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Tax bill explained

MARQUETTE — Senate Bill 1031, a proposed bill that would make certain types of qualified personal utility property tax exempt, has been under much discussion in Michigan, as proponents say it would address high energy costs, but opponents say it would significantly erode state and local tax bases.

As written, the bill defines qualified utility personal property as electric transmission and distribution systems, substation equipment, spare parts, gas distribution systems, water transmission and distribution systems, gas storage equipment, and transmission lines of gas or oil transporting companies installed in Michigan after Dec. 31, 2017.

If passed, it would reduce tax revenues across the state and in local municipalities, as the total taxable value of personal utility property in Michigan is $11.9 billion, according to a nonpartisan June 7 analysis as reported from the Senate Finance Committee.

Specifically, total local unit losses would be hundreds of millions of dollars if the legislation is enacted as written, according to the analysis, as the bill wouldn’t reimburse local units for revenue lost due to the exemptions.

“To illustrate the eventual magnitude of the exemption, if the bill were to exempt all existing eligible utility personal property, the revenue reduction would total approximately $652.8 million,” the analysis states.

Of this $652.8 million, around $576 million would be lost by local units of government, with the remaining $77 million lost by the School Aid Fund.

“School Aid Fund expenditures would need to increase by approximately $243.1 million in order to maintain per-pupil funding guarantees,” according to the analysis. “Of the $576.3 million in local unit losses, revenue to counties, cities, and villages would fall by $189.1 million, local school operating revenue would decline by $243.1 million, and the remaining revenue losses would be split across community colleges, intermediate school districts, and authorities.”

Furthermore, the revenues would continue to decline over time, as all qualified types of utility personal property would eventually become exempt once replaced, according to the analysis.

“While the initial fiscal impact would depend on the rate at which new property would be installed, as property ages and is replaced, the bill would eventually exempt all eligible utility personal property,” the analysis states.

The bill, introduced May 29 by Sen. John Proos, R-St. Joseph, has since been reported favorably without amendment in the Senate Committee on Finance and was referred to the Committee of the Whole in June.

For more information on SB 1031, visit www.legislature.mi.gov and search “SB 1031.”

Cecilia Brown can be reached at 906-228-2500, ext. 248. Her email address is cbrown@miningjournal.net.

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