Tax Abatements for Manufacturers
In 1974, the Michigan Legislature gave municipalities the ability to offer manufacturers tax abatements as an incentive to expand or locate in their communities. The abatement means that approximately 50% of the property taxes on new (to the Michigan tax rolls) real and personal investments are abated for up to 12 years. The tax savings helps finance the investment. At the end of the abatement term, the company pays full taxes. This is win:win in that the community gains jobs and stimulates new taxes, and the company has financial help with the expansion.
"The NLEA helped Bay Shore Steel Works obtain tax abatements on two expansions totaling $4.6 million. As a result of the investment, we won a $7.3 million General Dynamics Land Systems contract in 2011 and were able to hire 5 more employees.” Anton Matye, Bay Shore Steel Works
Personal Property Tax Relief in Distress Communities (PA328)
Certain distressed communities and all county seats (that are incorporated cities) can approve tax abatements on new personal property for eligible businesses in their community under the Personal Property Tax Relief in Distress Communities Act (PA 328 of 1998). Businesses in the field of manufacturing, mining, research and development, wholesale trade and office operations, can apply to their municipality for a tax abatement under this Act if their project will help to reduce unemployment, promote economic growth and increase capital investment. The business has to be located in an industrial development district, brownfield redevelopment zone, a tax increment financing district or a downtown development district. Abatements reduce property taxes on new personal property by the full millage rate (including state and local levies) for the number of years determined by the municipality. (Note: in NLEA’s region, the only cities eligible to use this Act are Charlevoix, Cheboygan and Petoskey.)
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Local Development Finance Act (LDFA)
Local Development Finance Act (LDFA) (Public Act 281 of 1986) allows a city, village or urban township (there are no urban townships in the NLEA region) to utilize tax increment financing (TIF) to fund public infrastructure improvements. An LDFA is typically formed around an industrial park, as the properties eligible for tax capture are only manufacturing, high-technology or value-added agricultural processing.
The city or village must set up the LDFA by following the requirements of the Act. This includes designating the LDFA district, notifying the public, holding public hearings, appointing an LDFA Board, etc. Once established, the LDFA prepares a development plan and tax increment financing plan, which they submit to the municipality for approval. Public hearings must be held for this step, as well. Once this is accomplished, the LDFA begins to capture a portion of the new property taxes that result from the improvements on the eligible property. These funds are then used by the LDFA, in accordance with the approved plan, for public infrastructure improvements, the acquisition of land, demolition, site preparation, etc. within the LDFA district.
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NLEA’s Team of Economic Development Specialists can assist communities in finding the most effective approach to meet their needs. To learn more about our services and full range of community development solutions, please contact us at 231-582-6482, or by email.