New Legislation Helps Michigan Land Banks

New legislation that gives land banks the option of waving the 5/50 tax capture on eligible properties became law on June 28. Equally important, a second provision for the first time penalizes those who do not pay the 5/50 tax and renders their properties eligible for tax foreclosure. On June 28th, Governor Snyder signed both provisions into law as PA 222 of 2012, with the new legislation going into effect immediately, and was greeted with great enthusiasm by those in the field.

PA 222 puts in place two important and long-sought-after policy priorities for land banks across Michigan.

First, it gives land banks greater flexibility in the exercise of their powers, namely the ability to waive their so-called 5/50 specific tax for specific properties, developments, or deals. This is especially critical in deals that involve property tax abatements and also in some circumstances involving the joining and combination of side lots.

Second, it finally closes an ill-conceived loophole that has denied land banks any mechanism for enforcing the payment and collection of their 5/50 specific tax – a loophole that also allowed tax scofflaws to avoid any accountability for either their refusal to pay owed taxes or be subject to penalties that have real consequences for neglect or abandonment. Before this reform was enacted on June 28, there was effectively no penalty when scofflaws failed to pay the 5/50 specific tax. Now, any failure to pay the 5/50 specific tax will be treated just as the failure to pay any other property tax is treated – these properties and their owners will foreclosed upon by the local foreclosing governmental unit.

“This bill has the potential to open up the door for more economic development statewide, as well as help land banks across the state move property more effectively into productive reuse,” said Amy Hovey, Interim President and CEO of the Center for Community Progress. “We’re delighted that land banking efforts can now utilize this important cost saving, which will ultimately help jumpstart both residential and commercial reuse for communities.”