The Problem

Michigan Department of Treasury (Treasury) denied homeowners a Principal Residence Exemption (PRE) on their East Grand Rapids home for tax years 2014-2016, claiming that homeowners received a similar exemption on an out-of-state condominium during the same period. This resulted in nearly $10,000 of additional property tax liabilities for the homeowners. Homeowners filed an informal appeal of the PRE denial, and also rescinded the out-of-state exemption in order to qualify for a PRE in Michigan – a practice allowed by the statutory language at the time. However, in October 2017, after homeowners filed their informal appeal, the Michigan legislature amended the statute to disallow rescission of an out-of-state exemption so as to qualify for the Michigan PRE. At the homeowners’ November 2017 informal appeal hearing, Treasury then argued that the 2017 amendments were “retroactive,” barring homeowners from rescinding the out-of-state exemption and receiving a PRE in Michigan. The informal hearing referee decided against the homeowners, and the homeowners then hired Terry Zabel and G. Will Furtado of Rhoades McKee to pursue a full appeal to the Michigan Tax Tribunal.

Our Approach

On behalf of the homeowners, Rhoades McKee filed a Petition for Appeal with the Michigan Tax Tribunal, arguing that the October 2017 amendments to the PRE statute were not “retroactive” and, therefore, homeowners could qualify for the 2014-2016 PRE by rescinding the out-of-state exemption and paying any out-of-state taxes owed as a result. Rhoades McKee relied on the plain language of the statute, both before and after the 2017 amendments, as well as a similar case decided by the Tribunal in favor of a homeowner earlier that year. Treasury contested the homeowners’ position.

The Result

Michigan Tax Tribunal decided in favor of the homeowners, ruling that the plain language of the October 2017 amendments showed no intent by the Legislature to apply those amendments “retroactively.” Because the amendments were not “retroactive,” the statutory language in place prior to October 2017 applied to homeowners’ appeal, thus allowing them to rescind the out-of-state exemption in order to qualify for the Michigan PRE. The homeowners received a full refund of the additional property taxes paid for tax years 2014-2016.