, including the following:

(1) Except as otherwise provided in this act, an authority may do all things necessary or convenient to implement the purposes, objectives, and provisions of this act, and the purposes, objectives, and powers delegated to the board of directors of an authority by other laws or executive orders, including, but not limited to, all of the following:

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(d) Enter into contracts and other instruments necessary, incidental, or convenient to the performance of its duties and the exercise of its powers, including, but not limited to, interlocal agreements under the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, for the joint exercise of powers under this act. [Emphasis added.]

The purposes of the Land Bank Act are stated in its title, in part as, "to facilitate the use and development of certain property; [and] to promote economic growth." Section 2 explains the purpose of creating and empowering a county land bank under the Act, beginning with finding the need to strengthen and revitalize the economy and determining it to be in the public interest to assemble and dispose of property to foster the development of that property and to promote economic growth:

The legislature finds that there exists in this state a continuing need to strengthen and revitalize the economy of this state and local units of government in this state and that it is in the best interests of this state and local units of government in this state to assemble or dispose of public property, including tax reverted property, in a coordinated manner to foster the development of that property and to promote economic growth in this state and local units of government in this state. It is declared to be a valid public purpose for a land bank fast track authority created under this act to acquire, assemble, dispose of, and quiet title to property under this act. It is further declared to be a valid public purpose for a land bank fast track authority created under this act to provide for the financing of the acquisition, assembly, disposition, and quieting of title to property, and for a land bank fast track authority to exercise other powers granted to a land bank fast track authority under this act. The legislature finds that a land bank fast track authority created under this act and powers conferred by this act constitute a necessary program and serve a necessary public purpose. [MCL 124.752; emphasis added.]

Under these various and broad statutory provisions, a county land bank is authorized to enter into an agreement to acquire real property from a private owner under terms and conditions the land bank considers necessary or appropriate. Since there are no restrictions regarding to whom a county land bank may dispose of or convey its real property, the property may be conveyed back to the original owner in a manner and for an amount of consideration the land bank considers proper.

The Legislature, however, has provided that if the property is acquired by the land bank before, and reconveyed after, December 31, that property is exempt from ad valorem taxation while title is held by the land bank, and for the year in which it is reconveyed. To secure these tax consequences, it is important to ensure that the transaction between the county land bank and the owner is in fact a conveyance, and not a sham transaction for purposes of avoiding taxation.

MCL 124.763 provides:

Property of an authority is public property devoted to an essential public and governmental function and purpose. Income of the authority is considered to be for a public and governmental purpose. The property of the authority and its income and operation are exempt from all taxes and special assessments of this state or a local unit of government of this state. [Emphasis added.]

This section is implemented in the General Property Tax Act by MCL 211.7gg, which states "[p]roperty, the title to which is held by a land bank fast track authority under the land bank fast track act, is exempt from the collection of taxes under this act." (Emphasis added.) Reading these sections together, a county land bank must acquire property and hold title to it in order for the property to become tax exempt.

Neither the Land Bank Act nor the General Property Tax Act defines the words "acquire" and "title." Where words are not defined in a statute, they must be construed and understood according to the common and approved usage of the language. MCL 8.3a. To determine that meaning, it is appropriate to consult dictionary definitions. Title Office, Inc v Van Buren County Treasurer, 469 Mich 516, 522-523; 676 NW2d 207 (2004). While a lay dictionary may be consulted to define a common word or phrase that lacks a unique legal meaning; "a legal term of art . . . must be construed in accordance with its peculiar and appropriate legal meaning." Brackett v Focus Hope, Inc, 482 Mich 269, 276; 753 NW2d 207 (2008).

The word "acquire" has not developed a unique legal meaning, and may be accorded its common meaning: "to get or gain by one's own efforts or actions . . . to come to have as one's own; get possession of." Webster's New World Dictionary, Third College Edition (1988). The term "title," however, has a unique legal meaning when used in reference to real property. Black's Law Dictionary (8th ed) p 1522, defines "title" generally as:

The union of all elements (as ownership, possession, and custody) constituting the legal right to control and dispose of property; the legal link between a person who owns property and the property itself . . . Legal evidence of a person's ownership rights in property; an instrument (such as a deed) that constitutes such evidence. [Emphasis added.]

The concept of "title" is fluid, and there are various permutations of what constitutes "title." See 63C Am Jur 2d, Property, § 25. Whether a county land bank acquires title to property will depend upon the terms of a particular transaction. However, under any transaction, the land bank must acquire the traditional incidents of title such as possession, use, and control. Thus, the terms of the transaction must evidence the intent to actually convey and acquire the property. For example, an agreement that allows the original owner of the property to retain control and responsibility over the property, and prohibits the county land bank from selling or transferring any rights, title, or interest in the property to a third party, would not result in a conveyance of title to the land bank.

The Michigan Supreme Court has recognized that a purported conveyance of property that does not also convey elements of possession and control over the property is insufficient to establish the right to a tax exemption. In H M Loud & Sons Lumber Co v Elmer Twp, 123 Mich 61; 81 NW 965 (1900), the original property owner conveyed property to a person to render the property tax exempt, but retained the right to possess and control the property, including the ability to use it for timber production and to control any subsequent sale. The township refused to assess the property taxes to the new owner, which would have resulted in no taxes being owed, and instead assessed the taxes to the original owner. The original owner paid the taxes under protest and filed suit to recover the monies paid. Ruling that the original owner remained liable for the taxes, the Court held that the deed "was a mere subterfuge, and made for the very purpose of escaping taxation."⁶ H M Loud, 123 Mich at 66. Also instructive is Gray v Finn, 96 Mich 62, 64; 55 NW 615 (1893), where the Court found that, when personal property is transferred but the original owner retained possession of the property and received no consideration, it was a "pretended sale" for the purpose of defeating the collection of the tax.

This is consistent with the law regarding tax exemptions as well. Exemptions must first be conferred by the Legislature before another unit of government may exempt property from taxation. See OAG, 1977-1978, No 5277, p 385 (March 13, 1978), quoting 2 Cooley, The Law of Taxation (4th ed), § 670, p 1398. Similarly, a person seeking exemption from taxation under the laws of the State of Michigan must establish that the law unambiguously provides for an exemption, and that the person falls within the provisions affording such an exemption. In re Smith Estate, 343 Mich 291, 297; 72 NW2d 287 (1955). And in reviewing particular tax exemptions, the Michigan Courts "narrowly" construe such statutes "because tax exemptions upset the desirable balance achieved by equal taxation." Wexford Med Group v City of Cadillac, 474 Mich 192, 204; 713 NW2d 734 (2006) (citations omitted).

Based on these precedents, the terms of any agreement between a county land bank and a property owner must demonstrate that the land bank is acquiring title to the property, and not engaging in a sham transaction. Otherwise the transaction will fail to render the property tax exempt under MCL 124.763 and MCL 211.7gg(1) because title to the property is not actually acquired by the county land bank.

This is significant because if the county land bank does not acquire title to the property at the acquisition stage, the property will not be eligible for the five-year exemption from general taxation upon its disposition by the land bank.

MCL 211.7gg provides, in part:

(1) Property, the title to which is held by a land bank fast track authority under the land bank fast track act, is exempt from the collection of taxes under this act.

(2) . . . [R]eal property sold or otherwise conveyed by a land bank fast track authority under the land bank fast track act is exempt from the collection of taxes under this act beginning on December 31 in the year in which the property is sold or otherwise conveyed by the land bank fast track authority until December 31 in the year 5 years after the December 31 on which the exemption was initially granted under this subsection.

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(4) Property exempt from the collection of taxes under subsection (2) is subject to the specific tax levied under the tax reverted property clean title act. [Emphasis added.]

As noted previously, under the Tax Reverted Clean Title Act, fifty percent of the eligible tax reverted property specific tax is disbursed to the county land bank that sold or otherwise conveyed the property under the Land Bank Act. MCL 211.1025(4)(b). The county land bank may then use those funds for the purposes authorized under the land bank act or to repay a loan. MCL 211.1025(4)(b)(i) and (ii).


Under subsection 7gg(2), the five-year exemption from taxation under the General Property Tax Act only operates if title to the property is first held by the county land bank. MCL 211.7gg(2). The conveyance of title to the county land bank must transfer the recognized indicia of property ownership and must not be a sham transaction for purposes of avoiding taxation.

It is my opinion, therefore, that a county land bank fast track authority established under the Land Bank Fast Track Act, 2003 PA 258, MCL 124.751 et seq, may acquire title to property from a private owner and reconvey that property to the same owner making that property exempt from ad valorem property taxes during the period that title is held by the county land bank fast track authority, and for the five-year period after it is reconveyed. For those tax consequences to attach, the county land bank fast track authority must obtain and reconvey actual title, with recognized indicia of ownership.

MIKE COX
Attorney General

¹   An intergovernmental agreement is a contract between governmental agencies. It includes interlocal agreements under the Urban Cooperation Act, MCL 124.501 et seq, to jointly exercise any power, privilege, or authority that the agencies share in common and that each might exercise separately. MCL 124.753(h).

²   "The taxable status of persons and real and personal property for a tax year shall be determined as of each December 31 of the immediately preceding year . . . ." MCL 211.2(2).

³   Under the Land Bank Act, the term "authority" means a county land bank fast track authority. MCL 124.753(a).

⁴  A county land bank's power to acquire property is not without restriction. It cannot exercise the power of eminent domain. MCL 124.754(8). And it is not authorized to accept "a deed in lieu of foreclosure or sale of the tax lien attributable to taxes levied by a local unit of government or other taxing jurisdiction without the written approval of all taxing jurisdictions and the foreclosing governmental unit that would be affected." MCL 124.756(4). The intergovernmental agreement may further constrain a county land bank's discretion. MCL 124.773(4) and (6).

⁵  As with its power to acquire real property, a county land bank's power to dispose of property is not without restriction. For example, it may not assist or expend any funds for the development of a casino. MCL 124.754(6). It may not convey certain contaminated property until the Michigan Department of Natural Resources and Environment (formerly Department of Environmental Quality) has determined that the acute threat to public health, safety, welfare, or environment has been eliminated and that conveyance will not interfere with any response activities by the department. MCL 124.757(1). The disposition of property by a county land bank may also be limited by the terms of its intergovernmental agreement. Consistent with the Land Bank Act, the terms of an intergovernmental agreement shall provide, for example, for the "distribution of proceeds" received by a county land bank and "[a]ny other matters considered advisable by the participating governmental agencies." MCL 124.773(6)(f) and (h).

⁶   H M Loud is currently cited by the treatise Michigan Law & Practice, 30 Michigan Law & Practice 2d, Taxation, § 46, for the principle "[t]he courts will frown on a conveyance designed to evade taxation where it is a mere subterfuge, and in such a case it will be ineffective."