Industrial Development Districts & Plant Rehabilitation - PA 198 of 1974 - Property Tax Abatement
What - PA 198 allows for the abatement of taxes on manufacturing and high-technology related investment in the city. The incentive is available for improvements to buildings and structures (real property), as well as the purchase of machinery and equipment (personal property). The abatement is for a period up to 12 years.
The incentive involves a two part process: 1) the creation of a Plant Rehabilitation or Industrial Development District, 2) the approval of an Industrial Facility Tax Certificate.
Upon issuance of an Industrial Facility Tax Certificate for a new project, within a Plant Rehabilitation or Industrial Development District, the company pays an abated Industrial Facilities Tax (IFT) on the new qualified investment, which is approximately 50% of the standard millage rate. The exemption applies only to the specific project that is the subject of the application. Any buildings and equipment that existed prior to construction of the new facility or are not specified on the application are not exempt. The incentive only abates taxable value on new improvements to the structural portion of a property, and new personal property added within the district. Personal property (i.e. equipment) that is currently being taxed anywhere within the state cannot receive the abatement.
If the project is rehabilitation of real property, the value of any preexisting obsolete property (as determined by a level 3 or 4 Assessor) is exempt from ad valorem property taxes but will be used as the base for the Industrial Facilities Tax.
Who - Eligible businesses include manufacturing plants, and related facilities such as office, engineering, and research and development. As well as, high-technology business operations such as advance computing, advanced materials, bio-technology, and information technology.
Why - PA 198 is used to encourage the creation and / or expansion of manufacturing and high technology business operations. The incentive is to assist companies in making significant investment and creating job opportunities within the city. It abates revenue that would not exist if not for the use of the incentive, leaving at least half of the new revenue on the tax rolls.
Cash Value of New Equipment = $1,000,000
Building Redevelopment Costs = $2,000,000
New Taxable Value Added = $1,500,000
(assumes 50% of true cash value of improvements and equipment)
Est. Tax Savings over 12 Years = $580,000
(estimate does not include depreciation of equipment)