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 passed by the Senate http://www.legislature.mi.gov
Sponsor: Sen. Paul Wojno
House Bills 6211 and 6212 as introduced
Sponsor: Rep. Kristian Grant
House Committee: Economic Development and Small Business
Senate Committee (SBs 536 and 537): Economic and Community Development
Complete to 12-2-24
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 3
 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 Page 2 of 3
 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.
The bill could not take effect unless both Senate Bill 536 and House Bill 6212 were also
enacted.
MCL 207.557
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.
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 Page 3 of 3


Statutes affected:
Senate Introduced Bill: 207.552
As Passed by the Senate: 207.552