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Delta Business Center, LLC v. Delta Charter Township

Court of Appeals of Michigan

June 20, 2019

DELTA BUSINESS CENTER, LLC, Petitioner-Appellant,
DELTA CHARTER TOWNSHIP, Respondent-Appellee, and DEPARTMENT OF TREASURY, Intervening Respondent-Appellee.

          Oakland Circuit Court LC No. 2017-161231-AA

          Before: Sawyer, P.J., and O'Brien and Letica, JJ.

          PER CURIAM.

         Petitioner, Delta Business Center, LLC (Delta), appeals as of right the trial court's opinion and order affirming the State Tax Commission's (STC's) denial of Delta's application for a tax exemption under the Plant Rehabilitation and Industrial Development Districts Act (the PRIDDA), MCL 207.551 et seq. On appeal, we are asked to decide under what circumstances leased property can qualify as "industrial property" under the PRIDDA. We conclude that for leased property to qualify as "industrial property" under the PRIDDA, a lessee must be liable for property taxes and must furnish proof of that liability. We further conclude that this means that a lessor cannot receive a tax exemption under the PRIDDA when the leased property must qualify as "industrial property." Because Delta is strictly a lessor of the property at issue, and because that property must qualify as "industrial property" for Delta to receive its requested tax exemption, the STC properly denied Delta's application. We affirm.

         I. BACKGROUND

         Under the PRIDDA, local governmental units may establish "plant rehabilitation districts" and "industrial development districts." MCL 207.554(1). After such a district is established, "the owner or lessee of a facility may file an application for an industrial facilities exemption certificate [IFEC] with the clerk of the local governmental unit that established the plant rehabilitation district or industrial development district." MCL 207.555(1). If approved by the local government, the application goes to the STC for review. MCL 207.557(1). If the STC grants the IFEC application, the applicant gets a tax advantage: in place of ad valorem taxes, an "industrial facility tax" is levied on the exempt property. MCL 207.561. If the STC had granted Delta's IFEC application, Delta's "industrial facility tax" for up to the next 12 years would have been calculated using the taxable value of the at-issue property in the year before the effective date of the IFEC, essentially freezing the taxable value of the property. MCL 207.564(1); MCL 207.566.

         Delta is the owner of a 93, 000-square-foot industrial park that it leases to tenants. The building on Delta's property was originally intended for printing newspapers, but, by 2017, that use was no longer economically feasible. So in an agreement between Delta Charter Township (the Township) and Delta, the Township agreed to grant Delta a 10-year IFEC; in return, Delta would invest $3, 900, 000 in the property.

         After being approved by the Township, Delta's IFEC application went to the STC for review. For Delta to receive the IFEC that it requested, it had to establish, among other things, that its property would constitute "industrial property" under MCL 207.552(7) after it was renovated. That definition provides a detailed explanation of all the activities that can be performed on a property for it to qualify as "industrial property." The STC interpreted MCL 207.552(7) as requiring that the IFEC applicant engage in one of the activities listed in that statute for the applicant to qualify for the exemption. Though Delta's tenants were allegedly engaging in listed activities, Delta was using the property for an unlisted activity-real estate development. The STC therefore denied Delta's IFEC application, concluding that Delta "does not qualify for the exemption because it does not engage in any of the activities listed within the definition of industrial property as outlined in MCL 207.552."

         Delta appealed to the circuit court.[1] The circuit court affirmed the STC's decision, but on other grounds.[2] The trial court reasoned that for leased property to be considered "industrial property" under MCL 207.552(7), "the lessee must be liable for the payment of property taxes and must furnish proof of that liability."[3] The court concluded that because Delta "offered no proof of [its] lessees' liability for payment of property taxes," the STC was authorized by law to deny Delta's application.

         Delta now appeals by right.


         Delta appealed the STC's decision in accordance with the Administrative Procedures Act, MCL 24.201 et seq. Under that act, the circuit court was required to set aside the STC's decision if, among other reasons, it was in violation of a statute or was affected by a substantial and material error of law. MCL 24.306.

         This Court reviews the circuit court's decision "to determine whether the circuit court applied correct legal principles and whether it misapprehended or grossly misapplied the substantial evidence test to the agency's findings." Sterling Heights v Chrysler Grp, LLC, 309 Mich.App. 676, 681; 873 N.W.2d 342 (2015) (quotation marks and citation omitted). "This Court reviews de novo questions of statutory interpretation." Id.

         III. ANALYSIS

         On appeal, Delta argues that the STC's denial of Delta's IFEC application was a material error of law or otherwise violated the PRIDDA. We disagree.

         "A court's primary task when interpreting a statute is to discern and give effect to the intent of the Legislature." Tomra of North America, Inc v Dep 't of Treasury,325 Mich.App. 289, 299; 926 N.W.2d 259 (2018). This Court must "first consider the statutory language itself; if the language is unambiguous, we conclude that the Legislature must have intended the clearly expressed meaning and we enforce the statute as written." Id. Tax exemptions are ...

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