GOOD NEWS SB 0540 (2017) – WRITE YOUR SENATORS

Good news!  Yesterday, Senate Bill 0540 (2017) was introduced by Senator Tonya Schuitmaker, and the Bill has been referred to the Committee on Local Government.  Senate Bill 0540 updates the statutory definition of a “transfer of ownership” for uncapping purposes, and modifies certain excluded transfers to include a limited liability company (LLC) membership interest to close family members.  We have been working for some time to include a transfer of an LLC membership interest to close family members as an exempt transfer, and this will be a great step forward for families that own vacation property and use an LLC for management purposes.  We believe this was the intention of the original change in the law that allowed for transfers of real property to close family members without uncapping property value for property tax purposes.

Please show your support by writing your Senator, or the Senator for the area where you own vacation property in Michigan.  The Committee on Local Government includes Senators Robertson (C), Meekhof (VC), Brandenburg and Young (MVC).  The Committee Clerk can be reached at (517) 373-5323, and the Committee meets on Wednesday afternoons.

We will continue to follow this Bill and update you as it proceeds.

Comments

  1. Rita Sparks says:

    Senate Bill 0540 is certainly a welcome change and I pray it passes for the benefit of our future generations. My husband and I own 110 acres of Qualified Forest and an adjoining 10a with a cottage in Oceana County. Due to uncapping concerns, we did not establish an LLC but recently did a quit-claim deed adding our three sons as owners to benefit from the exemption of direct family members from taxable value increases. For legal liability concerns and to provide a management structure, we still would be interested in establishing an LLC. With our three sons now jointly owning the property with my husband and me, can we now establish the LLC with all five of us being members without it being a change in ownership with the threat of uncapping since the LLC would have exactly the same members as the five owners on the deed. Question # 2, Can we put both the forest land and the cottage on a separate parcel into one LLC umbrella? Many changes in property transfer laws have come about since we read your book. We look forward to having a personal consultation with you to determine the best course of action now.

    • You haven’t indicated whether the residential property is now owned by all 5 family members as tenants in common or jointly with full rights of survivorship, but it is very likely that you may put both properties into a single LLC without uncapping, so long as the owners of the LLC after the transfer are identical to the owners of the property before the transfer. The Qualified Forest property should be exempt from uncapping regardless of ownership transfers going forward, unless the property laws change. The residential property, on the other hand, will uncap when more than 50% of the ownership of the LLC is transferred. If all 5 own equal percentages of the LLC, then there will be no uncapping when both parents pass away, since that will transfer only 40% of the ownership. When more than 10% of the total ownership is transferred thereafter, the residential property value will uncap, unless the laws change in the future with the passage of this Bill.

  2. Thank you for this. Is there any sense at all as to how long this would take to get passed at the soonest? Weeks, months, next year?

    • There is no way to predict how long it will take to get this proposed bill passed. I know of no immediate plans to conduct hearings on the bill, so my best guess would be that it will be some time yet before we see any action on it. The more people who write their legislators, the more likely it is that the bill will get attention.

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