Attorney General Clarifies Important Exemption to Michigan Transfer Tax

By
Real Estate Agent with Westbrook Realty Broker-Owner

I sent three files in for review to my title officer today. The calls to the clients that they might get a refund

of the State Transfer tax was received with surprise and appreciation that I had gone to the trouble of

doing this after the sale was completed. Not all of the title companies are aware of this. You still need

to pay the transfer tax at close and then request the refund.

                                                                                                                 stack of money

I hope you have some clients that might be able to take advantage of this law.

You get to be a valued business person and put money in their pocket. Win~Win

for Everyone - except the State. 

                                                                                              

 

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of

an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a

request from Representative Martin Griffin (D-Jackson), should afford certain home sellers immediate

financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek

an exemption from paying the state transfer tax if the following criteria are met:

  • The property must have been occupied as a principle residence, classified as homestead property;
  • The property’s State Equalized Value (“SEV”) for the calendar year in which the transfer is made
         must be less than or equal to the property’s SEV for the calendar year in which the transferor  
 
        acquired the property; and                               
  • The property cannot be transferred for consideration exceeding its true cash value for the
           year of the transfer.

With property values and corresponding SEV declining due to the struggling economy, home owners

and real estate agents first took notice of the exemption’s possible applicability under the state

transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply.

One example illustrating application provides:

If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when
transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish
the true cash value by doubling the SEV at the time of transfer. In this case the true cash value
is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true
cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the

reality of declining value on their single greatest asset. The opinion also provides a uniform

reading of the exemption that is necessary to provide consistent application among the various

Registers of Deeds across the state as they are already receiving filings for the exemption.

 

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria

could bring a penalty equal to 20% of the tax assessed in addition to the tax due

Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

 

Further questions should be directed to:

Brian Westrin, MAR Manager of Legal Affairs. He can be reached at 517.372.8890.

 

  Copyright by Terry Westbrook 2008

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Rainmaker
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Jane Wallace
ERA Herman Group Real Estate - Denver, CO
CRS | SRES, Denver Real Estate

Terry,

I like your halo

Apr 23, 2008 01:25 PM #1
Rainmaker
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Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re
Jane: I get blamed for all the bad stuff its fun to have good news sometimes.
Apr 28, 2008 07:55 PM #2
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Terry & Bonnie Westbrook

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