How to Apply for a Michigan Nonprofit Property Tax Exemption

An exemption from local property taxes in Michigan offers a financial benefit for qualifying nonprofit organizations. The state provides this exemption through the General Property Tax Act, but it is not automatic. Organizations must meet state requirements and follow application procedures to secure this status. This involves demonstrating that both their structure and property usage align with the law’s intent.

Core Eligibility Requirements

Eligibility for a Michigan property tax exemption depends on the nature of the organization and the use of its property. The entity must be a nonprofit institution, such as a religious, educational, scientific, or benevolent organization. An organization’s federal 501(c)(3) status from the IRS is considered but does not automatically grant a property tax exemption, as Michigan law establishes a more detailed test for what qualifies as a “charitable institution.”

This test outlines several factors to define a charitable institution. A primary factor is whether the organization’s activities relieve a burden that would otherwise fall to the government, such as providing food, shelter, or low-cost medical care. The institution must be organized chiefly for charity, and its services cannot be offered on a discriminatory basis to a chosen few within the group it intends to serve.

How an organization handles fees is an important part of this standard. A nonprofit can charge for its services and still qualify for the exemption. The charges must not exceed what is necessary for the organization’s successful maintenance and operation. There is no specific monetary threshold of free services an organization must provide; the focus is on the “overall nature” of the institution.

Beyond the organization’s charitable nature, the property itself must meet specific criteria. The law requires that the real estate be both owned and occupied by the nonprofit claimant. This means the organization must hold the title to the property and physically use the space. Leasing the property to another entity, even another nonprofit, can jeopardize the exemption for that portion of the property.

The property must be occupied and used solely for the purposes for which the nonprofit was established. This “exclusive use” test is an important hurdle. For example, a building used for religious worship or a classroom for a nonprofit school aligns with an exempt purpose. A thrift store operated by a charity qualifies if all proceeds directly fund its charitable programs, while a vacant lot held for investment would not.

Information and Documentation for the Application

Before beginning the application, an organization should gather its foundational legal paperwork. This includes the Articles of Incorporation as filed with the state, the organization’s bylaws, and the IRS determination letter confirming its federal tax-exempt status under section 501(c)(3). These documents establish the legal structure and stated purpose of the nonprofit.

For the property in question, the organization will need its legal description and parcel identification number, which can be found on the property’s deed or prior tax statements. Proof of ownership, such as a copy of the recorded deed or land contract, is necessary if the local assessor’s records do not already list the nonprofit as the owner. Compiling financial statements, including detailed income and expense reports for the organization, is also a standard requirement.

The application process is handled at the local level. There is no single, statewide form for general nonprofit exemptions. Organizations must contact the city or township assessor where the property is located to obtain the correct application form and procedure. Many municipalities provide their own specific “Property Tax Exemption Request Form.”

The application form will require the organization’s legal name, address, and incorporation details. It will have sections where the applicant must describe its charitable activities and objectives, linking them to the property’s use. The applicant must explain how the property is occupied and used exclusively for the nonprofit’s exempt purposes. The financial information section will ask for summaries of income and expenses, which should align with the detailed financial statements being submitted.

The Submission and Review Process

The complete application package must be filed with the local city or township assessor where the property is physically located. Applications are not sent to the state. The assessor for that specific tax jurisdiction is responsible for the initial review and determination.

Timing is an important factor in the submission process. Many local assessors set their own deadlines for submitting exemption applications, such as January 31 or January 15. Organizations must confirm the exact filing deadline with their local assessor’s office, as missing it can lead to denial of the exemption for the tax year.

After the application is submitted, the assessor conducts a review. They will examine the application and supporting evidence to determine if the organization and property use meet the legal requirements under Michigan law. The assessor has the authority to grant the exemption, deny it, or request additional information from the applicant.

The final decision on the exemption is made by the local Board of Review, which considers the assessor’s recommendation. The organization will receive a formal notification of the decision. If the exemption is approved, the property will be removed from the taxable roll. If denied, the notification will explain the reasons and outline the organization’s appeal rights, which is typically to file an appeal with the Michigan Tax Tribunal.

Maintaining Your Tax-Exempt Status

Securing a property tax exemption is not a one-time event, as the status must be actively maintained. The exemption is subject to ongoing review by the local assessor. Assessors annually review the status of all exempt properties to ensure they continue to meet the requirements for ownership, occupancy, and use, so an organization cannot assume the exemption is permanent.

The annual review process can vary by jurisdiction. In some municipalities, the assessor may require the nonprofit to file an annual reaffirmation form to confirm its eligibility. In other areas, the assessor may send a request for information if they have reason to believe the property’s status may have changed. Organizations should be prepared to respond promptly to any such requests to avoid jeopardizing their exempt status.

A nonprofit has a duty to report any changes related to the exempt property. The organization must notify the local assessor if there is a change in the ownership, occupancy, or use of the property. For instance, if the nonprofit sells the property, it must report the transfer. If the organization begins leasing a floor to a for-profit company or ceases to use the property for its exempt mission, these changes must be disclosed.

Failing to report such a change can have consequences. If an assessor discovers that a property no longer qualifies for the exemption and the organization did not provide notification, the exemption can be revoked. This revocation can be made retroactive, leading to the assessment of back taxes for the period the property was out of compliance, along with potential interest and penalties.