Bill Summary – FastDemocracy

Legislative Analysis
MODIFY INDUSTRIAL FACILITIES EXEMPTION PROGRAM                                  Phone: (517) 373-8080
                                                                                http://www.house.mi.gov/hfa
FOR CERTAIN WAREHOUSE OR DISTRIBUTION FACILITIES
                                                                                Analysis available at
Senate Bills 536 and 537 as reported from House committee                       http://www.legislature.mi.gov
Sponsor: Sen. Paul Wojno
House Bills 6211 and 6212 as reported
Sponsor: Rep. Kristian Grant
House Committee: Economic Development and Small Business
Senate Committee (SBs 536 and 537): Economic and Community Development
Complete to 12-11-24
SUMMARY:
        The bills would amend 1974 PA 198, known as the plant rehabilitation and industrial
        development act, to allow more buildings to qualify for a tax abatement for industrial property
        under the act.
        The plant rehabilitation and industrial development act allows local units of government to
        grant industrial facility exemption certificates 1 to new and speculative buildings and to
        replacement facilities that meet certain criteria. The certificate, generally speaking, grants a
        property tax abatement on a facility (but not the land) for up to 12 years, by allowing a firm to
        pay a lower specific tax instead of regular ad valorem property taxes. For a new facility, the
        specific tax is roughly one-half of the standard property tax. The tax for a rehabilitated facility
        is based on the value of the property prior to renovation. Approval is first required by a local
        unit of government and subsequently by the State Tax Commission, which checks to see if the
        law has been properly followed. The state treasurer can also allow the abatement of the state
        education tax.
        Local units cannot approve, and the State Tax Commission cannot grant, an industrial facilities
        exemption certificate for a speculative building unless it is or will be located in a duly
        established plant rehabilitation district or industrial development district, was constructed
        within nine years before the application for the certificate was filed and has not been occupied
        since construction was completed, and otherwise qualifies for the certificate.
        Senate Bill 537 would newly allow commercial property that is located in a county not adjacent
        to another state or Canada to qualify as industrial property eligible for an industrial facility
        exemption certificate under certain circumstances.
                The act defines industrial property as land improvements, buildings, structures, other
                real property, machinery, equipment, furniture, or fixtures, or any part or accessory,
                that have the primary purpose of and are used for one of several allowable activities,
                including qualified commercial activity.
1
  For more information on the exemption, see: https://www.michigan.gov/taxes/property/exemptions/industrial-
facilities/industrial-facilities-exemption.
House Fiscal Agency                                                                              Page 1 of 4
                  Currently, qualified commercial activity means commercial property 2 that occupies a
                  building or structure that is over 100,000 square feet in size and of which at least 90%
                  is used for warehousing, distribution, or logistical purposes and is located in a county
                  that borders another state or Canada, or of which at least 90% is used for a
                  communications center.
         The bill would remove the requirement that a property used for warehousing, distribution, or
         logistical purposes must be in a county bordering another state or Canada to qualify as qualified
         commercial activity and thus be considered industrial property eligible (if other applicable
         conditions are met) for an industrial facility exemption certificate.
         MCL 207.552
         Senate Bill 536 would expand the definition of a speculative building to include certain
         buildings to be constructed for warehousing or distribution facilities.
         Currently, a new building (including any machinery or fixtures inside of it) must generally
         meet the following criteria to qualify under the act as a speculative building:
            • The building is owned by a local governmental unit in which the building is located,
                approved as a speculative building by a governmental unit in which the building is
                located, or owned by a development organization 3 and located in the district of the
                development organization.
            • The building is constructed for the purpose of providing a manufacturing facility before
                a specific user for the building is identified.
            • The building does not qualify as a replacement facility.
         The bill would provide that a building constructed for a warehousing or distribution facility
         before a specific user is identified also qualifies as a speculative building if it otherwise meets
         the requirements listed above.
         MCL 207.553
         House Bill 6211 would add “warehousing or distribution” to provisions that describe the use
         or potential use of a speculative building and that now refer only to “manufacturing.” The bill
         could not take effect unless both Senate Bill 536 and House Bill 6212 were also enacted.
         MCL 207.565
2
  Commercial property means that term as defined in section 2 of the Obsolete Property Rehabilitation Act
(https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-125-2782). Generally, it means land improvements
and buildings that are classified as real property and are for the operation of a commercial business enterprise. It
includes facilities relating to a commercial business enterprise under the same ownership at that location (including
office, research, and warehousing activities) and a building or group of contiguous buildings that were previously used
for industrial purposes and will be converted to use for the operation of a commercial business enterprise, multiple-
unit dwelling, or mixed-use structure.
3
  The act defines development organization as any economic development corporation, downtown development
authority, or tax increment financing authority, or an organization created by and under the supervision of a local
governmental unit for economic development purposes.
House Fiscal Agency                              SBs 536 and 537 and HBs 6211 and 6212 as reported         Page 2 of 4
       House Bill 6212 would provide that the standard effective date of an industrial facilities
       exemption certificate for a speculative building or portion of a speculative building is the first
       December 31 after the date the certificate is issued.
       Currently, the effective date of the certificate for a speculative building or portion of a
       speculative building is the first December 31 after the date the speculative building or portion
       of a speculative building is used as a manufacturing facility.
       MCL 207.557
BRIEF DISCUSSION:
       Supporters of the bills argue that they would allow additional support for speculative
       development. Specifically, expanding the eligibility criteria to include warehouse and
       distribution facilities as proposed by Senate Bill 536 would incentivize a larger pool of
       businesses to redevelop vacant industrial sites in Michigan.
FISCAL IMPACT:
       The bills would reduce state and local property tax revenue by an unknown amount, subject to
       certain assumptions explained below. The overall revenue impact would depend on the
       number, location, value, and millage rates of newly eligible property under the bills. The
       revenue loss would be mitigated to the extent that the activity would not have occurred but for
       the changes prescribed in the bills. However, this cannot be determined with any certainty.
       As noted above, the tax exemption/abatement provided under the act depends on the
       characteristics of the property, mainly whether the facility is new or rehabilitated. If the
       property is rehabilitated, the industrial facilities tax (IFT) is levied at the same rate as the local
       property tax, but the taxable value remains the taxable value of the property before the
       rehabilitation, resulting in a 100% exemption from property taxes on the improvements. For a
       new facility, the IFT is 50% of the property tax rate applied to the taxable value of the new
       facility, and the six-mill state education tax (SET) may be reduced by 50% or 100% as provided
       under statute.
       Whatever version of IFT is levied (new or rehabilitated), the distribution of the IFT would be
       in the same proportion as the property tax collected if the IFT were not in place. However, the
       portion that would have gone to the intermediate school district (ISD) or school district without
       an industrial facility exemption certificate is distributed to the School Aid Fund (SAF) under
       the IFT. Since school operating mills would be redirected to the SAF, costs for the SAF would
       increase, assuming the foundation allowance was maintained so that the ISD or school district
       was held harmless. If the SET is reduced or eliminated on the property, the SAF would realize
       reduced revenues. Local units of government would realize reduced revenues due to the IFT
       abatement. As noted above, to the extent that the activity would not have occurred but for the
       bill, the overall fiscal impact would be mitigated, but this cannot be estimated with any
       certainty.
House Fiscal Agency                         SBs 536 and 537 and HBs 6211 and 6212 as reported     Page 3 of 4
POSITIONS:
       A representative of Warner Norcross + Judd testified in support of Senate Bills 536 and 537.
       (11-12-24)
       The Michigan Manufacturers Association indicated support for the bills. (12-3-24)
       Northpoint Development indicated support for Senate Bills 536 and 537. (11-12-24)
       The following entities indicated opposition to Senate Bills 536 and 537 (11-12-24):
          • Education Advocates of West Michigan
          • Michigan Alliance for Student Opportunity
          • Michigan Association of Intermediate School Administrators
          • Michigan Association of Secondary School Principals
          • Michigan Association of Superintendents and Administrators
                                                           Legislative Analyst: Holly Kuhn
                                                                Fiscal Analyst: Ben Gielczyk
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency                        SBs 536 and 537 and HBs 6211 and 6212 as reported   Page 4 of 4
Statutes affected: 
Senate Introduced Bill: 207.552
As Passed by the Senate: 207.552