Mich. House OKs Retooled Property Tax Relief Bill After Veto

By Paul Williams
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Law360 (July 23, 2020, 5:37 PM EDT) -- Michigan's House of Representatives has passed a bill that would allow municipalities to defer property tax payments until next year due to the COVID-19 pandemic, believing the measure cures constitutional concerns the governor raised in vetoing similar legislation.

The House passed S.B. 943 on Wednesday by a 57-47 vote that was mostly along party lines, with all of the chamber's Republicans supporting the legislation. The bill would allow property owners who have experienced economic hardships from the pandemic to apply for a payment deferral of summer 2020 property taxes — those levied in 2020 that become a lien before Dec. 1 — until Feb. 15, 2021. Certain utility properties would be ineligible to seek a deferral.

The bill will return to the Senate, as the House removed provisions from the legislation requiring counties to finance advance payments to their cities and towns that matched the amount of deferred property taxes. In vetoing similar property tax relief bills on July 8, Democratic Gov. Gretchen Whitmer said such provisions could run afoul of certain state constitutional provisions limiting the government's ability to borrow money.

After Whitmer's office had communicated its objections about the previous property tax bills to the sponsor of the vetoed measures, Rep. James Lower, R-Cedar Lake, lawmakers began crafting S.B. 943 as a vehicle to pass a retooled version of a property tax relief measure that the governor could support.

In a statement Wednesday, Lower said it's imperative for the state to reach a compromise and extend property tax relief to those affected by the novel coronavirus, which causes the respiratory illness COVID-19. The bill would also allow property owners affected by flooding caused by dam failures in May to seek a deferral.

"While we disagree on the alleged issues with the prior bill, the Legislature nevertheless removed the provisions the governor pointed to in her veto letter," Lower said. "It's impossible to overstate how important this legislation is to the people of the state of Michigan."

Tiffany Brown, a Whitmer spokeswoman, told Law360 on Thursday that she had no comment on the bill.

The Michigan Municipal League, which advocates for legislation on behalf of local governments, meanwhile, has raised several objections to the bill, including its lack of a mechanism for municipalities to backfill their coffers while the property tax payments are deferred.

Chris Hackbarth, the league's director of state and federal affairs, told Law360 on Thursday that the organization had been negotiating with lawmakers about finding a temporary funding provision for localities that wouldn't trip the constitutional concerns that Whitmer raised in the previous bills. However, he said the version of S.B. 943 that the House passed doesn't include any safeguards for municipalities' cash flow.

"We don't want our small businesses to have liquidity issues," Hackbarth said of providing property tax relief during the pandemic. "But we can't do it by strangling the local government itself and the services that they are providing."

Additionally, Hackbarth said the bill raises some uniformity issues because municipalities have discretion to grant or deny the deferrals, meaning that individuals and businesses that own properties in multiple towns could be granted deferrals in some municipalities but not others.

In a blog post on Thursday, Hackbarth also said the timing of the bill could make its proposed deferral program difficult to administer, as many localities' property taxes are due July 31.

The Senate did not vote on the legislation on Thursday. Denny Schwarze, a spokesman for Lower, told Law360 on Thursday that he was unsure when the Senate may take up the measure.

The offices of Senate Majority Leader Mike Shirkey, R-Clarklake, and the bill's primary sponsor, Sen. Peter MacGregor, R-Rockford, did not respond to requests for comment on Thursday.

The office of House Democratic Leader Christine Greig, D-Farmington Hills, who voted against the bill, also did not respond to requests for comment on Thursday.

--Editing by Joyce Laskowski. 

For a reprint of this article, please contact reprints@law360.com.

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