The Classification of Real Property

Michigan State Tax Commission

Property Classification

MCL 211.34c

Issued November 2018

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Table of Contents 
Definitions and Introduction ........................................................................................................... 2 
Residential Real Property ............................................................................................................... 3 
Agricultural Real Property .............................................................................................................. 4 
Commercial Real Property .............................................................................................................. 9 
Developmental Real Property ....................................................................................................... 11 
Industrial Real Property ................................................................................................................ 11 
Timber-Cutover Real Property ..................................................................................................... 11 
Agricultural Personal Property Classification .............................................................................. 12 
Commercial Personal Property Classification .............................................................................. 15 
Industrial Personal Property Classification ................................................................................... 16 
Residential Personal Property Classification ................................................................................ 17 
Utility Personal Property Classification........................................................................................ 17 
Appeal Procedures: ....................................................................................................................... 18 
 
 
 
 

Definitions and Introduction

Michigan Law MCL 211.34c requires that not later than the first Monday in March each

year, the local assessor shall classify all assessable property in their jurisdictional

boundaries according to the definitions contained in this section.

MCL 211.34c defines there are six real property classifications and five personal

property classifications. Each of these will be reviewed in detail later in this document:

Residential Real and Residential Personal

Agricultural Real and Agricultural Personal

Commercial Real and Commercial Personal

Industrial Real and Industrial Personal

Developmental Real

Timber Cut-over Real

Utility Personal

Property classification is necessary for the equalization process. Equalization is

simply the process to ensure that all taxable property under a jurisdiction is

assessed at the same percentage of market value, in Michigan 50% of true cash

value. By definition it is the process of making property taxation equal or uniform.

Equalization ensures uniformity in the level of assessment from one property to another,

among the classifications within each assessment jurisdiction, among the cities and

townships in each county, and among all of the counties within the State of Michigan.

Therefore, the classification of property does not affect the use of the property.

Similarly, zoning of a property does not dictate the classification of a property.

Property is classified according to it’s current use. The highest and best use of the

property has been, and continues to be, the standard upon which an assessor values

property but is not how its classification is determined. These are two different and

distinct issues; valuation does not drive the property’s classification.

A property cannot have more than one classification. MCL 211.34c (5) states that if the

total usage of a parcel includes more than one classification, the assessor shall

determine the classification that most significantly influences the total valuation of the

parcel. For example:

A parcel of land used for residential purposes also includes a use that is agricultural

in nature, will be classified by the use that has the greatest influence on the value of

the property. The following is a sample calculation:

Agricultural Value Calculation:

67 Tillable Acres at $980 per acre = $65,660 True Cash Value

Equipment Shed $10,186 True Cash Value

Total Agricultural Use $75,846 True Cash Value

Residential Value Calculation:

House $22,591 True Cash Value

Recreational Value (adds to residential value):

173 Acres at $980 per acre $169,540 True Cash Value

Total Residential Use: $192,131 True Cash Value

Therefore, the property in this example would be classified residential.

Residential Real Property

MCL 211.34c defines residential real property as:

(i) Platted or unplatted parcels, with or without buildings, and condominium

apartments located within or outside a village or city, which are used for, or probably

will be used for, residential purposes.

(ii) Parcels that are used for, or probably will be used for, recreational purposes,

such as lake lots and hunting lands, located in an area used predominantly for

recreational purposes.

(iii) For taxes levied after December 31, 2002, a home, cottage, or cabin on leased

land, and a mobile home that would be assessable as real property under section 2a

except that the land on which it is located is not assessable because the land is

exempt.

Does there have to be a house on the property for it to be classified residential?

No. As indicated above, the definition of residential property includes parcels with or

without buildings.

Recreational property is to be classified residential even though there is not a

house on the property or I don’t live there?

There is no separate classification for recreational property. Lands whose primary use

is for recreational activities such as hunting, fishing, camping, snowmobile use,

mushroom hunting, photography, bird watching, and other recreational pursuits are

properly classified as residential.

What about my cottage or hunting camp?

A vacation cottage or hunting camp is a recreational property and should be included in

the residential classification.

A hunting or fishing camp owned by an individual or a group of individuals is a

recreational property. These properties should be included in the residential

classification provided a fee is not charged to the users of the property.

What about a small apartment building?

A single housing unit or single structure consisting of four or less subunits is generally

included in the residential classification.

My house is used as a bed and breakfast. Should the classification be residential

or commercial?

Houses used as Bed and Breakfast establishments are sometimes classified residential

and sometimes classified commercial. If the main use of the house is as a private

residence and the bed and breakfast is only a minor use, the property should be

classified residential. If the primary use is to generate income similar to a motel, the

property should be classified commercial.

Agricultural Real Property

MCL 211.34c defines agricultural real property as:

Agricultural real property includes parcels used partially or wholly for agricultural

operations, with or without buildings. For taxes levied after December 31, 2002,

agricultural real property includes buildings on leased land used for agricultural

operations. If a parcel of real property is classified as agricultural real property and is

engaged in agricultural operations, any contiguous parcel owned by the same

taxpayer, that is a vacant parcel, a wooded parcel, or a parcel on which is located 1

or more agricultural outbuildings that comprise more than 50% of the taxable value

of all buildings on that parcel as indicated by the assessment records for the local

tax collecting unit in which that parcel is located, shall be classified as agricultural

real property. Contiguity is not broken by a boundary between local tax collecting

units, a section boundary, a road, a right-of-way, or property purchased or taken

under condemnation proceedings by a public utility for power transmission lines if

the 2 parcels separated by the purchased or condemned property were a single

parcel prior to the sale or condemnation. For purposes of this subsection, contiguity

requires that the parcel classified as agricultural real property by reason of its

agriculture use and the vacant parcel, wooded parcel, or parcel on which is located 1

or more agricultural outbuildings must be immediately adjacent to each other,

without intervening parcels that do not qualify for classification as agricultural real

property based on their actual agricultural use. It is the intent of the legislature that if

a parcel of real property is classified as agricultural real property and is engaged in

agricultural operations, any contiguous parcel owned by the same taxpayer, that is a

vacant parcel, a wooded parcel, or a parcel on which is located 1 or more

agricultural outbuildings that comprise more than 50% of the taxable value of all

buildings on that parcel as indicated by the assessment records for the local tax

collecting unit in which that parcel is located, shall be classified as agricultural real

property even if the contiguous parcels are located in different local tax collecting

units. Property shall not lose its classification as agricultural real property as a result

of an owner or lessee of that property implementing a wildlife risk mitigation action

plan. As used in this subdivision:

(i) "Agricultural outbuilding" means a building or other structure primarily used for

agricultural operations.

(ii) "Agricultural operations" means the following:

(A) Farming in all its branches, including cultivating soil.

(B) Growing and harvesting any agricultural, horticultural, or floricultural commodity.

(D) Raising livestock, bees, fish, fur-bearing animals, or poultry, including operating

a game bird hunting preserve licensed under part 417 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.41701 to 324.41712, and also

including farming operations that harvest cervidae on site where not less than 60%

of the cervidae were born as part of the farming operation. As used in this

subparagraph, "livestock" includes, but is not limited to, cattle, sheep, new world

camelids, goats, bison, privately owned cervids, ratites, swine, equine, poultry,

aquaculture, and rabbits. Livestock does not include dogs and cats.

(E) Raising, breeding, training, leasing, or boarding horses.

(F) Turf and tree farming.

(G) Performing any practices on a farm incident to, or in conjunction with, farming

operations. A commercial storage, processing, distribution, marketing, or shipping

operation is not part of agricultural operations.

(iii) "Project" means certain risk mitigating measures, which may include, but are not

limited to, the following:

(A) Making it difficult for wildlife to access feed by storing livestock feed securely,

restricting wildlife access to feeding and watering areas, and deterring or reducing

wildlife presence around livestock feed by storing feed in an enclosed barn,

wrapping bales or covering stacks with tarps, closing ends of bags, storing grains in

animal-proof containers or bins, maintaining fences, practicing small mammal and

rodent control, or feeding away from wildlife cover.

(B) Minimizing wildlife access to livestock feed and water by feeding livestock in an

enclosed area, feeding in open areas near buildings and human activity, removing

extra or waste feed when livestock are moved, using hay feeders to reduce waste,

using artificial water systems to help keep livestock from sharing water sources with

wildlife, fencing off stagnant ponds, wetlands, or areas of wildlife habitats that pose a

disease risk, and keeping mineral feeders near buildings and human activity or using

devices that restrict wildlife usage.

(iv) "Wildlife risk mitigation action plan" means a written plan consisting of 1 or more

projects to help reduce the risks of a communicable disease spreading between

wildlife and livestock that is approved by the department of agriculture and rural

development under the animal industry act, 1988 PA 466, MCL 287.701 to 287.746.

What if I own a parcel that is contiguous to my farm but it is vacant?

If a parcel of real property is classified as agricultural real property and is engaged in

agricultural operations, any contiguous parcel owned by the same taxpayer, that is a

vacant parcel, a wooded parcel, or a parcel on which is located one or more agricultural

outbuildings that comprise more than 50% of the taxable value of all buildings on that

parcel as indicated by the assessment records for the local tax collecting unit in which

that parcel is located, is also classified as agricultural real property.

How is contiguity defined?

Contiguity is not broken by a boundary between local tax collecting units, a section

boundary, a road, a right-of-way, or property purchased or taken under condemnation

proceedings by a public utility for power transmission lines if the two parcels separated

by the purchased or condemned property were a single parcel prior to the sale or

condemnation. Contiguity requires that the parcel classified as agricultural real property

and the vacant parcel, wooded parcel, or parcel on which is located one or more

agricultural outbuildings must be immediately adjacent to each other, without

intervening parcels that do not qualify for classification as agricultural real property

based on their actual agricultural use.

What if the parcels are in different tax collecting units?

It is the intent of the legislature that the parcel shall be classified as agricultural real

property even if the contiguous parcels are located in different local tax collecting units.

What is an agricultural operation?

Agricultural operations include:

Farming in all aspects that include the cultivating of soil.

Growing and harvesting any agricultural, horticultural, or floricultural commodity.

Dairy farming.

Raising livestock, to include, but not limited to, cattle, sheep, new world camelids,

goats, bison, privately owned cervids, ratites, swine, equine, poultry, aquaculture,

and rabbits. Livestock does not include dogs and cats.

Raising bees, fish, fur-bearing animals, or poultry.

Operating a game bird hunting preserve licensed under part 417 of the natural

resources and environmental protection act.

Farming operations that harvest cervidae on site where not less than 60% of the

cervidae were born as part of the farming operation.

Raising, breeding, training, leasing, or boarding horses.

Turf and tree farming.

Performing any practices on a farm incident to, or in conjunction with, farming

operations.

Commercial storage, processing, distribution, marketing, or shipping operations are not

part of the agricultural classification. Gardening and woodlot/forest management are

also not considered agricultural for classification purposes.

Are there minimum size requirements to be classified agricultural?

There are no minimum size or income requirements for the agricultural classification.

For instance, viable agricultural operations growing herbs or mushroom crops are

possible on just a few acres of land.

My property is zoned agricultural, so I should automatically be classified

agricultural, right?

Property that is zoned agricultural may not necessarily be classified as agricultural.

While the zoning of a particular property may be an influencing factor, the zoning does

not dictate the classification.

If my property is not classified agricultural does that mean I can’t farm anymore?

The classification of your property has nothing to do with your ability or “right” to farm.

Classification is for property tax equalization purposes and does not dictate the use of

the property.

What is the benefit to my property being classified agricultural?

Property that is classified agricultural is exempt from certain school taxes (18 mills of

school operating) and is the same benefit as a homestead or principle residence

exemption.

If my property is not classified agricultural is there a way to still be exempt from

the 18 mills?

Yes, your property may be eligible for the Qualified Agricultural Program Exemption.

This program is explained in detail in a STC publication available on our Web site at

www.Michigan.gov/statetaxcommission.

If my property is in a federal set aside program, that would cause it to be

classified agricultural. Correct?

The inclusion of some or all of the acreage of a property in a federal set aside program

does not necessarily mean that the property should be classified as agricultural.

If the property is in an area of heavy residential or recreational use and the market for

agricultural property is limited or nonexistent, the residential classification may be

determined as the most appropriate.

If the property is under active cultivation or other agricultural use and the property is in

an area of heavy residential or recreational use and the market for agricultural property

is limited or nonexistent, developmental may be the appropriate classification.

Should property in the PA 116 program be classified agricultural?

Inclusion of land in the Farmland and Open Space Preservation Act (P.A. 116) does not

necessarily mean the property should be classified as agricultural.

There are situations in which a property subject to a farmland development rights

agreement could be classified other than agricultural – for example:

A farm in the path of immediate development that has a market value in excess of its

value in current use may be classified other than agriculture. The land could be

purchased with the intent being for commercial or residential use with the purchaser

waiting for the agreement to expire.

A farm with a short period left on the agreement that is in the path of residential

development. It could qualify for a residential classification because it probably will

be used for residential purposes in the immediate future.

Under certain circumstances the agreement can be relinquished. One of these

circumstances is when a local governing body determines that relinquishment is in

the public interest and it has been zoned commercial or industrial for the preceding

three years.

What is the definition of tree farming?

Tree farming includes growing nursery stock for wholesale or retail markets as well as

Christmas trees for the holiday wholesale or retail markets. Tree farming typically

incorporates the cultivating of land, planting seedlings, periodic removal of weeds and

grasses and protecting the stock from insects, and other harmful pests. Nursery stock

includes trees being grown for replanting for a landscaping, erosion control practice, or

for stocking or restocking a timber land property.

What about a commercial orchard?

A commercial orchard is an agricultural operation.

If I am harvesting for the value of the wood is that tree farming?

Tree farming does not include a forest or woodlot that will eventually be harvested for

the value of the wood as lumber or pulp. Further clarification of the difference between

tree farming and forest or woodlands is discussed in Attorney General Opinion Number

5702 dated May 6, 1980 (see appendix).

What about Maple Syrup operations?

Property with a significant number of maple syrup trees is an agricultural use. However

the land devoted to the processing and bottling of maple syrup is not part of the

agricultural classification. Assessors will refer to MCL 211.34c (5) for guidance

regarding multiple classifications on a single parcel. According to MCL 211.9, personal

property used in agricultural operations is exempt. Agricultural operations are defined

to include collecting, evaporating, and preparing maple syrup if the owner of the

property has $25,000.00 or less in annual gross wholesale sales.

What is included in the definition of raising bees?

Beekeepers and/or Honey Producers include:

Hobbyists (less than 25 colonies)

Sideliners (25 – 300 colonies)

Commercial (300 or more colonies)

Hobbyists generally produce for themselves, relatives and friends. Sideliners produce

honey for sale to consumers and processors. Commercial producers generally produce

honey for sale to consumers, processors and distributors of honey and honey products.

If I am a hobbyist can my property be classified agricultural?

While raising bees is an agricultural activity, raising them as a hobby would usually not

result in being classified agricultural. Sideliners are generally a unit of other agricultural

operations. Commercial producers may best be classified Agricultural although the

commercial storage, processing, distribution, marketing or shipping portions of the

operation are not agricultural.

What is a hobby farm and are they classified agricultural?

Hobby farms are not generally part of the agricultural class.

“Hobby farms” usually consist of a home, a few acres (in rare occasions many acres),

and out buildings. They frequently include the raising of livestock which are being used

by the property owner such as horses, a few cows, sheep or goats, chickens for

household use (meat and eggs), or a small fishpond. Occasionally excess produce

from a garden may be sold to a list of clients or at a roadside stand.

Small orchards and gardens used for family consumption are common on the hobby

farm. In many cases the hobby farm may have been a part of a past agricultural

operation. The farmstead may have been sold or the land may have been sold, but in

any case, the property value is mainly in the residential property.

What about a captive cervidae operation?

The raising of captive cervidae for sale as breeding stock or for the sale of the meat to a

store is an agricultural activity. Habitat manipulation and the feeding of wild cervidae to

encourage cervidae to remain in or visit an area to assist in the viewing and/or hunting

of the animals is not an agricultural activity.

What if an owner implements a wildlife mitigation action plan?

Statute indicates that property shall not lose its classification as agricultural real

property as a result of an owner or lessee of that property implementing a wildlife risk

mitigation action plan. These projects are to assist in the reduction of risk of a spreading

a communicable disease between wildlife and livestock and are done with the approval

of the Department of Agriculture.

Commercial Real Property

MCL 211.34c defines Commercial Real Property as:

Commercial real property includes the following:

(i) Platted or unplatted parcels used for commercial purposes, whether wholesale,

retail, or service, with or without buildings.

(ii) Parcels used by fraternal societies.

(iii) Parcels used as golf courses, boat clubs, ski areas, or apartment buildings with

more than 4 units.

What if I have a small business in my house?

When a small part of a house is used for a commercial or retail operation, and the

house is in a residential area, the property will usually be classified residential.

What if my business is in a building that at one time was a residence?

Many areas have structures that were built for residential use but are now used as

commercial, office, or retail space. These parcels should generally be included in the

commercial classification.

What if my business is on the same property as my home?

The heavy equipment repair shop of a contractor, logger, or trucker located on the same

property as the homestead will require the assessor to determine the value of each use.

See MCL 211.34c (5) and the discussion of multiple uses of a property.

This also applies to offices, storage or warehouse facilities, fabrication areas, and retail

areas in conjunction with homestead properties.

What about a pay to hunt operation?

If 60% or more of the cervidae were born and raised on site, the property is to be

classified agricultural. If less than 60% were born and raised on site, a fee is paid to

hunt, and this is the predominant use of the property, then it is classified commercial.

I have a fishing camp where I rent out rooms, gear and boats. Would this

property be classified commercial?

Fish camps that include lodging and/or may include the rental of fishing gear and boats

should be classified in the commercial class. If the property includes the owner's

residence, the total value of each use must be calculated to determine the proper

classification.

If the residence is worth $200,000 and the commercial uses are worth only half that, the

land would be classified residential.

What about a youth day camp or residential camp?

Youth activity day camps and residential camps that are not part of an exempt

organization should be included in the commercial classification. Examples of this type

of property include Eco-adventure camps, nature retreats, sport camps, music camps,

and childcare camps. Examples of similar camps that are frequently exempt would be

Boy Scout and Girl Scout camps, YMCA day camps, and Church camps.

Developmental Real Property

MCL 211.34c defines developmental real property as: parcels containing more than 5

acres without buildings, or more than 15 acres with a market value in excess of its value

in use. Developmental real property may include farm land or open space land adjacent

to a population center, or farm land subject to several competing valuation influences.

parcels containing more than 5 acres without buildings, or more than 15 acres with a

market value in excess of its value in use. Developmental real property may include

farm land or open space land adjacent to a population center, or farm land subject to

several competing valuation influences.

The developmental classification is normally used in areas of changing use near

significant population centers.

Industrial Real Property

MCL 211.34c defines industrial real property as:

Platted or unplatted parcels used for manufacturing and processing purposes, with

or without buildings.

(ii) Parcels used for utilities sites for generating plants, pumping stations, switches,

substations, compressing stations, warehouses, rights-of-way, flowage land, and

storage areas.

(iii) Parcels used for removal or processing of gravel, stone, or mineral ores.

(iv) For taxes levied after December 31, 2002, buildings on leased land used for

industrial purposes.

(v) For taxes levied after December 31, 2002, buildings on leased land for utility

purposes.

Timber-Cutover Real Property

MCL 211.34c defines timber-cutover real property as: parcels that are stocked with

forest products of merchantable type and size, cutover forest land with little or no

merchantable products, and marsh lands or other barren land. However, when a typical

purchase of this type of land is for residential or recreational uses, the classification

shall be changed to residential.

What if I bought the land to hunt or camp on?

When a typical purchase of this type of land is for residential or recreational uses, the

classification shall be changed to residential.

How do we decide if our property should be timber-cutover or not?

In determining if a wooded parcel should be classified as timber-cutover or another

classification, you need to look at the use of the property.

Some questions an assessor may ask before determining that a parcel should be

classified as timber-cut over are:

Does the property have a history of timber sales?

Does the owner have a written forest management plan?

Does the property owner keep a business journal with records of expenses, receipts,

timber additions, and removal?

Does the owner complete IRS Form T (Timber)?

Frequently, an indication that wooded lands should be classified as other than timber-

cutover is when there are buildings on the land, such as a home, cottage, or a hunting

and fishing camp.

However, this is not always the case. For example, there may be a building on the

property that is used to store timber-harvesting equipment. Or the total usage of a

parcel may include more than one classification, but the timber-cutover use most

significantly influences the total valuation of the parcel.

What about marshland or sand dunes?

Marshlands, sand dunes, and other "barren land" that is in areas that cannot be used

for recreational or residential purposes are generally included in the timber-cutover

classification.

Agricultural Personal Property Classification

MCL 211.34c defines agricultural personal property as: any agricultural equipment and

produce not exempt by law.

MCL 211.9 provides a specific exemption for agricultural personal property:

Property actually used in agricultural operations and farm implements held for sale

or resale by retail servicing dealers for use in agricultural production. As used in this

subdivision, "agricultural operations" means farming in all its branches, including

cultivation of the soil, growing and harvesting of an agricultural, horticultural, or

floricultural commodity, dairying, raising of livestock, bees, fur-bearing animals, or

poultry, turf and tree farming, raising and harvesting of fish, collecting, evaporating,

and preparing maple syrup if the owner of the property has $25,000.00 or less in

annual gross wholesale sales, and any practices performed by a farmer or on a farm

as an incident to, or in conjunction with, farming operations, but excluding retail

sales and food processing operations. Property used in agricultural operations

includes all of the following:

(i) A methane digester and a methane digester electric generating system if the

person claiming the exemption complies with all of the following:

(A) After the construction of the methane digester or the methane digester electric

generating system is completed, the person claiming the exemption submits to the

local tax collecting unit an application for the exemption and a copy of certification

from the department of agriculture that it has verified that the farm operation on

which the methane digester or methane digester electric generating system is

located is in compliance with the appropriate system of the Michigan agriculture

environmental assurance program in the year immediately preceding the year in

which the affidavit is submitted. Three years after an application for exemption is

approved and every 3 years thereafter, the person claiming the exemption shall

submit to the local tax collecting unit an affidavit attesting that the department of

agriculture has verified that the farm operation on which the methane digester or

methane digester electric generating system is located is in compliance with the

appropriate system of the Michigan agriculture environmental assurance program.

The application for the exemption under this subparagraph shall be in a form

prescribed by the department of treasury and shall be provided to the person

claiming the exemption by the local tax collecting unit.

(B) When the application is submitted to the local tax collecting unit, the person

claiming the exemption also submits certification provided by the department of

environmental quality that he or she is not currently being investigated for a violation

of part 31 of the natural resources and environmental protection act, 1994 PA 451,

MCL 324.3101 to 324.3133, that within a 3-year period immediately preceding the

date the application is submitted to the local tax collecting unit, he or she has not

been found guilty of a criminal violation under part 31 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.3101 to 324.3133, and that

within a 1-year period immediately preceding the date the application is submitted to

the local tax collecting unit, he or she has not been found responsible for a civil

violation that resulted in a civil fine of $10,000.00 or more under part 31 of the

natural resources and environmental protection act, 1994 PA 451, MCL 324.3101 to

324.3133.

than 2 universities to collect information regarding the effectiveness of the methane

digester and the methane digester electric generating system in generating

electricity and processing animal waste and production area waste. Information

collected under this sub-subparagraph shall not be provided to the public in a

manner that would identify the owner of the methane digester or the methane

digester electric generating system or the farm operation on which the methane

digester or the methane digester electric generating system is located. The identity

of the owner of the methane digester or the methane digester electric generating

system and the identity of the owner and location of the farm operation on which the

methane digester or the methane digester electric generating system is located are

exempt from disclosure under the freedom of information act, 1976 PA 442, MCL

15.231 to 15.246. As used in this sub-subparagraph, "university" means a public 4-

year institution of higher education created under article VIII of the state constitution

of 1963.

(D) The person claiming the exemption ensures that the methane digester and

methane digester electric generating system are operated under the specific

supervision and control of persons certified by the department of agriculture as

properly qualified to operate the methane digester, methane digester electric

generating system, and related waste treatment and control facilities. The

department of agriculture shall consult with the department of environmental quality

and the Michigan state university cooperative extension service in developing the

operator certification program.

(ii) A biomass gasification system. As used in this subparagraph, "biomass

gasification system" means apparatus and equipment that thermally decomposes

agricultural, food, or animal waste at high temperatures and in an oxygen-free or a

controlled oxygen-restricted environment into a gaseous fuel and the equipment

used to generate electricity or heat from the gaseous fuel or store the gaseous fuel

for future generation of electricity or heat.

(iii) A thermal depolymerization system. As used in this subparagraph, "thermal

depolymerization system" means apparatus and equipment that use heat to break

down natural and synthetic polymers and that can accept only organic waste.

(iv) Machinery that is capable of simultaneously harvesting grain or other crops and

biomass and machinery used for the purpose of harvesting biomass. As used in this

subparagraph, "biomass" means crop residue used to produce energy or agricultural

crops grown specifically for the production of energy.

(v) Machinery used to prepare the crop for market operated incidental to a farming

operation that does not substantially alter the form, shape, or substance of the crop

and is limited to cleaning, cooling, washing, pitting, grading, sizing, sorting, drying,

bagging, boxing, crating, and handling if not less than 33% of the volume of the

crops processed in the year ending on the applicable tax day or in at least 3 of the

immediately preceding 5 years were grown by the farmer in Michigan who is the

owner or user of the crop processing machinery.

(vi) Machinery used to install land tile on property exempt under section 7ee as

qualified agricultural property. If machinery is used to install land tile on property

other than qualified agricultural property, that machinery is exempt only to the extent

that it is used to install land tile on qualified agricultural property. A person claiming

an exemption under this section shall indicate the machinery's percentage of exempt

use in the statement submitted under section 19. As used in this subparagraph,

"land tile" means fired clay or perforated plastic tubing used as part of a subsurface

drainage system for land.

(vii) Machinery used to install or implement soil and water conservation techniques

on property exempt under section 7ee as qualified agricultural property. If machinery

is used to install or implement soil and water conservation techniques on property

other than qualified agricultural property, that machinery is exempt only to the extent

that it is used to install or implement soil and water conservation techniques on

qualified agricultural property. A person claiming an exemption under this section

shall indicate the machinery's percentage of exempt use in the statement submitted

under section 19. As used in this subparagraph, "soil and water conservation

techniques" means techniques for the conservation of soil and water described in

the field office technical guide published by the natural resources conservation

service of the United States department of agriculture.

Is a building on leased land used for agricultural operations classified as

agricultural personal property?

No. MCL 211.34c states that buildings on leased land used for agricultural operations

are to be classified as Agricultural Real Property.

What is the correct classification of a building on leased land when the building is

being used for industrial purposes and the land is classified as agricultural?

For taxes levied after December 31, 2002, buildings on leased land used for industrial

purposes is to be classified as Industrial Real property.

Would a building on leased land used for agricultural purposes that is classified

agricultural be entitled to the qualified agricultural property exemption?

Yes. The leased building is devoted to an agricultural use as defined by law and is

eligible for the Qualified Agricultural property exemption.

Is the agricultural personal property used in retail sales and food processing

exempt?

Personal property used in retail sales and in food processing does not generally qualify

for the exemption. However, the exemption does extend to equipment used in a

manner incidental to the farming operation that prepares a crop for market and does not

substantially alter the form, shape, or substance of the crop, if not less than 33% of the

volume of the crops processed in at least three of the last five years were grown by the

Michigan farmer who is the owner or user of the processing equipment.

Commercial Personal Property Classification

MCL 211.34c defines commercial personal property as:

(i) All equipment, furniture, and fixtures on commercial parcels, and inventories not

exempt by law.

(ii) All outdoor advertising signs and billboards.

(iii) Well drilling rigs and other equipment attached to a transporting vehicle but not

designed for operation while the vehicle is moving on the highway.

(iv) Unlicensed commercial vehicles or commercial vehicles licensed as special

mobile equipment or by temporary permits.

What types of businesses would be considered as having a commercial use?

The following businesses are commercial and would have commercial personal

property associated with their respective enterprise: automotive repair, construction

company, contractors, concrete providers, data center, distribution center, engineering,

excavating, financial service, inspection, installation service, investment service, leasing

company, loan service, moving company, packaging, printing service, rental company,

repair service, retail, sales, service company, shipping and receiving, storage company,

supply, technology support service, transportation, trucking-common carrier, and

warehousing.

Is a building on leased land used for commercial purposes classified as

commercial personal property?

No. MCL 211.34c states that buildings on leased land used for commercial purposes

are to be classified as Commercial Real Property.

Are communication towers on leased land assessed as personal property?

No. The tower is valued and assessed as a real property improvement. When a

communication tower is built on leased land, the owner of the tower is required to report

the original construction costs of the tower in the year the tower was built on Section N

of the Personal Property Statement, in same way that it would report any other structure

on leased land.

Industrial Personal Property Classification

MCL 211.34c defines industrial personal property as:

(i) All machinery and equipment, furniture and fixtures, and dies on industrial

parcels, and inventories not exempt by law.

(ii) Personal property of mining companies.

(d) For taxes levied before January 1, 2003, residential personal property includes a

home, cottage, or cabin on leased land, and a mobile home that would be

assessable as real property under section 2a except that the land on which it is

located is not assessable because the land is exempt.

Is a building on leased land used for industrial purposes classified as Industrial

Personal Property?

No. MCL 211.34c states that buildings on leased land used for industrial or utility

purposes are to be classified as Industrial Real Property.

A leasing company in an Industrial Park is on property zoned Industrial. The

majority of the personal property owned by the leasing company is leased to

industrial businesses. How should the personal property be classified?

The classification of a leasing company’s personal property is Commercial Personal.

The classification of personal property owned by the leasing company is not determined

by the lessees using the equipment and not by the zoning of the property.

Example: A leasing company leases assessable personal property (photocopiers) to

both commercial and industrial property owners. They also lease manufacturing

equipment to owners of industrial sites. The classification of property owned by a

leasing company is not determined by the classification of the lessees using the

equipment.

Residential Personal Property Classification

MCL 211.34c defines residential real property as: For taxes levied before January 1,

2003, residential personal property includes a home, cottage, or cabin on leased land,

and a mobile home that would be assessable as real property under section 2a except

that the land on which it is located is not assessable because the land is exempt.

Are homes, cottages and cabins on leased land to be classified as residential

personal property?

No. PA 620 of 2002 has amended the definition of MCL 211.34c to state that homes,

cottages, and cabins on leased land are no longer Residential Personal property. For

taxes levied after January 1, 2003, homes, cottages, and cabins on leased land are to

be classified as Residential Real property. (Note: This is also true of mobile homes that

would be assessable as real property to the owner of the land as provided by MCL

211.2a except that the land on which the mobile home is located is exempt.

Should improvements to a mobile home (such as porches, decks, etc.) located in

a licensed mobile home park which is subject to the $3.00 per month specific tax

be treated as a building on leased land?

Yes. Improvements to a mobile home located within a licensed mobile home park that

are not exempt due to the $3.00 per month specific tax, shall be assessed on the real

property roll to the owner of the improvements.

Utility Personal Property Classification

MCL 211.34c defines utility personal property as:

(i) Electric transmission and distribution systems, substation equipment, spare parts,

gas distribution systems, and water transmission and distribution systems.

(ii) Oil wells and allied equipment such as tanks, gathering lines, and field pump

units and buildings.

(iii) Inventories not exempt by law.

(iv) Gas wells with allied equipment and gathering lines.

(v) Oil or gas field equipment stored in the open or in warehouses such as drilling

rigs, motors, pipes and parts.

(vi) Gas storage equipment

(vii) Transmission lines of gas or oil transporting companies.

Is a building on leased land which is used for utility purposes to be classified as

Utility Personal Property?

No. MCL 211.34c states that buildings on leased land used for utility or industrial

purposes shall be classified as Industrial Real Property.

Appeal Procedures:

Property owners that disagree with the assessor’s decision regarding the property’s

classification must file a petition with the March Board of Review to appeal the

classification.

If a taxpayer disagrees with the decision of the Board of Review’s decision, they must

fully complete and submit a Form 2167 to the State Tax Commission (STC), for each

parcel being appealed, by June 30

of the current year.

Upon receipt of a classification appeal, a response form is sent to either the assessor

(when a property owner files) or the property owner (when the assessor files). The

assessor or property owner has 30 days to provide a response to the Commission.

Those responses, along with the original petition, are reviewed by STC staff. STC staff

then makes a recommendation to the STC. The STC makes a final determination by

reviewing the petition filed, the response provided by the assessor or property owner

and the staff recommendation.

A taxpayer that disagrees with the determination of the State Tax Commission can

either file for reconsideration with the STC within 21 days of the determination or file an

appeal in Circuit Court. The request for reconsideration must include information not

previously submitted to the STC.

An assessor who wants to appeal the March Board of Review’s decision can appeal to

the STC by completing and submitting Form 2167A not later than June 30

of the

current year. However, Pursuant to a decision ordered by the Court of Appeals, an

assessor cannot appeal the classification of a subject property that was not protested

before the March Board of Review.

APPENDIX

STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5702

May 6, 1980

TAXATION:

Ad valorem property taxes--exemption

LOGGING EQUIPMENT:

Exemption of logging equipment

Logging equipment of commercial operators growing or harvesting trees and other timber is not exempt from ad

valorem property taxes.

Honorable Russell R. Hellman

State Representative

The Capitol

Lansing, Michigan

Dear Representative Hellman:

You have requested my opinion as to whether or not logging equipment used in the growing or harvesting of trees is

exempt from taxation under the general property tax act, 1893 PA 206, MCLA 211.1 et seq; MSA 7.1 et seq.

1893 PA 206, supra, Sec. 1, provides:

'That all property, real and personal, within the jurisdiction of this state, not expressly exempted, shall be

subject to taxation.'

In 1893 PA 206, supra, Sec. 9, the legislature has provided for the exemption of certain designated personal

property. No specific mention is made of timber or logging operations or the personal property used in connection

therewith.

The closest reference to timber or logging operations is contained in 1893 PA 206, Sec. 9, supra, subdivision (j),

which deals with property used in agricultural operations and agricultural operations are therein defined as:

'. . . farming in all its branches, including cultivation of the soil, growing and harvesting of an agricultural,

horticultural, or floricultural commodity, dairying, raising of livestock, bees, fur-bearing animals, poultry

or fish, turf and tree farming, and any practice performed by a farmer or on a farm as an incident to, or in

conjunction with, farming operations.'

As is evident, there is no mention of timber or logging operations. The term 'tree farming' as it is used in 1893 PA

206, Sec. 9, supra, does not embrace logging operations. Traditionally, the legislature has observed a distinction

between agriculture and forestry. The term 'tree farm' has been limited to orchards and ornamental tree farms. For

example, 1893 PA 206, supra, Sec. 7e(1), of the general property tax act [MCLA 211.7e; MSA 7.7(4b)] exempts

from real property taxation:

'The value of deciduous and evergreen trees, shrubs . . . growing on agricultural land devoted to agricultural

purposes . . .' (Emphasis supplied.)

However, 1893 PA 206, supra, Sec. 7e(1), also provides:

'. . . Nothing herein contained shall affect the taxation of growing timber.'

It is noteworthy that 1893 PA 206, supra, Sec. 7e(1), was added to the general property tax act by 1966 PA 268, and

that the same legislature also amended 1893 PA 206, supra, Sec. 9, by means of 1966 PA 205. In framing and

enacting both 1966 PA 268 and 1966 PA 205, the legislature had full knowledge of the provisions of each. Reichert

v Peoples State Bank for Savings, 265 Mich 668; 252 NW 484 (1934). Thus, the intent of the legislature is clear that

the exemption for 'tree farming', which includes the growing of ornamental, Christmas and fruit trees contained in

1893 PA 206, supra, Sec. 7e(1), does not include 'growing of timber' for harvest of lumber or pulp.

It is also necessary to consider two legislative enactments dealing with forest reservations. 1917 PA 86, Sec. 1,

MCLA 320.271; MSA 13.201, provides:

'Upon any tract of land not exceeding 160 acres, where at least 1/2 is improved and devoted to agricultural

purposes in this state, there may be selected by the owner or owners thereof, as a private forest reservation,

a portion thereof not exceeding 1/4 of the total area of said tract . . .' (Emphasis supplied.)

While such lands are exempt from all taxation by 1917 PA 86, Sec. 11, MCLA 320.281; MSA 13.211, but made

subject to a stumpage payment for cut timber, the statute contains no exemption from ad valorem property taxes for

personal property used in timber or logging operations.

Consideration must also be given to 1925 PA 94, MCLA 320.301 et seq; MSA 13.221 et seq, which provides for the

establishment of commercial forest reserves and which are defined as tracts of land 'containing no material natural

resources other than forest growth, no portion of which is used for agricultural . . . purposes, . . .'. 1925 PA 94, supra,

Sec. 2.

Eligible commercial forest reserve lands are exempt from ad valorem property taxation pursuant to 1925 PA 94,

supra, Sec. 5, but are made subject to a specific tax per acre based upon the total millage rate levied in the township.

In addition, a stumpage tax is imposed upon the forest products cut as permitted by the act. This statute contains no

provision for exemption from ad valorem property tax of timber or logging equipment utilized to remove forest

products from the commercial forest reserve.

It is, therefore, my opinion that the answer to your question is in the negative.

Frank J. Kelley

Attorney General