A recent statutory amendment, consisting of only a few words, could have a significant impact for many Michigan taxpayers in convalescent care. The amendment, effective May 3, 2018 (HB 4905 introduced by Rep. Lucido), amended Michigan’s General Property Tax Act (“GPTA”) , (“Amendment”). Michigan adopted the GPTA to for “uniform general ad valorem taxation of real and tangible personal property not exempt by law;” the statute sets exemptions for real and personal property, depending upon use, ownership, or other factors. One exemption is the Principal Residence Exemption (“PRE”) or the “homestead exemption.” A principal residence is defined the place “where an owner … has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return … until another principal residence is established.”
Previously, to maintain a PRE, a homeowner needing temporary care but intending to return home was required to remain in nursing care rather than with a friend or relative, and his or her home must remain vacant.
The amendment changes only two phrases, adding “or other location,” and removing “is not occupied.” The same homeowner noted above will be able to maintain the PRE, convalesce with family or friends, and also allow someone to occupy his or her home, so long as the occupier is not paying rent. Per the changed language, a homeowner may for PRE purposes manifest an intent to return to the property by all of the following:
- continues to own the property while residing in the nursing home, assisted living facility, or other location.
- has not established a new principal residence
- maintains or provides for the maintenance of the property while residing in the nursing home, assisted living facility, or other location.
- the property [is not occupied], is not for sale, is not leased, and is not used for any business or commercial purpose.
The modification recognizes two common circumstances: (1) an individual, often a senior citizen, who resides in a nursing home or assisted living facility while allowing an individual, often a family member, to occupy his or her home for purposes of maintenance or convenience; and/or (2) a senior citizen or another in convalescence who resides with family members or friends while recovering from illness. The amendment introduction indicates the intent for a “common-sense solution,” particularly beneficial for senior citizens facing health and aging challenges, and accommodates seniors who may not know PRE filing and rescission requirements. As Michigan’s population continues to age, the analysis notes that policies supportive of individuals’ ability to age in their own homes will be beneficial.
In some cases, the answer could be to simply forego the PRE. But where the property has significant value and a significant PRE, or for persons on a fixed income, this answer may not be so simple. Prior to the amendment, loss of the PRE could leave a homeowner with poor choices. The sometimes staggering cost of nursing facility case is undeniable. Studies find that in the U.S., millions of unpaid individuals— family members, friends and neighbors—provide care to someone ill, disabled or aged. PRE varies with property value and, depending upon individual circumstances, loss of PRE can be impactful; the tax savings on an average home may not be as staggering a number as nursing care, but offers a savings that can be used for health care or other needs. This seemingly small amendment allows a homeowner far more choices, and appears to indeed be a common-sense improvement to assist many Michigan families.
