A principal residence exemption (PRE) exempts a residence from the tax levied by a local school district for school operating purposes up to 18 mills. To qualify for a PRE, a person must be a Michigan resident who owns and occupies the property as a “principal residence.” This “principal residence” issue becomes very significant for local residents who may want to take a PRE on their lakeshore property rather than homes that they own elsewhere in Michigan or other states.
Nass has lived in and runs her business out of her home in Fennville since 2008. Her husband maintains a separate home in Illinois. In 2012, Nass was notified by the local assessor that because her husband claimed a PRE for his home in Illinois, she was not entitled to a PRE for the Fennville property, and therefore was assessed for back taxes allegedly owed for 2009 through 2012.
Often local lakeshore municipality assessors are seeking additional revenue from those whom they feel are improperly claiming exemptions for vacation homes or cottages. Denial of a PRE can cost taxpayers thousands of dollars per year, and the decision to deny a PRE is extremely difficult to overturn, and as by law the assessor’s initial decision and the Tax Tribunal’s subsequent review are entitled to significant deference on appeal. Once a decision is made to deny a PRE, it is extremely difficult to have that decision overturned, because a court’s review of a tax tribunal decision is “very limited” under the law.
When Nass appealed this decision to the Michigan Tax Tribunal, the Magistrate Judge agreed with the local assessor, despite evidence supplied by Nass (including business records, driver’s license, utility bills, etc.) that showed that she lived in Fennville.
Rhoades McKee Attorneys, Bruce Courtade, Jim Schipper, Greg Timmer, and Terry Zabel, appealed the Tax Tribunal’s denial of her PRE to the Michigan Court of Appeals. They submitted evidence that included voter registration, tax returns and utility bills. “This documentation demonstrated that Nass used the residence as her home, the place to which she returns when she is away”, explained Zabel, a tax attorney and former IRS attorney. Timmer and Courtade, who handled the appellate brief and argument before the Court of Appeals, pointed out that the local assessor offered no evidence to contradict that supplied by Nass.
The Court of Appeals found that the Tax Tribunal’s decision “was not based on ‘substantial’ evidence, particularly in light of the voluminous evidence submitted by petitioner,” noted that the local assessor offered “absolutely no evidence” in support of the position that Nass’ home was not her primary residence, and, therefore concluded that the denial of her PRE “constituted an ‘error of law’.” The Court of Appeals therefore reversed the denial of Nass’ PRE, and ordered the Township to grant her a PRE for each of the years in dispute.More Case Studies