Before Proposal A was approved by the Michigan voters on March 15, 1994, all property taxes in the state were based on Assessed Values (AV) which represent 50% of the true cash value (or market value) of all properties as of December 31st of the previous year. If the market value of your property is $186,000, then the assessed value of your property should be 50% of that market value or 93,000. After the county and state review the assessed values in each taxing jurisdiction they become State Equalized Values (SEV).
One of the most important changes that occurred with the passage of Proposal A was a limit placed on the percentage that property taxes can increase each year. This limitation was accomplished by creating a new term called “Taxable Value.” Taxable Value (TV) is defined as the lesser of a property’s SEV or “Capped Value.” A property’s Capped Value (CV) is defined as the previous year’s taxable value increased by the inflation rate or 5%, whichever is less, plus construction changes.
The State Tax Commission (STC) determines this inflation rate each year. What this tax system has meant for most residents is that if you have not purchased your home in the previous year and have not made any physical additions to your property (like building a garage), your property taxes will not increase by more than the previous year’s inflation rate or 5%, whichever is less.
The Sterling Heights Assessing Office calculates assessed values for all properties in the City in the same manner as they were calculated before Proposal A was enacted. The STC has again mandated that local municipalities use a 2-year sales study in calculating residential assessed values (e.g. October 1, 2011 to September 30, 2013). Changes in assessed value reflect changes in the market value of property.
The City typically mails the Notice of Assessment, Taxable Valuation, and Property Classification (1019) form to all property owners on the last day of February. In the center near the left side of this annual notice there is a new feature that details how the change in taxable value should increase or decrease the current year tax bill for all of the residential property owners in the City.
The March Board of Review (BOR) typically begins on the third Monday in March. These 2 3-member committees, made up of City residents, are responsible for hearing appeals of assessment figures, property classification and hardship exemption appeals. It is the responsibility of the BOR members to review the assessments placed on all of the properties that are appealed and to determine whether these values represent the actual true cash value of each specific property. Please see your assessment notice for more information on making an appointment with the BOR. All property owners that file an appeal to the March BOR will receive a written response around the first week of June. Residential property owners that are not satisfied with the decision of the BOR will have the right to appeal to the Michigan Tax Tribunal.
Another important issue to address is that the specific sale price of a property will not automatically determine that property’s assessed value in the year following a transfer. The Assessing Office determines a land and building value for all of the properties in the City and annually adjusts these values based on sales that have occurred during each sales study period. Although current law defines a property’s assessed value as the “true cash value” of a property, not every sale price will reflect that property’s actual market value. For example, one would expect that the sale price from parents to one of their children could be less than if they had sold to someone with which they had no prior relationship. That is the reason that the Assessing Office determines assessed values by using accepted mass appraisal techniques and does not reassess properties based on one sales transaction.
When a property transfers, the following year’s SEV, by statute, becomes that year’s Taxable Value. There is no limit to the change, so the amount of property taxes that were billed to the seller may be much less than the taxes that will be billed to the new owner in the year following the transfer. The Taxable Value of a transferred property will become “capped” again in the year after a transfer and will be limited to inflation or five percent in the following year, and for as long as the property ownership is not transferred again and there were no physical changes to the property.
It is the responsibility of the buyer in a transfer to file a Property Transfer Affidavit (2766) form with the Assessing Office within 45 days of the property transfer. Blank affidavits are available at the City Assessing Office and on the Department of Treasury website or the City’s website. Department of Treasury
If you own and occupy your home as a principal residence, it may be exempt from a portion of local school operating taxes. Your assessment notice will list this percentage near the bottom of the notice. If the percentage is listed as “0” on your assessment notice and you wish to claim an exemption for the current year, a Homeowner’s Principal Residence Exemption Affidavit (2368) form must be completed and filed with the Assessing Office by June 1st to affect the summer tax levy or November 1st to affect the winter tax levy.
If you have a Principal Residence Exemption (PRE) on your property and you no longer own and occupy the property as your primary residence, you must file a Request to Rescind Homeowner’s Principal Residence Exemption (2602) form with the Assessing Office. These 2 forms are also available at the Assessing Office and on the Department of Treasury and Sterling Heights websites. Department of Treasury
This form enables a person who has established a new principal residence to also simultaneously retain a Principal Residence Exemption on a property that was previously exempt as the same owner’s principal residence. An owner may receive the PRE on the previous principal residence for up to 3 years if that property is not occupied, is for sale, is not leased and is not used for any type of business or commercial purpose. The Conditional Rescission of Principal Residence Exemption (4640) form must be filed with the Assessor’s office on or before June 1st to affect the summer tax levy or November 1st to affect the winter tax levy.
The owner claiming an exemption must annually submit this form on or before December 31 to verify that the property for which the PRE is retained is not occupied, is for sale, is not leased, and is not used for any business or commercial purpose. If the conditional rescission requirements are all met, this form would take the place of STC Form 2602.