Alternative Energy Personal Property Tax Exemption

Summary

Note: The exemption may only be taken on taxes levied between December 31, 2002 and January 1, 2013.

In July 2002, the Michigan legislature created a statewide personal property tax exemption designed to promote the development, commercialization, and manufacturing of a broad range of alternative energy technologies. The Michigan Next Energy Authority Act of 2002 subsequently created the Michigan Next Energy Authority which among other things is tasked with certifying alternative energy property tax exemptions within the state on a yearly basis.

Property exempt from personal property tax includes:

• alternative energy systems less than two megawatts (MW), or an integrated combination of alternative energy systems of no more than 10 MW (except for wind, photovoltaics and fuel cells, which have no capacity limit)
• alternative energy vehicles
• the personal property of an alternative energy technology business
• the personal property of a business not engaged in alternative-energy technology that is used solely for the purpose of researching, developing or manufacturing alternative energy technologies

Alternative energy systems include: fuel cells, PV, solar thermal heating and cooling, wind energy, CHP, microturbines, miniturbines, Stirling engines, electricity storage systems, and clean fuel energy systems powered by methane, natural gas, methanol, ethanol or hydrogen. See MCL § 207.822 for a complete listing of eligible technologies. The exemption may be taken on taxes levied between December 31, 2002 and January 1, 2013.

The exemption applies to companies engaged in the manufacturing or research and development of alternative energy technologies and non-residential alternative technology owners. Property must be new to Michigan; must not have previously been subject to or exempted from Michigan taxation; and be certified by the Michigan Next Energy Authority in order to qualify for the exemption. The exemption does not include real property, such as land and buildings. Local school districts or local tax collecting units may adopt a resolution disallowing exemption of the property from certain taxes.

The NextEnergy Authority legislation was amended in 2006 (SB 583), making additional alternative energy technologies and systems eligible for tax benefits. The amendment expands tax exemption eligibility to include biomass energy systems and thermoelectric energy systems, broadens the scope of companies that can be certified as alternative energy technology companies, expands the definition of alternative energy vehicles to include hydraulic hybrid vehicles, broadens the definition of clean fuels to include renewable fuels such as biodiesel and fuels from biomass, and removes the capacity caps for fuel cell, photovoltaic, and wind energy systems.

Separately, the Michigan Strategic Fund designated a Michigan NextEnergy Zone as a Renaissance Zone in 2002. The Renaissance Zone designation means that businesses within the NextEnergy Zone may be eligible for other tax benefits*. The NextEnergy Zone is located in Detroit at Wayne State University Research and Technology Park. It is home to the NextEnergy Center, which includes laboratory facilities, business incubator space, and other facilities to support Michigan’s alternative energy industry. Contact the NextEnergy Center for more information.

* Public Act 38 of 2011 repealed the Michigan Business Tax (MBT) and implemented the Corporate Income Tax (CIT). Public Act 39 was passed in conjunction with the CIT and allows for credits awarded under the MBT to be retained for the duration of the agreements. Businesses receiving certain credits, including Renaissance Zone credits, may choose to either continue to file under the MBT to continue claiming their credits, or file under the CIT. No additional Renaissance Zone business tax credits will be awarded after 2011.