On November 21, 2023, the Michigan Court of Appeals issued an important decision regarding property tax uncapping for a corporation that owned a family cottage. In Resort Properties Co-Operative v Township of Waterloo, Court of Appeals Case No. 364744, a married couple (the Babbages) owned 24% of the corporation’s share. The Babbages then purchased an additional 48% of the corporation’s shares and in the same year sold 20% of the corporation’s shares to other individuals. The Township determined that 68% of the corporation’s shares had transferred in the same year, which the Township found to trigger an uncapping of the taxes on the cottage owned by the corporation, pursuant to MCL 211.27a(6)(h). The corporation contested the uncapping claiming that the two share transactions should be interpreted individually, rather than cumulatively, to determine whether a “transfer of ownership” had occurred.
The Michigan Tax Tribunal agreed with the Township that a “transfer of ownership” had occurred, and that the Township had properly “uncapped” the taxes on the cottage. The corporation appealed to the Michigan Court of Appeals, who upheld the Township’s determination and found that it had properly considered the Babbages’ two share transfers cumulatively. The Court of Appeals recognized that the Legislature has explicitly directed that “transfers of ownership” involving corporate share sales are only considered individually for certain types of corporations (i.e., Summer Resort and Park Associations). Because the corporation-petitioner was not one of these types of corporations, the Legislature had implicitly set forth that sales of corporate shares must be considered cumulatively for determining whether a “transfer of ownership” has occurred. The Court of Appeals affirmed that a “transfer of ownership” occurs when a majority (in this case, 68%) of the corporation’s shares changed hands in the same calendar year. This case is pending for publication. If you have questions about property tax uncapping, our attorneys are here to help.