Bill Summary – FastDemocracy

Legislative Analysis
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LOCAL GOVERNMENT REIMBURSEMENT FUND
                                                                                 http://www.house.mi.gov/hfa
House Bill 4553 as reported from committee
                                                                                 Analysis available at
Sponsor: Rep. John Fitzgerald                                                    http://www.legislature.mi.gov
House Bill 4554 (H-1) as reported from committee
Sponsor: Rep. Denise Mentzer
Committee: Tax Policy
Revised 10-3-23                                            (Enacted as Public Acts 174 and 175 of 2023)
SUMMARY:
           House Bills 4553 and 4554 would amend different acts to create the Local Government
           Reimbursement Fund and provide for the deposit of use tax revenue in the fund. The fund
           would be used to reimburse municipalities for changes to the small business personal property
           tax exemption proposed by Senate Bill 331. 1
           House Bill 4553 would amend the Michigan Trust Fund Act to create the Local Government
           Reimbursement Fund in the state treasury. The state treasurer would deposit money and assets
           received under the amendments to the Use Tax Act proposed by House Bill 4554 or from any
           other source. The investment of the fund would be directed by the state treasurer, and interest
           and earnings from those investments would be credited to the fund. Money would not lapse to
           the general fund at the close of the fiscal year.
           The Department of Treasury would expend money from the fund, upon appropriation, only to
           compensate municipalities on or before May 31 annually, beginning in 2024, for revenue lost
           during the immediately preceding property tax year as a result of exemptions claimed under
           changes to the General Property Tax Act proposed by Senate Bill 331. If the money if the fund
           were insufficient to fully compensate all municipalities for the lost revenue, the payments
           would be prorated among the municipalities.
                   Municipalities would include, but not be limited to, counties, cities, villages,
                   townships, local authorities, local school districts, intermediate school districts,
                   community college districts, libraries, tax increment finance authorities, and other local
                   and intergovernmental taxing units.
           MCL 12.252 and proposed MCL 12.253a
           House Bill 4554 would amend the Use Tax Act to require $75.0 million in use tax revenue to
           be deposited into the Local Government Reimbursement Fund each fiscal year beginning with
           the fiscal year ending September 30, 2024.
           MCL 205.111
           The bills are tie-barred to each other and to Senate Bill 331, which means that none of them
           can take effect unless all three are enacted.
1
    http://legislature.mi.gov/doc.aspx?2023-SB-0331
House Fiscal Agency                                                                               Page 1 of 2
BACKGROUND:
           Taken with Senate Bill 331, the bills are identical to Senate Bills 1060, 1061, and 1062 of the
           2021-22 legislative session. 2 Those bills were passed by the Senate but did not advance further.
           According to committee testimony, 2021 PA 150 (HB 5351), which increased the ceiling to be
           eligible for the small business personal property tax exemption from $80,000 to $180,000
           beginning December 31, 2022, was enacted with the understanding that the state would
           reimburse local governments for the revenue losses that resulted. The bills would provide a
           mechanism and the funding for this reimbursement.
           The House Tax Policy Committee referred House Bill 4554 with an H-1substitute that makes
           no substantive changes but updates the section of law being amended to include changes made
           to that section by a recent amendatory act (2023 PA 21). 3 Without this conflict substitute, the
           bill would overwrite Public Act 21 and undo the changes it made.
FISCAL IMPACT:
           As written, the bills would reduce use tax revenue accruing to the general fund by $75.0 million
           and transfer that amount to the Local Government Reimbursement Fund, which will be used
           to reimburse local governments for losses resulting from increasing the small taxpayer
           exemption threshold from $80,000 of true cash value to $180,000.
POSITIONS:
           Representatives of the following entities testified in support of the bills (9-13-23):
              • Department of Treasury
              • Michigan Townships Association
           The following entities indicated support for the bills (9-13-23):
              • City of Ann Arbor
              • Southeast Michigan Council of Governments (SEMCOG)
              • Michigan Municipal League
              • National Federation of Independent Businesses
              • Michigan Association of Counties
                                                               Legislative Analyst: Alex Stegbauer
                                                                  Fiscal Analysts: Ben Gielczyk
                                                                                    Jim Stansell
■ 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.
2
    http://legislature.mi.gov/doc.aspx?2022-SB-1061
3
    http://legislature.mi.gov/doc.aspx?2023-HB-4253
House Fiscal Agency                                              HBs 4553 and 4554 as introduced    Page 2 of 2
Statutes affected: 
House Introduced Bill: 12.252
As Passed by the House: 12.252
As Passed by the Senate: 12.252
House Concurred Bill: 12.252
Public Act: 12.252
House Enrolled Bill: 12.252