Toll Northville Limited Partnership v. Township of Northville ( 2012 )

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:
Opinion Robert P. Young, Jr. Michael F. Cavanagh
Marilyn Kelly
Stephen J. Markman
Diane M. Hathaway
Mary Beth Kelly
Brian K. Zahra
FILED JUNE 14, 2012
STATE OF MICHIGAN
SUPREME COURT
MICHIGAN PROPERTIES, L.L.C.,
Petitioner-Appellee,
v Nos. 143085, 143086,
and 143087
MERIDIAN TOWNSHIP,
Respondent-Appellant.
TOLL NORTHVILLE LIMITED
PARTNERSHIP and BILTMORE
WINEMAN LLC,
Petitioners-Appellants,
v No. 143281
NORTHVILLE TOWNSHIP,
Respondent-Appellee.
BEFORE THE ENTIRE BENCH
HATHAWAY, J.
The cases before us involve the proper interpretation of the General Property Tax
Act (GPTA), MCL 211.1 et seq. In Michigan Properties, LLC v Meridian Township, we
address whether a tax assessor’s failure to adjust the taxable value of a parcel of real
property in the year immediately following its transfer 1 precludes a March board of
review from adjusting the taxable value in a later year.
We hold that the failure to adjust the taxable value in the year immediately
following the transfer produced an erroneous taxable value because the taxable value was
not in compliance with the GPTA. Further, the GPTA does not preclude a March board
of review from correcting an erroneous taxable value that resulted from the failure of an
assessor to adjust a property’s taxable value in the year immediately following its
transfer. Accordingly, we also hold that a March board of review may adjust the
erroneous taxable value in a subsequent year in order to bring the current taxable value
into compliance with the GPTA. The Court of Appeals held that the error in this case
could not be remedied and, therefore, we reverse the judgment of the Court of Appeals
and reinstate the Michigan Tax Tribunal’s decision affirming the March board of
review’s correction of the tax rolls to reflect the properly adjusted taxable values.
Next, in Toll Northville Limited Partnership v Northville Township, we address
whether the Tax Tribunal has the authority to reduce an unconstitutional increase in the
taxable value of property when the erroneous taxable value was not challenged in the
year of the increase. 2 We hold that the Tax Tribunal does have the authority to reduce an
1
See MCL 211.27a(3).
2
This appeal marks the second time that Toll Northville Limited Partnership and
Northville Township have come before us with this dispute. In Toll Northville Ltd v
2
unconstitutional previous increase in taxable value for purposes of adjusting a taxable
value that was timely challenged in a subsequent year. The Tax Tribunal Act 3 sets forth
the Tax Tribunal’s jurisdiction. 4 Once its jurisdiction is properly invoked, the Tax
Tribunal possesses the same powers and duties as those assigned to a March board of
review under the GPTA, including the duty to adjust erroneous taxable values to bring
the current tax rolls into compliance with the GPTA. Because the Court of Appeals
erroneously held that the Tax Tribunal did not have jurisdiction to review taxable values
in years not under appeal, we reverse the Court of Appeals’ judgment and remand to that
Court to consider Northville Township’s remaining issues on appeal regarding the Tax
Tribunal’s valuation of the properties. 5
I. MICHIGAN PROPERTIES, LLC v MERIDIAN TOWNSHIP
A. FACTS AND PROCEDURAL HISTORY
Michigan Properties, L.L.C., purchased three apartment complexes located in
Meridian Township in December 2004. Michigan Properties timely filed a required
affidavit in January 2005, notifying Meridian’s assessor of the transfers of ownership.
Northville Twp, 480 Mich 6, 13-14; 743 NW2d 902 (2008), we unanimously declared
that the statutory provision allowing the value of the properties at issue to increase
because of public-service improvements was unconstitutional.
3
MCL 205.701 et seq.
4
MCL 205.731.
5
We will discuss each case separately. We begin with Mich Props because the issue in
Toll Northville is predicated on whether a March board of review has the power to correct
a previous erroneous taxable value.
3
Meridian’s assessor failed to comply with MCL 211.27a(3) 6 by not adjusting, or
“uncapping,” 7 the taxable values of the properties for tax year 2005 to reflect their
posttransfer taxable values. As a result of this failure, the taxable values for tax year
2005 were entered into the tax rolls using pretransfer values that were not in compliance
with MCL 211.27a(3).
In October 2006, Meridian sent a letter notifying Michigan Properties of the
erroneous values. The letter informed Michigan Properties that it would receive a revised
tax bill for tax year 2005 reflecting new taxable values because of the 2004 transfer and
that the taxable values for tax year 2006 would be revised accordingly by Meridian’s
December board of review. 8 Litigation ensued, and the parties ultimately entered into a
consent judgment for each property in February 2007 pertaining to tax years 2005 and
2006. The consent judgments stipulated that Meridian reserved the right to petition the
March board of review for tax year 2007, or for any year thereafter, to uncap the
properties’ taxable values because of the transfers in December 2004. Meridian
6
MCL 211.27a(3) provides: “Upon a transfer of ownership of property after 1994, the
property’s taxable value for the calendar year following the year of the transfer is the
property’s state equalized valuation for the calendar year following the transfer.”
7
After ownership of a property has been transferred, the taxable value of the property is
“uncapped” and is subject to reassessment based on the property’s actual value. Klooster
v City of Charlevoix, 488 Mich 289, 297; 795 NW2d 578 (2011).
8
The December board of review, however, took no action. Michigan Properties appealed
Meridian’s decision for tax years 2005 and 2006 in the Tax Tribunal. Michigan
Properties argued that the time frame for challenging the 2005 taxable values, and any
subsequent values based on the 2005 assessment, had expired because Meridian had not
timely challenged the 2005 assessments when the 2005 values were first placed on the tax
rolls.
4
subsequently exercised its right to petition the March board of review to adjust the 2007
taxable values. The March board of review granted Meridian’s requested relief,
uncapping the taxable values for tax year 2007 on the basis of the December 2004
transfers of ownership. 9
Michigan Properties filed the instant appeals of those decisions in the Tax
Tribunal, arguing that the time frame for challenging the 2005 taxable values, and any
subsequent values based on the 2005 assessments, had expired because Meridian had not
timely challenged the 2005 assessments. Meridian moved for summary disposition,
arguing that the March board of review had acted within its authority to bring taxable
values into compliance with the GPTA pursuant to MCL 211.29 and MCL 211.30. The
tribunal granted Meridian’s motion for summary disposition.
Michigan Properties appealed the Tax Tribunal’s decision in the Court of Appeals.
In a published decision, the Court of Appeals reversed the Tax Tribunal and held that the
March board of review could not uncap the taxable values relating to the December 2004
transfers. 10 Meridian sought leave to appeal in this Court. We granted leave to appeal,
directing the parties to discuss “whether the failure of the taxing authority’s assessor to
adjust the taxable value of real property in the year immediately after a transfer of the
property in accordance with MCL 211.27a(3) precludes the board of review from
9
Thus, 2007 is the only tax year before us in Mich Props. For tax year 2007, the total
pretransfer taxable value for the three properties combined was assessed at $10,376,535.
By including the uncapping based on the 2004 transfers, the March board of review
adjusted the assessments for 2007 to a total taxable value of $14,905,107.
10
Mich Props, LLC v Meridian Twp, 292 Mich App 147; 808 NW2d 506 (2011).
5
adjusting the taxable value in a later year.” Mich Props, LLC v Meridian Twp, 490 Mich
877 (2011).
B. STANDARD OF REVIEW
Review of decisions by the Tax Tribunal is limited. Mt Pleasant v State Tax
Comm, 477 Mich 50, 53; 729 NW2d 833 (2007). “In the absence of fraud, error of law or
the adoption of wrong principles, no appeal may be taken to any court from any final
agency provided for the administration of property tax laws from any decision relating to
valuation or allocation.” Const 1963, art 6, § 28. The Tax Tribunal’s factual findings are
final if they are supported by competent, material, and substantial evidence on the whole
record. Id.; Meadowlanes Ltd Dividend Housing Ass’n v City of Holland, 437 Mich 473,
482; 473 NW2d 636 (1991). If the facts are not disputed and fraud is not alleged, our
review is limited to whether the Tax Tribunal made an error of law or adopted a wrong
principle. Meadowlanes, 437 Mich at 482-483. The cases before us present a question of
statutory interpretation, which this Court reviews de novo. Wexford Med Group v City of
Cadillac, 474 Mich 192, 202; 713 NW2d 734 (2006). When interpreting statutes, this
Court must “ascertain and give effect to the intent of the Legislature.” People v Koonce,
466 Mich 515, 518; 648 NW2d 153 (2002). In interpreting a statute, this Court avoids a
construction that would render any part of the statute surplusage or nugatory. People v
McGraw, 484 Mich 120, 126; 771 NW2d 655 (2009), citing Baker v Gen Motors Corp,
409 Mich 639, 665; 297 NW2d 387 (1980). When considering the correct interpretation,
the statute must be read as a whole. Sun Valley Foods Co v Ward, 460 Mich 230, 237;
596 NW2d 119 (1999). Individual words and phrases, while important, should be read in
6
the context of the entire legislative scheme. Herman v Berrien Co, 481 Mich 352, 366;
750 NW2d 570 (2008).
C. ANALYSIS
1. TAXABLE VALUES IN PROPOSAL A AND THE GPTA
The specific issue before us in Mich Props is whether the failure of a taxing
authority’s assessor to adjust the taxable value of real property in the year immediately
following a transfer of the property, in accordance with MCL 211.27a(3), precludes a
March board of review from adjusting the taxable value in a subsequent year.
Resolving this issue requires an analysis of the GPTA, which sets forth the
parameters for determining taxable values of real property. These parameters are a direct
response from the Legislature to the limitations on taxable values established in Proposal
A of 1994, which amended article 9, § 3 of Michigan’s Constitution. 11 In Klooster, we
11
Proposal A amended Const 1963, art 9, § 3 to read as follows:
The legislature shall provide for the uniform general ad valorem
taxation of real and tangible personal property not exempt by law except for
taxes levied for school operating purposes. The legislature shall provide for
the determination of true cash value of such property; the proportion of true
cash value at which such property shall be uniformly assessed, which shall
not, after January 1, 1966, exceed 50 percent; and for a system of
equalization of assessments. For taxes levied in 1995 and each year
thereafter, the legislature shall provide that the taxable value of each parcel
of property adjusted for additions and losses, shall not increase each year
by more than the increase in the immediately preceding year in the general
price level, as defined in [Const 1963, art 9, § 33], or 5 percent, whichever
is less until ownership of the parcel of property is transferred. When
ownership of the parcel of property is transferred as defined by law, the
parcel shall be assessed at the applicable proportion of current true cash
value. The legislature may provide for alternative means of taxation of
designated real and tangible personal property in lieu of general ad valorem
7
stated that “[t]he purpose of Proposal A was to limit tax increases on property as long as
it remains owned by the same party, even though the actual market value of the property
may have risen at a greater rate.” 12
Proposal A places a cap on the taxable value of a property so that, based on the
previous year’s taxable value, any yearly increase in taxable value is limited to either the
rate of inflation or 5 percent, whichever is less. 13 That cap on taxable value applies only
to the current owner of the property, and the property’s taxable value is uncapped when
the property is transferred. The uncapped taxable value for the year after the transfer sets
a new baseline value that is subject to a new cap. The GPTA is the enabling legislation
that carries out the edicts of Proposal A. 14
The GPTA provides a comprehensive system for the assessment of property for ad
valorem tax purposes and the collection of those taxes. It also provides for the
administration of the system. When read in conjunction, MCL 211.27a(2) and (3)
provide the statutory framework to implement the capping and uncapping mechanisms
taxation. Every tax other than the general ad valorem property tax shall be
uniform upon the class or classes on which it operates. A law that increases
the statutory limits in effect as of February 1, 1994 on the maximum
amount of ad valorem property taxes that may be levied for school district
operating purposes requires the approval of 3/4 of the members elected to
and serving in the Senate and in the House of Representatives.
12
Klooster, 488 Mich at 296.
13
Also, the valuation must be adjusted when there are additions or losses to the property
that affect the property’s value.
14
Id. at 296-297.
8
required by Proposal A. To establish taxable values of property, MCL 211.27a contains
parameters that comply with the requirements of Proposal A.
Unless a property’s ownership has been transferred in the previous year, the
calculation for the current taxable value is set forth in MCL 211.27a(2), which provides:
Except as otherwise provided in [MCL 211.27a(3)], for taxes levied
in 1995 and for each year after 1995, the taxable value of each parcel of
property is the lesser of the following:
(a) The property’s taxable value in the immediately preceding year
minus any losses, multiplied by the lesser of 1.05 or the inflation rate, plus
all additions. For taxes levied in 1995, the property’s taxable value in the
immediately preceding year is the property’s state equalized valuation in
1994.
(b) The property’s current state equalized valuation.
In short, MCL 211.27a(2) establishes that, except as otherwise provided in MCL
211.27a(3), the taxable value of property for each year after 1995 is the value reached
after applying the formula in MCL 211.27a(2)(a) or the current state equalized value,
whichever is less. Under MCL 211.27a(2), the current year’s taxable value is directly
predicated on the immediately preceding year’s taxable value unless the current state
equalized valuation is lower.
MCL 211.27a(3) sets forth an exception to the MCL 211.27a(2) calculation. It
provides:
Upon a transfer of ownership of property after 1994, the property’s
taxable value for the calendar year following the year of the transfer is the
property’s state equalized valuation for the calendar year following the
transfer.
This language requires that when a property has been transferred, it must be valued at the
state equalized valuation for the calendar year following the transfer. Accordingly, once
9
the property is transferred, its taxable value is no longer predicated on the previous year’s
taxable value; rather, it is “uncapped.” This uncapping event sets a base valuation on
which future taxable values will be determined. 15 Because MCL 211.27a(2)(a) is
predicated on the previous year’s taxable value, any error in the uncapping valuation
carries the resulting erroneous taxable value over into future years.
The provisions establishing taxable values in MCL 211.27a(2) and MCL
211.27a(3) are both mandatory and automatic. Both subsections unambiguously provide
that the taxable value for a property falling under each respective subsection “is” the
value that results from the parameters contained in the applicable subsection. 16
Therefore, if the mandates from the applicable subsection were not followed when
placing a property’s assessment on the tax rolls for a given tax year, the resulting taxable
value from that year would not be in compliance with the GPTA and would thus be
erroneous as a matter of law.
15
Valuations after uncapping will again be based on MCL 211.27a(2), until the next time
that the property’s ownership is transferred. MCL 211.27a(4).
16
The pertinent language in MCL 211.27a(3) states that “the property’s taxable value for
the calendar year following the year of the transfer is the property’s state equalized
valuation . . . .” (Emphasis added.) The Court of Appeals’ analysis implies that the
phrase “calendar year following the year of the transfer” establishes a period of
limitations during which MCL 211.27a(3) can be applied and that it cannot be applied to
adjust a taxable value in years subsequent to the year immediately following a transfer.
However, MCL 211.27a(3) does not contain a period of limitations. Rather, it sets forth
that the state equalized value during the designated period of time—the year immediately
following a transfer—is the basis for the uncapped taxable value. Thus, the purpose of
MCL 211.27a(3) is to override the limitation in MCL 211.27a(2) when a property is
transferred and allow the property’s taxable value to “catch up” with the value of the
property.
10
In Mich Props, Meridian’s assessor failed to update the tax rolls to reflect the
uncapped taxable values of Michigan Properties’ recently purchased properties for tax
year 2005. Because of this failure to uncap the taxable value, the taxable value as entered
on the tax rolls for 2005 violated the automatic requirement in MCL 211.27a(3) that the
taxable value for the year following the transfer “is” the uncapped value. As a result, the
2005 taxable values of the three properties at issue were erroneous. 17
2. A MARCH BOARD OF REVIEW’S DUTIES AND POWERS
We must next determine whether the erroneous previous year’s values can be
corrected for purposes of adjusting the timely challenged 2007 taxable values. We hold
that they can because a March board of review is authorized and required, pursuant to
MCL 211.29 and MCL 211.30, to correct errors in valuation to bring taxable values into
compliance with the GPTA. To hold otherwise would allow errors in taxable value to run
with the property until the next transfer of ownership occurs. The Legislature clearly did
not intend this result. Judging by the plain language of the GPTA, the Legislature
intended that a township’s March board of review have the power to bring previous
erroneous taxable values back into compliance with the GPTA, as long as that power is
only exercised to bring the taxable value in line with the GPTA for the current tax year. 18
17
Our conclusion does not mean that because a previous year’s taxable value is
erroneous, it is subject to correction for purposes of a property owner’s tax obligation for
that previous year.
18
The facts before us in both cases are distinguishable from those presented in Leahy v
Orion Twp, 269 Mich App 527; 711 NW2d 438 (2006). In Leahy, the Court of Appeals
refused to allow a taxpayer’s challenge to a property’s taxable value from a previous year
for purposes of adjusting a subsequent year’s taxable value. The taxpayer in Leahy had
already challenged that previous year’s taxable value in the year that the value was
11
Our decision is limited to adjusting a current year’s taxable value to prevent previous
errors from running in perpetuity against the current taxpayer. While actions to collect or
receive a refund of a previous year’s taxes are subject to various limitations, 19 there are
no such limitations within the GPTA prohibiting correction of a previous year’s taxable
value so that a taxpayer may receive relief for the tax year under appeal.
As noted earlier, the GPTA sets forth a comprehensive property tax system. Part
of this system involves oversight and error correction by various entities. 20 In this
system, assessors are responsible for assessing properties in accordance with various
guidelines set forth in the GPTA. 21 However, once an assessment has been entered, an
assessor is powerless to change that assessment. 22 If there is a challenge to an
entered, claiming that the taxable value was erroneous. The taxpayer’s challenge went to
the Tax Tribunal, which ruled against him, and the taxpayer did not appeal that decision.
Accordingly, the Court of Appeals correctly concluded that the taxpayer was collaterally
estopped from relitigating the issue. Id. at 530-531.
19
See Briggs Tax Serv, LLC v Detroit Pub Sch, 485 Mich 69; 780 NW2d 753 (2010)
(holding that refund claims for previously paid taxes are subject to a 30-day limitations
period unless a mutual mistake of fact occurred); see also MCL 211.53a (setting forth a
three-year limitation on claims to collect a refund of previously paid taxes after a mutual
mistake of fact occurred).
20
See, e.g., MCL 211.53b (setting forth the process for the correction of “qualified
error[s]”) and MCL 211.34(4) (setting forth the process for appeals to the state tax
commission regarding county equalization of taxes).
21
MCL 211.10; MCL 211.10d(1); MCL 211.10e.
22
In preparing assessments, an assessor is limited to using approved assessment manuals
to carry out his or her duties. See MCL 211.10e.
12
assessment, or if an error is discovered, the GPTA provides various circumstances in
which the error can be corrected and specifies who can correct the error. 23
Meridian argues that the taxable values are subject to the March board of review’s
error-correction mechanisms found in MCL 211.29 and MCL 211.30, which set forth the
duties and powers of all townships’ March boards of review. MCL 211.29 provides, in
pertinent part:
(1) On the Tuesday immediately following the first Monday in
March, the board of review of each township shall meet at the office of the
supervisor, at which time the supervisor shall submit to the board the
assessment roll for the current year, as prepared by the supervisor, and the
board shall proceed to examine and review the assessment roll.
(2) During that day, and the day following, if necessary, the board,
of its own motion, or on sufficient cause being shown by a person, shall add
to the roll the names of persons, the value of personal property, and the
description and value of real property liable to assessment in the township,
omitted from the assessment roll. The board shall correct errors in the
names of persons, in the descriptions of property upon the roll, and in the
assessment and valuation of property. The board shall do whatever else is
necessary to make the roll comply with this act.
(3) The roll shall be reviewed according to the facts existing on the
tax day. The board shall not add to the roll property not subject to taxation
on the tax day, and the board shall not remove from the roll property
subject to taxation on that day regardless of a change in the taxable status of
the property since that day.
(4) The board shall pass upon each valuation and each interest, and
shall enter the valuation of each, as fixed by the board, in a separate
column. [Emphasis added.]
These provisions give a March board of review the authority and the duty to
correct errors in taxable values. When an error is brought to the attention of a March
23
See, e.g., MCL 211.29, MCL 211.30, MCL 211.34(4), and MCL 211.53b.
13
board of review, whether it is brought to the board’s attention by another person or the
board itself, the board must correct the error. Subsection (2) provides that “[t]he board
shall correct errors . . . in the assessment and valuation of property.” 24 A March board of
review also has broad authority to correct a mistake in valuation because “[t]he board
shall do whatever else is necessary to make the roll comply with this act.” 25 This
authority is further enforced by the language of MCL 211.30(4), which allows a March
board of review to change an assessed or tentative taxable value as long as there is an
opportunity for the person affected to file objections to any of the March board of
review’s changes. 26
Most importantly, there are no limitations contained in the GPTA that would
prevent a March board of review from considering previous erroneous taxable values
when bringing current taxable values into compliance with the GPTA. Had the
Legislature intended to preclude errors from being corrected in subsequent years, it
would have included such a limitation. While MCL 211.29 and MCL 211.30 do not
grant a March board of review the authority to alter a previous year’s tax rolls, and thus
24
MCL 211.29(2).
25
Id.26
MCL 211.30(4) states in pertinent part:
The board of review, on its own motion, may change assessed values
or tentative taxable values or add to the roll property omitted from the roll
that is liable to assessment if the person who is assessed for the altered
valuation or for the omitted property is promptly notified and granted an
opportunity to file objections to the change at the meeting or at a
subsequent meeting.
14
alter previous tax obligations, a March board of review does have the power to correct
previous errors for the purpose of updating the current year’s tax rolls.
A March board of review has the power to review the tax rolls currently before it
“according to the facts existing on the tax day.” MCL 211.29(3). Among the facts
existing on a current year’s tax day would be the fact that a previous taxable value did not
comply with the GPTA, and that fact is within the purview of the duties of the March
board of review. Having considered the language of the GPTA, we agree with Meridian
that the Legislature’s directive to March boards of review to “do whatever else is
necessary to make the roll comply with” the act includes correcting errors of law
pertaining to taxable values that have carried over from previous years. By correcting
previous errors of law for purposes of determining a current year’s taxable value, a
March board of review “make[s] the roll comply with” the GPTA.
Finally, allowing a March board of review to prospectively correct previous
erroneous taxable values provides taxpayers and municipalities with meaningful review
of a current year’s taxes. It prevents an error in taxable value from being set in stone and
perpetuating a deprivation of the constitutional protections set forth in Proposal A. 27
27
In the Court of Appeals opinion pertaining to Toll Northville, which was decided with
two companion cases involving the same issue, the Court of Appeals relied on Auditor
General v Smith, 351 Mich 162; 88 NW2d 429 (1958), for the proposition that a failure
by a board of review to correct an erroneous value in a previous year precludes attack on
that value in a subsequent year. MJC/Lotus Group v Brownstown Twp, 293 Mich App 1,
9; 809 NW2d 605 (2011). However, Auditor General was decided nearly 40 years before
Proposal A was enacted in 1994. We now take the opportunity to clarify that Auditor
General is limited to situations predating Proposal A, and thus it is not applicable to the
cases before us.
15
Whether to prevent windfalls for taxpayers or municipalities, 28 the Constitution must be
enforced, and deprivations of constitutional protections must be avoided.
In Mich Props, we hold that the March board of review correctly brought the 2007
taxable values into compliance with the GPTA by adjusting the current values because of
the uncapping of the 2005 taxable values. The Court of Appeals incorrectly prevented the
erroneous taxable values from being remedied until another uncapping event occurs.
Accordingly, we reverse the judgment of the Court of Appeals in Michigan Properties,
LLC v Meridian Township, and we reinstate the Tax Tribunal’s decision affirming the
March board of review’s correction of the tax rolls to reflect the properly adjusted taxable
values.
II. TOLL NORTHVILLE LIMITED PARTNTERSHIP v NORTHVILLE TOWNSHIP
A. FACTS AND PROCEDURAL HISTORY
This case raises the issue of whether the Michigan Tax Tribunal has the same
powers and duties as a March board of review to adjust previously entered erroneous
taxable values for purposes of bringing the current tax rolls into compliance with the
GPTA. The underlying factual basis for the dispute between Toll Northville Limited
Partnership and Northville Township 29 began in 2000 when Toll, a residential developer,
28
As is evident from the cases before us, a failure to correct previous errors can either
result in taxpayers being forced to pay more property taxes than the Constitution permits
or prevent a municipality from receiving property taxes to which it is constitutionally
entitled.
29
Biltmore Wineman LLC owns the properties at issue along with Toll and is also a party
to this dispute. For ease of reading, however, we will refer exclusively to Toll and
Northville as the parties in this opinion.
16
installed public-service improvements 30 to a “parent” parcel that was to be divided into
residential “child” parcels. The value of the public-service improvements, which were
legally defined as “additions” pursuant to MCL 211.34d(1)(b)(viii), was included in the
taxable value for the parent parcel for tax year 2000, thereby substantially increasing the
taxable value of Toll’s property. 31 Toll did not timely challenge the increase in taxable
value for tax year 2000, and the parent parcel was divided into child parcels by tax year
2001. 32 For 2001, the assessor proportionately split the addition to the taxable values
among the resulting child parcels, so that each child parcel carried its portion of the
addition of the value of the public-service improvements to the taxable value that had
previously been assessed to the parent parcel. 33
Toll timely appealed the taxable values of the child parcels for tax year 2001 in the
Tax Tribunal. 34 Also, Toll filed a declaratory action in the circuit court to have MCL
211.34d(1)(b)(viii), the basis for including public-service improvements as “additions,”
30
The public-service improvements included infrastructure such as a primary access
road, streetlights, sewer service, water service, electrical service, natural gas service,
telephone service, and sidewalks.
31
The inclusion of the public-service improvements as additions increased the taxable
value of the property from $4,701,861 to $23,395,587 for tax year 2000.
32
This division of property did not trigger uncapping under MCL 211.27a(3) because
Toll remained the owner of the divided parcels.
33
The value of the additions is approximately 79.903 percent of the assessed taxable
value for each parcel.
34
Toll eventually amended its petition to include tax years after 2001. Thus, the tax
years before us for Toll Northville are 2001 and later.
17
declared unconstitutional. 35 The Tax Tribunal held Toll’s tribunal case in abeyance
pending the outcome of the circuit court action. Toll was successful in its circuit court
action, culminating in an opinion from this Court that unanimously declared MCL
211.34d(1)(b)(viii) unconstitutional. 36
Following this Court’s decision, the Tax Tribunal proceedings were reopened.
The tribunal concluded that it lacked jurisdiction to amend the taxable value of the parent
parcel for tax year 2000 because that value was not timely appealed. However, the
tribunal prospectively amended the taxable value of the properties at issue to conform to
this Court’s decision. Thus, the tribunal removed the value of the public-service
improvement additions from the parcels’ taxable values for tax year 2001 and subsequent
years.
35
Generally speaking, quasi-judicial agencies such as the Tax Tribunal do not have the
authority to hold a statute unconstitutional. See Wikman v City of Novi, 413 Mich 617,
646-647; 322 NW2d 103 (1982); Dation v Ford Motor Co, 314 Mich 152; 22 NW2d 252
(1946).
36
In Toll Northville, 480 Mich at 13-14, we stated:
The issue is the constitutionality of MCL 211.34d(1)(b)(viii), which,
as written, defines “public services” as “additions” and, therefore, would
allow for the taxation of the value added from the installation of public-
service improvements, which are “water service, sewer service, a primary
access road, natural gas service, electrical service, telephone service,
sidewalks, or street lighting.” We agree with the analysis and the decision
of the Court of Appeals [Toll Northville, Ltd v Northville Twp, 272 Mich
App 352; 726 NW2d 57 (2006)], which declared MCL 211.34d(1)(b)(viii)
unconstitutional. The Court of Appeals correctly concluded that the mere
installation of public-service improvements on public property or on utility
easements does not constitute a taxable “addition”—as that term was
understood when the public adopted Proposal A—in this instance,
involving infrastructure improvements made to land destined to become a
residential subdivision.
18
Northville appealed the tribunal’s decision in the Court of Appeals. 37 In a
published opinion, the Court of Appeals reversed the tribunal’s decision 38 and held that
the Tax Tribunal did not have jurisdiction to review a previous year’s taxable value for
purposes of determining a timely appealed current year’s taxable value. 39 Accordingly,
the Court of Appeals ordered the Tax Tribunal to reinstate and affirm the taxable values
assessed by Northville, including the unconstitutional additions for public-service
improvements. 40
Toll sought leave to appeal in this Court. We granted leave to appeal, limiting the
issue to “whether the Court of Appeals correctly held that the Michigan Tax Tribunal had
no jurisdiction to reduce an unconstitutional increase in the taxable value of property if
the improperly increased taxable value was not challenged in the year of the increase.”
Toll Northville Ltd Partnership v Northville Twp, 490 Mich 877 (2011).
37
As noted, the Court of Appeals consolidated Northville’s appeal with two other cases
involving the same issue regarding the removal of unconstitutional public-service
improvements from taxable values.
38
MJC/Lotus Group, 293 Mich App 1.
39
Because the Court of Appeals held that the Tax Tribunal did not have jurisdiction to
review the accuracy of a property’s taxable value for a year that was not timely appealed,
the Court of Appeals did not address Northville’s alternative argument that the adjusted
valuation set by the Tax Tribunal did not comport with a stipulation by the parties
regarding the valuation. On remand, we direct the Court of Appeals to address this issue.
40
MJC/Lotus Group, 293 Mich App at 16. Because the Court of Appeals held that the
tribunal lacked jurisdiction, it did not reach Northville’s remaining arguments on appeal
concerning the valuation methods used by the Tax Tribunal to adjust the taxable values of
Toll’s parcels. Id. at 14-15. On remand, we direct the Court of Appeals to address these
issues as well.
19
B. ANALYSIS
As noted in the discussion of Mich Props, the GPTA provides a March board of
review with the authority to bring previous erroneous taxable values into compliance with
the GPTA for purposes of determining the taxable value in a subsequent year. As in
Mich Props, the initial taxable value in this case was erroneous as a matter of law, 41 and
it was not challenged in the year that it was placed on the tax rolls; rather, it was
challenged in a subsequent year. However, unlike the proceedings in Mich Props, the
proceedings in this matter involved the Tax Tribunal instead of the March board of
review. Therefore, we must determine whether the Tax Tribunal possesses the same
powers of correction as a March board of review. We hold that under the plain language
of the Tax Tribunal Act, 42 it does.
The Michigan Tax Tribunal was created by the Tax Tribunal Act. 43 The Tax
Tribunal is charged with original jurisdiction over tax proceedings, including appeals of
cases arising from March boards of review. In Wikman v City of Novi, 413 Mich 617,
629; 322 NW2d 103 (1982), we described the tribunal as follows:
41
In Toll Northville, the taxable value for Toll’s parcel included an addition for public-
service improvements that was declared unconstitutional by this very Court. An
unconstitutional addition is no addition at all. See Toll Northville, 480 Mich at 14.
Because the 2000 taxable value included this unconstitutional addition, the taxable value
was not in accordance with MCL 211.27a(2) for that tax year. Moreover, the resulting
tax year 2000 taxable values were also unlawfully valued above the constitutional cap set
by article 9, § 3.
42
MCL 205.701 et seq.
43
MCL 205.721. For a discussion of the history and purpose of the Tax Tribunal Act,
see Wikman, 413 Mich at 626-629.
20
The Tax Tribunal is a “quasi-judicial agency” designed to provide a
forum in which taxpayers may obtain relief from adverse agency decisions.
The primary functions of the Tax Tribunal are to find facts and review the
decisions of agencies within its jurisdiction. The Tax Tribunal specializes
in reviewing these determinations. To assure that it possesses the necessary
expertise to resolve these cases efficiently, the Tax Tribunal Act requires
that certain members of the tribunal have special qualifications.
The Tax Tribunal Act sets forth the powers and jurisdiction of the tribunal. MCL
205.731 provides 44 in pertinent part:
The tribunal has exclusive and original jurisdiction over all of the
following:
(a) A proceeding for direct review of a final decision, finding, ruling,
determination, or order of an agency relating to the assessment, valuation,
rates, special assessments, allocation, or equalization, under the property
tax laws of this state.
(b) A proceeding for a refund or redetermination of a tax levied
under the property tax laws of this state.
Thus, according to the plain language of MCL 205.731, the Tax Tribunal has exclusive
and original jurisdiction to review decisions of “an agency relating to . . . valuation . . .
under the property tax laws of this state.” This language pertains to local taxing
authorities such as a township’s March board of review. 45 Moreover, pursuant to MCL
205.735(2) and MCL 205.735a(2), the proceedings before the tribunal are “original and
independent and [are] considered de novo.” (Emphasis added.)
44
Although a previous version of MCL 205.731 was in effect during the tax years at
issue in this case, the differences do not affect our analysis. See 2008 PA 125; 1973 PA
186.
45
See MCL 205.703(a) (defining “agency” for purposes of the Tax Tribunal Act); see
also MCL 211.29 and 211.30.
21
MCL 205.732 sets forth the tribunal’s powers in reviewing a taxing authority’s
decision once the tribunal’s jurisdiction is properly invoked under MCL 205.735 or MCL
205.735a(6). It provides 46 in pertinent part:
The tribunal’s powers include, but are not limited to, all of the
following:
(a) Affirming, reversing, modifying, or remanding a final decision,
finding, ruling, determination, or order of an agency.
(b) Ordering the payment or refund of taxes in a matter over which it
may acquire jurisdiction.
(c) Granting other relief or issuing writs, orders, or directives that it
deems necessary or appropriate in the process of disposition of a matter
over which it may acquire jurisdiction.
(d) Promulgating rules for the implementation of this act, including
rules for practice and procedure before the tribunal . . . under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328. [Emphasis added.]
Additionally, MCL 205.737(1) provides that “[t]he tribunal shall determine a property’s
taxable value pursuant to [MCL 211.27a].” 47
It is apparent from these provisions that the Tax Tribunal has original jurisdiction
over appeals regarding the valuation of property by an assessor or a March board of
review and that the tribunal reviews those appeals de novo. As part of the tribunal’s
powers, the tribunal can affirm, reverse, or modify the decision of a March board of
46
Again, the amendments of MCL 205.732 do not affect its application to the case at
issue. See 2008 PA 125; 1973 PA 186.
47
Further, Mich Admin Code, R 205.1283(1) indicates that once the Tax Tribunal’s
jurisdiction is properly invoked, the scope of its inquiry in determining the validity of an
assessment for the appealed tax year is broad and limited only by relevancy.
22
review, and in doing so, the tribunal is authorized to determine the property’s taxable
value in accordance with MCL 211.27a.
The Legislature has granted the tribunal the authority to enforce a March board of
review’s error corrections under MCL 211.29 and MCL 211.30. Thus, the Tax Tribunal
has the authority to carry out a March board of review’s duty to correct a previous
erroneous taxable value in order to adjust the current taxable value, thereby bringing the
taxable value back into compliance with the GPTA and Proposal A. 48 Accordingly, the
Tax Tribunal Act grants the Tax Tribunal the authority to provide the relief that Toll
argues for in this case. 49
48
As discussed in note 27 of this opinion, the Court of Appeals in this case relied on
Auditor General, 351 Mich 162, for the proposition that a previous failure to correct an
erroneous value by a board of review precludes attack on that value in a subsequent year.
Again, we note that Auditor General is limited to situations predating Proposal A and
thus it is not applicable to this case.
49
Northville argues that the Tax Tribunal did not have jurisdiction to change the 2001
taxable values because the 2000 taxable value of the parent parcel was not timely
appealed in accordance with the time limitations contained in MCL 205.735. Despite the
fact that Toll did not timely appeal the 2000 taxable value in the Tax Tribunal, Toll did
timely appeal the 2001 values of the child parcels. Thus, Toll properly invoked the
tribunal’s jurisdiction with respect to the 2001 values, and, notably, Toll does not seek a
refund or a reduction of taxes for tax year 2000. Although the Tax Tribunal cannot adjust
the tax year 2000 taxable value because of Toll’s failure to timely appeal that value, the
tribunal can consider data from that year when adjusting the timely challenged 2001
taxable values. Because the 2001 taxable values are predicated on the 2000 taxable
value, the information from 2000 is therefore relevant for determining the correct values
for 2001. In holding that the tribunal did not have jurisdiction to review taxable values of
a year not timely appealed, the Court of Appeals erred by confusing the difference
between the Tax Tribunal’s inability to change and grant relief regarding the tax year
2000 taxable value and its ability to consider evidence of how the tax year 2000
assessment was determined in reviewing taxable values for a year that was timely
appealed.
23
Thus, in Toll Northville, we agree with the Tax Tribunal that it has the ability to
prospectively adjust the timely challenged taxable values of Toll’s parcels for tax year
2001 and subsequent years because the tax year 2000 taxable value of the parent parcel
was erroneous as a result of the inclusion of unconstitutional additions. 50 Accordingly,
we reverse the Court of Appeals’ judgment pertaining to Toll in MJC/Lotus Group v
Brownstown Twp, 293 Mich App 1; 809 NW2d 605 (2011). However, because the Court
of Appeals did not reach Northville’s remaining issues on appeal regarding the valuation
of the subject properties, we remand this case to the Court of Appeals for consideration of
those issues.
III. CONCLUSION
In Michigan Properties, we hold that the failure to adjust the taxable values in the
year immediately following the transfer produced erroneous taxable values because the
taxable values were not in compliance with the GPTA. Further, the GPTA does not
preclude a March board of review from correcting an erroneous taxable value that
resulted from the failure of an assessor to adjust a property’s taxable value in the year
immediately following its transfer. Accordingly, we also hold that a March board of
review may adjust the erroneous taxable value in a subsequent year in order to bring the
current taxable value into compliance with the GPTA. The Court of Appeals held that
the error in this case could not be remedied and, therefore, we reverse the judgment of the
50
In carrying out this adjustment, the Tax Tribunal is required to ensure that the taxable
values comply with the Michigan Constitution and apply the parameters set forth in MCL
211.27a.
24
Court of Appeals and reinstate the Tax Tribunal’s decision affirming the March board of
review’s correction of the tax rolls to reflect the properly adjusted taxable values.
In Toll Northville, we hold that the Tax Tribunal does have the authority to reduce
an unconstitutional previous increase in taxable value for purposes of adjusting a taxable
value that was timely challenged in a subsequent year. The Tax Tribunal Act sets forth
the Tax Tribunal’s jurisdiction. Once its jurisdiction is properly invoked, the Tax
Tribunal possesses the same powers and duties assigned to a March board of review
under the GPTA, including the duty to adjust erroneous taxable values to bring the
current tax rolls into compliance with the GPTA. Accordingly, we reverse the judgment
of the Court of Appeals pertaining to Toll Northville Limited Partnership, and we remand
the case to the Court of Appeals to consider Northville Township’s remaining issues on
appeal regarding the Tax Tribunal’s valuation of the subject properties.
Diane M. Hathaway
Robert P. Young, Jr.
Michael F. Cavanagh
Marilyn Kelly
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
25