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Rentschler v. Township of Melrose

Court of Appeals of Michigan

November 28, 2017

DAVID N. RENTSCHLER, Petitioner-Appellant,
TOWNSHIP OF MELROSE, Respondent-Appellee.

         Tax Tribunal LC No. 16-000095-TT

          Before: Hoekstra, P.J., and Stephens and Shapiro, JJ.

          Shapiro, J.

         Petitioner appeals the Michigan Tax Tribunal's decision that he was not entitled to a Principal Residence Exemption (PRE) under MCL 211.7cc for the 2013, 2014, and 2015 tax years. Because the Tribunal made an error of law, we reverse.[1]


         Petitioner is the owner of a property located in Boyne City, Michigan ("the property"). Petitioner applied for PRE exemption on the property. On December 12, 2015, respondent issued a notice denying petitioner's claim for the 2013, 2014, and 2015 tax years for two reasons. First, it stated that "[t]he property claimed is not the owner's principal residence, " and second, that the "[o]wners employment [sic] out of state. Property possibly rented during part of year." Petitioner filed an appeal with the Michigan Tax Tribunal contesting respondent's factual assertions and contending that he should be granted a PRE on the property. In support of his appeal, petitioner submitted an affidavit stating that the property had been his principal residence for the relevant tax years. He presented proofs that during each year, he had been registered to vote at that address and that this was the address listed on his driver's license and his tax returns. Petitioner also averred that he had not claimed "a substantially similar exemption in property in another state."[2]

         After a hearing, the Tribunal accepted petitioner's factual claims. It found that petitioner was the owner of the property, that the property was residential, and that petitioner had occupied the property for the majority of the 2013, 2014, and 2015 tax years. Nevertheless, the Tribunal denied the PRE because petitioner had rented out the residence for more than 14 days during each year. It relied on the Michigan Department of Treasury Guidelines for the Michigan Principal Resident Exemption program (PRE guidelines). The relevant PRE guideline states: "[I]f an owner rents his property for more than 14 days a year, the property is not entitled to a principal residence exemption." The Tribunal noted:

[T]he guidelines "do not have the force of law." However, agency interpretations are granted respectful consideration, and if persuasive, should not be overruled without cogent reasons. The Tribunal, finding no cogent reason to disregard the Department's guidelines, is persuaded that Petitioner's leasing of the subject property negates entitlement to a principal residence exemption. [Quotation marks omitted.]

         Based upon this guideline, the Tribunal concluded that petitioner was not entitled to a PRE under MCL 211.7cc for the tax years, 2013-2015. Petitioner appeals from that determination.


         "Michigan's principal residence exemption, also known as the 'homestead exception, ' is governed by §§ 7cc and 7dd of the General Property Tax Act, MCL 211.7cc and MCL 211.7dd." EldenBrady v City of Albion, 294 Mich.App. 251, 256; 816 N.W.2d 449');">816 N.W.2d 449 (2011). MCL 211.7cc(1) provides in pertinent part that "[a] principal residence is exempt from the tax levied by a local school district for school operating purposes . . . if an owner of that principal residence claims an exemption as provided in this section."

         Further, MCL 211.7cc(2) provides in pertinent part:

[A]n owner of the property may claim 1 exemption under this section by filing an affidavit . . . . The affidavit shall state that the property is owned and occupied as a principal residence by that owner of the property on the date that the affidavit is signed and shall state that the owner has not claimed a substantially similar exemption, deduction, or credit on property in another state. . . .

         On appeal, petitioner points out that the Tribunal concluded that he satisfies each of these requirements. He further argues that the General Property Tax Act ("GPTA") itself does not contain any language that would disqualify him and that the PRE guideline is contrary to the clear and unambiguous language of the GPTA.[3] We agree with petitioner.

         In support of its adherence to the PRE guidelines, the Tribunal cited the second and third sentences of MCL 211.7dd(c). The Tribunal's opinion reads in pertinent part:

[W]hen the second and third sentence of MCL 211.7dd(c) are read in conjunction with one another, it is clear that the Legislature intended a principal residence to include only that portion of the property that is owned and occupied by the owner (as a principal residence), unless the portion that is unoccupied, and rented or leased to another, is less than 50% of the total square footage of living space. . . .

         The Tribunal wrongly applied the cited provisions within MCL 211.dd(c). The second sentence of MCL 211.7dd(c) deals with multiple-dwelling units, and provides, "Except as otherwise provided in this subdivision, principal residence includes only that portion of a dwelling or unit in a multiple-unit dwelling that is subject to ad valorem taxes and that is owned and occupied by an owner of the dwelling or unit." Petitioner's property is not a multiple-dwelling unit and so, this sentence does not apply. The third sentence of MCL 211.7dd(c) provides, "Principal residence also includes all of the owner's unoccupied property classified as residential that is adjoining or contiguous to the dwelling subject to ad valorem taxes and that is owned and occupied by the owner." This sentence is also inapplicable to the present case as there is no adjoining or contiguous property in issue.

         The other statutory provision cited by the Tribunal is MCL 211.27a(11) which defines "commercial purpose" as "used in connection with any business or other undertaking intended for profit, but does not include the rental of residential real property for a period of less than 15 days in a calendar year." However, that definition is by its own terms limited to 211.27a.[4] In addition, the use of the term in MCL 211.27a is limited to whether residential property transfers within a family trigger a reassessment of the property's equalized value. ...

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