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Smith v. Township of Forester

Court of Appeals of Michigan

February 13, 2018

WAYNE A. SMITH, Petitioner-Appellant,
v.
TOWNSHIP OF FORESTER, Respondent-Appellee.

         Tax Tribunal LC No. 15-004331-TT

          Before: Ronayne Krause, P.J., and Fort Hood and O'Brien, JJ.

          PER CURIAM.

         Petitioner appeals by right the judgment of the Michigan Tax Tribunal (MTT) denying his request for a poverty exemption from his 2015 property taxes. We affirm.

         Petitioner applied for a poverty exemption for his principal residence located in Forester Township. Respondent's poverty exemption guidelines provided that an exemption would be denied if the applicant's assets exceeded $4, 500 or if the applicant's income exceeded the federal poverty guidelines, which at that time was $11, 770 for a household of one. Respondent's guidelines also indicated that reverse mortgage[1] payments would be "added" to an applicant's income. In his application, petitioner calculated his assets at over $9, 000. He also disclosed that he received over $10, 000 in social security retirement payments and that he had received over $12, 000 in reverse mortgage payments that tax year. Respondent's board of review denied the request for an exemption on the ground that petitioner had "adequate resources."

         Petitioner then appealed to the MTT Small Claims Division, contending that respondent's asset limit was unduly restrictive.[2] Respondent maintained that it denied the exemption because petitioner's income exceeded the poverty guideline. The hearing referee, relying on IRS Publication 936 (2015), found that reverse mortgage payments should not constitute income and that petitioner's income was sufficiently low when those payments were excluded. The referee noted that petitioner still exceeded the asset limit, but nonetheless found a substantial and compelling reason to deviate from the guidelines because it would be unreasonable to require petitioner to sell his vehicle in order to pay his property taxes. Respondent filed exceptions to the proposed opinion and order, primarily arguing that reverse mortgage payments should be treated as income for poverty exemption purposes.

         In its final order and judgment, the MTT agreed with respondent. Relying on an unpublished opinion from this Court, the MTT concluded that it was irrelevant that reverse mortgage payments were not taxable income. The MTT found that the reverse mortgage payments were available to petitioner to pay his property taxes. Given that ruling, the MTT found it "unnecessary to evaluate [petitioner's] eligibility under the asset test, " but nonetheless found that there were not "substantial and compelling reasons to grant the exemption when considering both the income and the asset tests." Petitioner filed a motion for reconsideration, which the MTT denied because petitioner "failed to demonstrate that he was unable to contribute to the public charge as required by MCL 211.7u and is not eligible for the exemption."

         On appeal, petitioner challenges the MTT's final judgment and its denial of his motion for reconsideration. If fraud is not alleged, the MTT's decision is reviewed "for misapplication of the law or adoption of a wrong principle." Wexford Med Group v City of Cadillac, 474 Mich. 192, 201; 713 N.W.2d 734 (2006).

         The poverty exemption from property taxes on a principal residence is governed by § 7u of the General Property Tax Act (GPTA), MCL 211.1 et seq., which provides in pertinent part as follows:

(1) The principal residence of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges is eligible for exemption in whole or in part from taxation under this act. This section does not apply to the property of a corporation.
(2) To be eligible for exemption under this section, a person shall do all of the following on an annual basis:
* * *
(e) Meet the federal poverty guidelines updated annually in the federal register by the United States department of health and human services under authority of section 673 of subtitle B of title VI of the omnibus budget reconciliation act of 1981, Public Law 97-35, 42 USC 9902, or alternative guidelines adopted by the governing body of the local assessing unit provided the alternative ...

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