Most manufacturing-related personal property in Michigan became eligible for full property tax exemption in 2016, becoming subject to the much less burdensome State Essential Service Assessment (SESA, sometimes referred to as ESA). This enormous tax benefit will not occur automatically. Failure to meet deadlines, such as payment of the SESA, will result in loss of the exemption. This is a substantial penalty, so it is critical you meet all filing and payment deadlines. However, in 2018, MMA led the legislative change to delay the deadline for the rescission of property to April 15 of the following assessment year.
Businesses are required to take important steps to claim and retain the exemption:
February 20 — File your exemption with local assessor
Taxpayers wishing to claim the exemption must file a Michigan Department of Treasury Form 5278 with the local assessor by February 20. The form will not be considered filed unless it is:
- Received by the local assessor on or before February 20; OR
- Is received by the local assessor after February 20 with a postmark of February 20 or earlier.
- (Late filing of the Form 5278 may be sent directly to the local March board of review prior to its final adjournment. These changes were made possible thanks to MMA-led legislation signed into law in 2017)
Public Act 261 of 2017 •
Public Act 262 of 2017 •
Public Act 263 of 2017 •
Public Act 264 of 2017
Unlike some Michigan tax exemptions, the manufacturer’s exemption must be claimed by the deadline to take effect with the exception of a short late filing option before the final adjournment of your local March board of review. Claims made post-deadline cannot be claimed. However, if a claim is not made in a given year, the taxpayer still has the opportunity to file a claim for future years.
August 15 — DUE: SESA Statement and Payment to the State in full
Local assessors will forward the information that businesses submitted on Form 5278 to the Michigan Department of Treasury. Treasury will use the reported cost of each taxpayer’s newly exempt property to determine the amount of SESA the taxpayer will owe. In order to file and pay the SESA, taxpayers may register on Treasury’s web portal, Michigan Treasury Online (MTO) or file by e-file and pay through e-file or ACH (see Resources tab for more).
Starting around May 1 of each year, taxpayers can view their initial SESA statement on MTO. Taxpayers will need to review this statement and make necessary corrections before filing. After the taxpayer certifies the statement as correct, it may be filed through MTO or by using Treasury-approved commercial or proprietary software. Payment of the SESA may be made via electronic funds transfer (EFT) through MTO or as an EFT through the taxpayer’s financial institution.
The deadline for the filing of the SESA statement and payment is August 15. If payment is not made by August 15, late payment penalty accrues at 3 percent per month up to a maximum of 27 percent of the amount due and unpaid until April 15 of the following assessment year.
April 15 (of the following year) — Last day to file and pay tax and penalty for assessment year 2019
This is the last date that the SESA may be paid in full before the tax exemption is rescinded. If a taxpayer does not certify the statement and make electronic payment of the full amount owed including late payment penalty by April 15, 2020, Treasury will rescind the tax exemption for that year. If payment is made after 8/15/19, care must be taken to ensure that the late payment penalty is paid as well, or rescission will proceed. If an exemption is rescinded, the taxpayer will be required to file a regular personal property return with the local assessor and pay the full property tax. This means losing your exemption for that year.
Note: If there is an extended IFT or P.A. 328 and SESA is not paid in full (including late payment penalty), Treasury will request the STC rescind the extended IFT or P.A. 328.
Failure to pay the State Essential Services Assessment will result in a loss of exemption for that year.
The loss of exemption is a substantial penalty, so it is critical you meet all filing and payment deadlines.
The new personal property exemption offers significant tax savings to manufacturers but to ensure that you take full advantage of the new program, you must be diligent in claiming the exemption by filing form 5278 by the annual February 20 deadline and filing a SESA statement and paying the SESA.