Property Valuation & Tax Information
UNDERSTANDING PROPOSAL A AND YOUR PROPERTY ASSESSMENT
On March 15, 1994, Michigan voters approved the Constitutional Amendment, known as Proposal A, which limited the amount that property taxes could increase on an annual basis. Prior to Proposal A, property taxes were based upon Assessed Value (AV). Since the passage of Proposal A, property taxes are now based upon Taxable Value (TV). Taxable Value increases are limited to the Inflation Rate Multiplier (IRM), also referred to as the Consumer Price Index (CPI), or five percent (5%) whichever is lower, not to exceed Assessed Value until ownership in the property is transferred. The year following a transfer, the Assessed Value and Taxable Value will be the same. This is referred to as an uncapping. Proposal A has limited the property taxes that would have been collected if Proposal A had not been implemented, which has saved the average homeowner in Macomb Township thousands of dollars each year, since 1994.
Assessed Value represents approximately 50% of the estimated Market Value (or True Cash Value). Your Assessed Value is not based on 50% of your individual sales price. The law defines Market Value as the usual selling price of the property. The Michigan Legislature and courts have clearly stated that the actual sales price of a property is not the only controlling factor in determining the True Cash Value and Assessed Value. For the 2023 assessing year, the assessor’s office used a two-year sales study, using the sales data from April 1, 2020 through March 31, 2022, in order to estimate property market values as of December 31, 2022. Use of a 24-month study allows 2023 Assessed Values to more accurately reflect current market conditions.
Foreclosure Sales – Inherent in the definition of the usual selling price is the assumption that the sale does not involve any element of distress from either party. The State Tax Commission has issued guidelines concerning foreclosure sales and, generally speaking, these guidelines preclude the Assessor from considering foreclosure sales when calculating values for assessment purposes. For this reason, all distressed sales, such as foreclosures or transfers to or from relocation companies, are not considered in the valuation of property for assessment purposes or appeals.
Taxable Value is a mathematical formula, which is based on the prior year's Taxable Value increased by the IRM or 5%, whichever is lower. The IRM is determined for the entire State of Michigan and applied by each municipality. The 2023 IRM has been determined to be 1.05%. Taxable Value may also increase for physical additions and decrease for physical losses.
During the 1990s and early 2000s, and beginning again in 2013, property value increases greatly exceeded the annual IRM. Therefore, if a property owner has owned their property since Proposal A was implemented; they may see a significant difference in the amount of their Assessed Value and Taxable Value. For example:
2022 $200,000 $200,000
2023 $224,000 (increase 12%) $210,000 (increase of 1.05 IRM)
The example above shows that Assessed Value can increase by 12%, while Taxable Value increases by 5%. This is a function of the statute. Taxable Value may increase or decrease from year to year, until its ceiling of Assessed Value is reached. Taxable Value may not exceed Assessed Value.
When the calculation of prior years Taxable Value multiplied by the IRM exceeds the current years Assessed Value, the Statute mandates that the Assessed Value becomes the Taxable Value. The following example illustrates this concept:
2022 $200,000 $200,000
2023 $200,000 (increase 0%) $200,000
In the above example, the 2022 Taxable Value of $200,000 would increase to $210,000 for 2023, if the 1.05 IRM is applied. However, since the 2022 Assessed Value is only $200,000, the Taxable Value will also be $200,000. The Taxable Value may not exceed Assessed Value.