Property Tax Abatement (PA 198)
The Lansing Economic Development Corporation (LEDC) offers assistance in application for property tax abatement on manufacturing and/or high-technology related investment in Lansing. The tax abatement is available under Public Acts 198 of 1974, as amended, and 247 of 2000 for improvements to buildings and structures (real property), and the purchase of personal property such as machinery, equipment, furniture and fixtures, where the primary purpose and use is for manufacturing and/or high technology activity. High technology activities are defined as: advanced computing & materials, biotechnology, electronic device technology, engineering or laboratory testing, technology to assess or prevent human health or environmental threats, medical device technology, product research and development and advanced vehicles technology. Public Act 198 of 1974, as amended, is the primary tool to use as an incentive for companies to renovate and expand aging manufacturing plants or to build new plants.
Who is Eligible to Apply?
Eligible businesses include industrial plants that primarily manufacture or process goods or materials by physical or chemical change. Related facilities of manufacturers such as offices, engineering, research and development, warehousing or parts distribution are also eligible for exemption. Also added to the industrial property definition is qualified high-technology business activity as defined in the Michigan Economic Growth Authority (MEGA) Act: advanced computing, advanced materials, biotechnology, electronic device technology, engineering or laboratory testing, medical device technology, product research and development and advanced vehicles technology.
How Does It Work?
The local unit may, by resolution, exempt real and/or personal property for eligible businesses. The exemption applies to buildings, building improvements, machinery, equipment, furniture and fixtures. Real and personal property are eligible whether owned or leased (provided the lessee is liable for payment of taxes on the property). Instead of the property tax, the firm pays an Industrial Facilities Tax (IFT) that reflects the abatement savings. Industrial property tax abatements must be approved at both the local and state levels.
The exemption covers only the specific project that is the subject of the application. Any buildings and equipment that existed prior to construction of a new facility are not exempt. If the project is rehabilitation, the value of any preexisting obsolete property is exempt from ad valorem property taxes but will be used as the base for the IFT. Similarly, any structures or equipment added after completion of the project are fully taxable.
For speculative building applications, City Council must approve a resolution declaring a manufacturing facility a speculative building prior to the identification of prospective occupants in order to qualify for abatement. Initial construction and finishing costs would be eligible for a reduction in property taxes of about 50%.
Schools are generally not affected due to the school foundation grant. All or of the State 6 mills for education may be abated by the Michigan Economic Development Corporation (MEDC) if the project warrants.
What Is the Process?
The first step involves establishing the appropriate district: Industrial Development District for new or expanded industrial facilities. Only investments made after the establishment of a district will be considered eligible for a tax abatement certificate.
1. Application is reviewed by the Lansing Economic Development Corporation (LEDC) for completeness and errors.
2. Completed applications are presented by the LEDC to the City Clerk for transmittal to the Lansing City Council. The City Council refers the application to its Development & Planning Committee and to the Mayor.
3. The LEDC staff works with the Development and Planning Committee Chair to set a public hearing on the application request.
4. The LEDC and other City departments review the application to determine conformance with the requirements of Act 198 and with the policy considerations that have been set forth by the City Council. Review and comment is also solicited from all appropriate local agencies.
5. Prior to the public hearing a report recommending approval of the application is sent to the Mayor's office.
6. The applicant appears at the public hearing to give testimony regarding the need to establish a District.
7. The Development and Planning Committee considers the approval of the application, and a resolution to establish the District, and presents both items for Council's approval.
8. The Lansing City Council approves the application and a resolution to establish the District.
The application for Industrial Facilities Exemption Certificate should be filed after the Industrial Development and/or Plant Rehabilitation District has been established and no later than (within) six months after the commencement of the project. Applications received after Sept. 1st may not be approved and accepted by the State Tax Commission until the following tax year.
The application consists of two parts:
1. State Tax Commission Form 1012 (formerly L-4380) pursuant to P.A. 198 of 1974, as amended. Applicants should supply as much of the supporting documentation requested under "Instructions" on Form 1012 as possible. Missing documentation items may delay the application approval process.
2. A completed Workforce Utilization Form.
Why Offer an Industrial Property Tax Abatement?
1. To promote economic development.
2. To preserve current local tax base and provide for future tax revenue increases.
3. To attract new businesses.
4. To compete for jobs with other states and countries that has lower personal property taxes or none at all.
5. To reward a company who has been a good corporate citizen.
6. Annual salaries of the new and retained jobs flow into our community.
7. Other business factors may dictate where a company locates, but a tax abatement is one of the key considerations for a company to remain competitive, continue in business and maintain local employment.
Supporting Statute(s)
