Neighborhood Enterprise Zones
Neighborhood Enterprise Zone (NEZ)
Public Act 147 of 1992, as amended and authorized by the State of Michigan, allows specific local governments to enact Neighborhood Enterprise Zones (NEZs). The City of Lansing has approved the designation of NEZ areas within the City as Neighborhood Enterprise Zones (NEZs). The purpose of establishing NEZs in Lansing is to promote home ownership and investment in areas where the greatest impact would occur and where such improvements may trigger additional investment in adjacent neighborhoods. The benefit of the NEZ Program to property owners in these areas results in lower property taxes.
Who Is Eligible to Apply?
Residential property owners and landlords.
How Does It Work?
The taxes on property are reduced for 12 years in designated areas to promote the revitalization of those neighborhoods. Developers and owners must first seek approval for the NEZ benefits before starting a project.
There are two different types of projects that can be undertaken in an NEZ:
A rehabilitated facility is defined as an existing structure or a portion of an existing structure with a current true cash value of $80,000 or less per unit that has or will have as its primary purpose residential housing consisting of 1–8 units.
A new facility is defined as a new structure or portion of a new structure that has as its primary purpose residential housing consisting of one or two units, one of which will be owner occupied as a principal residence. This definition includes a new individual condominium unit, in a structure with one or more condominium units, that has as its primary purpose residential housing which will be owner-occupied as a principal residence. This definition does not include apartments.
What Is the Process?
PROCESS TO DESIGNATE A NEZ
1. The Lansing City Council by resolution may designate one or more NEZs Districts. The NEZ must contain, at a minimum, platted parcels of land and the land must be compact and contiguous. The NEZ total acreage cannot exceed 15%.
2. Written notice must be provided to the assessor and to the governing body of each taxing unit not less than 60 days before passing the resolution designating a NEZ.
3. Must make a finding that the proposed NEZ is consistent with the master plan, neighborhood preservation and economic development goals of the local governmental unit.
4. Adopt a statement of the City's goals, objectives and policies relative to the maintenance, preservation, improvement and development of housing for all persons regardless of income level living within the proposed NEZ.
5. Pass a housing inspection ordinance that, at a minimum, requires that before the sale of a unit in a new or rehabilitated facility for which a NEZ certificate is in effect, an inspection is made of the unit to determine compliance with any local construction or safety codes and that a sale may not be finalized until there is compliance with those local codes.
6. A public hearing is held not later than 45 days after the date the notice is sent but before acting upon resolution.
7. Assessor determines and furnishes the governing body the amount of true cash value of the property located within the proposed NEZ and any other information considered necessary by the governing body.
8. The clerk of the governing body notifies the state tax commission of resolution passage, including a copy of the resolution and a listing of each parcel located in the NEZ, showing parcel code numbers and addresses.
OWNER/DEVELOPER PROCESS FOR OBTAINING A NEZ CERTIFICATE
1. An owner or developer (or prospective owner or developer) of a proposed new facility or proposing to rehab property in a NEZ files an application for an NEZ certificate with the City Clerk. The application must be filed before a building permit is issued for the new construction or rehabilitation of the facility.
2. An owner/developer obtains a building permit and submits a copy to the Lansing EDC.
3. The Lansing EDC will forward an application approved by resolution and the appropriate documentation (building permit, resolution contractor estimates, legal description and parcel number) to the State Tax Commission within 60 days of receiving it.
4. Upon project completion, the property owner must submit to the Lansing EDC the following: New Facility-certificate of occupancy and an affidavit executed by the owner affirming that the facility is occupied by the owner as a principal residence. Rehabilitated Facility-an affidavit executed by the owner affirming that the facility is occupied by the owner as a principal residence, a certificate that the improvements have met the minimum cost requirements and the local building code standards issued by the local building inspector, and a certificate of occupancy if required by the local building permits or codes.
5. The Lansing EDC will then forward the documentation to the State Tax Commission.
6. The State Tax Commission will issue a certificate to the applicant if it is determined that the facility complies with the NEZ program requirements. Copies of the certificate will be sent to the applicant, assessor's office and each affected taxing unit.
REHABILITATION COST REQUIREMENTS
1. Improvements, if done by a licensed contractor, are estimated at more than $5,000 per owner-occupied unit or 50% of the true cash value (whichever is less), or $7,500 per non-owner-occupied unit or 50% of the true cash value (whichever is less).
2. If the owner proposes improvements that would be done by the owner, the cost of the materials must be in excess of $3,000 per owner-occupied unit or $4,500 per non-owner-occupied unit. Improvements estimated by the owner should not include the cost of labor.
3. These improvements must bring the structure into conformance with minimum building code standards. A rehabilitated facility does not include a facility rehabilitated with the proceeds of an insurance policy for property or casualty loss.
1. The NEZ certificate becomes effective December 31 of the year the new facility or rehabilitated facility is substantially completed and for a new facility occupied by an owner as a principal residence. OR-If a new facility is substantially completed in a year but is not occupied by an owner as a principal residence until the following year, upon the request of the owner, the effective date of the NEZ shall be December 31 in the year immediately preceding the date of occupancy by the owner as a principal resident. OR-Upon the request of the owner, the effective date of the NEZ for a rehabilitated facility shall be December 31 in the year immediately preceding the date on which the rehabilitated facility is substantially completed.
2. Certificates are effective for 12 years.
3. A certificate can be transferred to succeeding property owners within the 12 years provided that the new owner meets the NEZ requirements for the program.
4. A certificate expires if an owner fails to complete the filing within two years after the certificate is issued.
5. A certificate is automatically revoked if any one of the following exists:
The new facility is no longer a homestead or residential facility.
The NEZ tax is not paid or property tax is not paid.
If the state tax commission is notified that the structure is not in compliance with local construction, building or safety codes.
6. Requests for certificate revocation must be made to the State Tax Commission.
1. The NEZ tax is levied on NEZ certificate holders in place of ad valorem real property taxes on the new or rehabilitated facility (not on the land on which the facility is located). The property taxes levied on the land will continue to be collected as they would without the NEZ designation.
2. The NEZ tax is an annual tax payable at the same time, and in the same way, taxes under the general property tax act are collected.
3. Until paid, the NEZ tax is a lien on the real property upon which the new facility or rehabilitated facility subject to the certificate is located.
4. School taxes are reimbursed by the state.
NEW FACILITY PROPERTY TAX CALCULATION
Financial Residence Property-Apply one-half of the previous year's state average principal residence millage rate to the value of the facility.
Non-Principal Residence Property-Apply one-half of the previous year's state average non-principal residence millage rate to the taxable value of the facility.
The NEZ tax on new construction attached to an existing facility will only apply to the addition. The rest of the facility will continue to be assessed regular property taxes.
REHABILITATED FACILITY TAX CALCULATION
Apply the current total millage rate to the previous year's taxable value of the rehabilitated portion of the facility (not including the land).
A Neighborhood Enterprise Zone provides a tax incentive for the development and rehabilitation of residential housing and to spur the development and rehabilitation of residential housing in communities where it may not otherwise occur. A NEZ also promotes neighborhood revitalization, encourages owner occupied housing and new investment by lowering property taxes.
Supporting Documents and Examples
Treasury Form 2704 - Application for Neighborhood Enterprise Zone Certificate (.pdf)
Neighborhood Enterprize Zone Tax Abatement Process (.pdf)
Steps to Designate Neighborhood Enterprise Zones (page not found on site)