ELIGIBLE BROADBAND EQUIPMEN; TAX EXEMPT                                                                         H.B. 4210 (H-1):

                                                                                                                                                                                                      SUMMARY OF BILL

                                                                                                                                                                        REPORTED FROM COMMITTEE

House Bill 4210 (Substitute H-1 as reported without amendment)

Sponsor:   Representative Beth Griffin

House Committee:   Communications and Technology

Senate Committee:   Energy and Technology

CONTENT

The bill would amend Public Act 282 of 1905, which provides for the assessment of property owned, operated, or conducted by certain companies, to exempt from taxation under the Act eligible broadband equipment that was exempt from the collection of general ad valorem property taxes under the General Property Tax Act.

The bill is tie-barred to Senate Bill 46, which would amend the General Property Tax Act to exempt from the collection of taxes under the Act certain eligible broadband equipment.

Proposed MCL 207.5c                                                                                             Legislative Analyst:   Tyler VanHuyse

FISCAL IMPACT

The bill would reduce property tax revenue to the State by an unknown magnitude that would depend on the specific characteristics of equipment exempted by the bill and the businesses that owned the equipment. The exemption would apply only to eligible broadband equipment first installed or used after December 31, 2020, so while any revenue loss could be foregone revenue, over time exempted property could include property that replaced existing personal property currently being taxed. The exemption would reduce State-assessed property tax revenue, which is deposited into the General Fund.

The bill uses definitions and an exemption provided under Section 9p of the General Property Tax Act; that section would be added by Senate Bill 46, to which the bill is tie-barred. However, Senate Bill 46 contains language that could result in administrative issues that ultimately could affect the amount of revenue loss. As identified in the analysis for Senate Bill 46, while "lack of broadband service" is defined, it does not define the conditions to be met for equipment to have been considered to "resolve" a lack of service. Given that broadband services can be delivered through various media, including satellite services, fiber-optic cable, DSL connections, wireless connections (including through cell phones), and broadband over powerlines, it may be difficult for taxpayers and assessors to know if an area lacks broadband service or if the area simply lacks any service of a particular medium. Furthermore, it is unclear if the definition would consider a location that did have broadband access under one medium to "lack" broadband service if broadband service were available through a different medium. Finally, to the extent that broadband access involves networked equipment, the definitions would appear to allow new equipment placed in areas that currently have broadband service as long as the equipment was part of a network that expanded to offer service in an area that lacked service.

Certain market demographics could limit the revenue reduction comprised of forgone revenue (i.e. taxes that otherwise would have been levied on equipment that would not have been placed into service absent the bill). Over the last 20 years, Michigan has pursued a variety of options to create an incentive for or subsidize broadband deployment into underserved areas of the State. Additionally, multiple Federal programs seek to expand broadband access into underserved areas. One factor that hampers these efforts is the lack of a significant market for broadband services in certain locations. In some locations, connectivity has existed at various times but was terminated because it was not commercially viable.

To be eligible for an exemption, eligible equip