Michigan Charities Must Have Regular Physical Presence to Qualify for Property Tax Exemption
One of the perks of obtaining nonprofit status is getting tax breaks. Not only can charitable institutions get federal and state income tax breaks, they can also get real estate property tax breaks.
The requirements that must be satisfied in order to get a property tax exemption are contained in MCL 211.7o(1). These requirements include the provision that the real estate be "owned and occupied" by the nonprofit charitable institution. While that may seem easy enough, it was enough to trip up the Liberty Hill Housing Corporation in its recent Michigan Supreme Court case.
The case arose out of Liberty Hill's request to the City of Livonia for a property tax break. The City declined Liberty Hill's request. All parties agreed that Liberty Hill owned the property in question. The request was denied because the City didn't believe that Liberty Hill actually occupied the property. Liberty Hill leased to the property to disabled and low income individuals for their own personal use as housing. Liberty Hill mounted unsuccessful appeals to the Michigan Tax Tribunal and the Michigan Court of Appeals.
In its decision, the Michigan Supreme Court affirmed the lower tribunals, ruling that "to occupy property under MCL 211.7o(1), the charitable institution must at a minimum have a regular physical presence on the property." Leasing the property disqualifies it from being eligible for a tax break even though such activity is in furtherance of Liberty Hill's charitable purpose.
