Transfer of Ownership & Uncapping

Transfer of Ownership

  • Michigan statute defines Transfer of Ownership generally as the Conveyance of title to or a present interest in property, including the Beneficial Use of the property, the value of which is substantially equal to the value of the Fee Interest.
  • Central to the concept of Transfer of Ownership is a change in the Beneficial Use of the property.
  • In accordance with the Michigan Constitution, as amended by Michigan statutes, a Transfer of Ownership causes the Taxable Value of the transferred property to be Uncapped in the calendar year following the year of the Transfer of Ownership.
  • Michigan Complied Laws provides a variety of examples of what constitutes a Transfer of Ownership for Taxable Value Uncapping purposes.

Definitions

  • Beneficial Use - describes a person's right to enjoy the benefits of specific property.
  • Conveyance - the process of transferring property from one owner to another.
  • Fee Interest - absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
  • Proposal A - added to the Michigan Constitution in 1994, this states that the value of property used to calculate property taxes, the Taxable Value, cannot increase each year by more than the increase in inflation, or 5%, whichever is less, until the ownership of the property changes.
  • Taxable Value - the value used to calculate the property taxes for a property. In general, the taxable value multiplied by the appropriate millage rate yields the property taxes for a property.
  • True Cash Value - the assessor's determination of a property's worth or what the assessor believes the usual selling price may be. A property's true cash value is usually not the same as its sale price for a variety of reasons. An assessor must determine the true cash value of a property which has sold in the same manner that the assessor determines the true cash values of properties which have not sold. Therefore, an assessor may not automatically set an assessed value or a taxable value at half of a property's selling price.
  • Uncapping - annual increases in the property's taxable value, as stated in Proposal A, are limited to 1.05 or the inflation rate, whichever is less. In the year following a statutory transfer of ownership, that limitation is eliminated and the property's taxable value is set at 50% of the property's True Cash Value. By statute an assessor must uncap a property's taxable value in the year following the transfer of ownership of that property.

For a more detailed explanation please read the Transfer of Ownership Guidelines (PDF) as prepared by the State Tax Commission.