Are you thinking about renovating or expanding your aging Michigan manufacturing facility? Are you considering building a new facility or going high tech? If so, obtaining a Michigan Industrial Facilities Exemption Certificate (IFEC) could save you a significant amount on property taxes.
What is an Industrial Facilities Exemption Certificate?
An IFEC provides a property tax incentive — granted by the legislative body of the city, township or village in which the project will be located — to Michigan manufacturers that renovate or expand aging facilities, build new facilities or establish high-tech facilities. Certificates are granted to qualifying projects located in either an Industrial Development District or a Plant Rehabilitation District, as designated by the local government.
The IFEC exempts a facility from real property taxes for a term of one to 12 years, as determined by the local government. The IFEC on a new plant is computed at half the local property tax millage rate (except for the state education tax, which may be abated 100%, 50% or not at all). In other words, qualifying projects could be looking at an annual 50% property tax reduction on the new or renovated facility for up to 12 years.
How Do I Apply for an Industrial Facilities Exemption Certificate?
IFECs must be approved at both the local and state levels. There are numerous filings and actions required as part of the application process, some of which are time-sensitive.
In a typical application, the process begins with a qualifying business timely filing Michigan Form 1012, Application for Industrial Facilities Tax Exemption Certificate, together with all required attachments, with the local government. A common misconception is that “timely filing” means the application must be filed at the beginning of the project. To the contrary, the local government can generally receive applications and attachments within six months of the project start date. However, it’s important to verify this with your local government.
Approved applications will be discussed during a local public hearing and then filed with and reviewed by the State Tax Commission, which will grant final approval and issue certificates.
There are additional time-sensitive filing requirements with the Commission, such as notifying the government within 30 days of project completion and providing a final cost report within 90 days of completion. Your local government may have other filing requirements as well.
Is There a Downside to Using an Industrial Facilities Exemption Certificate?
Except for time and resources spent on the application process, if you don’t qualify you are no worse off than before. And if you and your advisors have carefully analyzed your project and situation alongside the IFEC requirements to know if your project is a good candidate, the potential benefits should far outweigh the time and resources spent.
It seems the biggest reason IFECs are underused on otherwise qualifying projects is that companies are simply unaware of them or don’t have the expertise, resources or time to get through the application process. If you have an upcoming project that may qualify for an IFEC, reach out to your tax advisors to discuss the process, identify Industrial Development District and Plant Rehabilitation District locations and determine whether your project (and which specific costs) qualifies.
Please contact a member of your service team or Jeff McMichael at firstname.lastname@example.org for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.