Poverty Exemption

Section 7u of the General Property Tax Act, MCL 211.7u, allows a property tax exemption for the homestead of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges. The township board must adopt poverty exemption income guidelines and an asset level test.

 

See page 2 of State Tax Commission Bulletin 9 of 2009 for the 2010 Federal Poverty Guidelines for use in determining poverty exemptions for the 2010 tax year: http://www.michigan.gov/documents/treasury/Bulletin9of2009_297376_7.pdf

 

2009 Poverty Exemption Income Guidelines and Asset Test Information (.pdf) 

Township Board Resolution to Adopt Poverty Exemption Income Guidelines and Asset Test (Word)

 

Related Bulletins (Poverty Exemption)

State Tax Commission Bulletin 1 of 2003

State Tax Commission Bulletin 17 of 1997

 

Examples of Local Unit Applications or Policies

Delhi Charter Township, Ingham County

City of Farmington Hills

Independence Charter Township, Oakland County 

City of Lansing 

City of Brighton 

 

Bulletin: In a memo to assessors dated Oct. 25, 2007, the Michigan Department of Treasury directed assessors to remind township boards to review their poverty exemption guidelines and ensure that they have an asset test in place. The memo also directed assessors to inform the STC If they believe a board of review is inappropriately granting poverty exemptions.

 

Section 7u of the General Property Tax Act, MCL 211.7u, allows a property tax exemption for the homestead of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges.

 

To be eligible for the poverty exemption, a person must own and occupy the homestead property for which the exemption is required, file a claim (each year the exemption is sought) with the supervisor or board of review on the township's form, along with federal and state income tax returns for all persons residing in the homestead, show proof of ownership, and meet federal poverty income standards annually determined by the U.S. Office of Management and Budget or standards adopted by the township board (if the board's standards are less strict that the federal guidelines).

 

It is very important for a township board, supervisor and board of review to work together in the poverty exemption process.

 

The township board must adopt poverty exemption income guidelines and an asset level test. The asset test may include a variety of assets that the board believes should be considered in determining the applicant's eligibility. The asset test, however, does not include the homestead. According to the Michigan Tax Tribunal in Robert Taylor v Sherman Twp. (MTT Small Claims Division, Docket No. 236230, August 13, 1997):

 

"The Tribunal views the 'asset test' to be an indication of funds available which might be used to pay one's taxes. If the equity of the homestead is included, it would require the Petitioner to sell his homestead or borrow against the equity to pay the taxes. The Tribunal finds that the inclusion of the value of the equity is inconsistent with the basic intent of the granting of poverty exemptions, that being to enable the petitioning party to maintain their homestead."

 

The supervisor notifies the board of review whether an applicant is eligible, and the board of review then determines the amount of the property tax exemption, from zero to 100%, for the homestead.

 

Poverty exemption denials may be appealed to the Michigan Tax Tribunal.

 

MCL 211.7u

Sec. 7u.

(1) The principal residence of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges is eligible for exemption in whole or in part from taxation under this act. This section does not apply to the property of a corporation. [excerpt]