Michigan
Airport Personal Property Tax
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the
author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Overview
•
Airports owned by a local unit of government are exempt from the
application of property taxes.
•
The local taxing entity, a township, city or county, may then assess property
tax to lessees of tax exempt property leasing hangars or operating
businesses for profit.
•
There are certain exceptions to this tax including:
– “property owned by, . . . by a county, township, city, village, or school district used
for public purposes and . . . is used to carry out a public purpose . . . is exempt
from taxation under this Act.” MCL 211.7m; and
– “property that is used as a concession at a public airport, park, market, or similar
property and that is available for use by the general public” is also exempt under
the Act. MCL 211.181 (2)(b).
•
However, exceptions have been strictly construed by local taxing
authorities.
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Exceptions
•
Entities seeking an exemption for property
tax assessed on a hangar located on airport
premises must prove the following:
1. That the property in question is owned by
the Airport Authority; and
2. That the property is used to carry out a
public purpose itself or on behalf of a public
subdivision or a combination.
–
Michigan Tax Tribunal in Brasseur v. Rutland
Charter Township, 2004 WL 725239 (Mich. Tax
Tribunal) (Feb. 5, 2004) (No. 0292326).
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Exceptions
• Under Brasseur, the lessee must be careful to
include in its Lease Agreement stipulations
regarding rent payments and retention of
property rights by the Airport Authority at lease
expiration, specifically a “yield and deliver up”
provision.
• Brasseur recognizes that permitting the storing
of private aircraft at a building owned by the
Airport Authority is in line with the general public
purpose of the airport, and ultimately the
building increases the value of the publicly
owned airport.
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Exceptions
•
Entities such as airport concessions,
FBOs, and other commercial aeronautical
operators must prove the following:
1. That the property is an airport concession;
and
2. That the property is open and available for
use by the general public.
–
Michigan Court of Appeals in Skybolt
Partnership v. City of Flint, 205 Mich. App. 597,
517 N.W. 2d 838 (1994).
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Exceptions
• Pursuant to Emery Worldwide v Township of
Cascade, 2005 WL 563323 (Mich. App. Mar 10,
2005) (NO. 251416), an entity must adequately
demonstrate it is, indeed, a concession open to the
public. The Court reasoned that something like a
retail, walk-in business is required.
• To be a concession, the Supreme Court has
previously established that that the services offered
by the would-be concessionaire must “bear a
reasonable relationship to the purposes” of the the
airport – which the Emery court said was “to provide
a public hub for activities ordinarily associated with
airplanes.”
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Exceptions
• Thus, FBOs and other commercial aeronautical
operators can be differentiated from Emery because
significant control is exercised by the airport in their
leases and through the airport’s minimum standards.
Also, these entities, by definition, are available to
serve the flying public. Airports traditionally require
FBOs to offer specific services such as: flights, and
aircraft maintenance and fuel.
• However, because the current trend is toward a
higher level of scrutiny of an airport/tenant’s lease
agreement, as well as its actual operations and a
greater deference to the tax assessors, we
recommend the following:
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Recommendations
1. Carefully analyze the Airport Lease Agreement. The
Agreement must show specific provisions that
comport to the airport’s minimum standards
including: minimum hours of operation, strict control
of improvements by the Airport Authority, and
oversight of operations by the landlord (Airport
Authority). The Agreement must have a clear
“imposition of obligations directed toward the
fulfillment of a public purpose.”
Example: In Emery, the freight building leased by Emery
Worldwide was used for cargo operations but it did not have
minimum hours enforced by the airport or a public counter
and it was never shown to have public purpose.
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Recommendations
2. Clearly demonstrate that the property is
directly devoted to serve the general public.
The “general public” definition does not just
encompass individual consumers but it also
includes business consumers.
Example: In Skybolt Partnership v. City of Flint, 205 Mich. App.
597, 517 N.W. 2d 838 (1994), where the property appeared to be an
FBO, but two of its hangars were subleased to Simmons Airlines for
maintenance. The Court concluded that the FBO hangar was exempt
but hangars sublet to Simmons were not exempt because they were
not available to the general public.
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Recommendations
3. Show the business has a reasonable relationship to
the purposes of the airport. Since a lessee’s is a
concessionary, its services must be “customarily
and needfully” required by the airport and these
services should “provide a public hub for activities
ordinarily associated with airplanes.”
Example: In Teledyne v. City of Norton Shores, 1984 WL 13972
(Mich. Tax Tribunal), where Teledyne’s private corporate hangar, a
portion of which was leased to another private business for office
space, was held as not exempt. The Tribunal not only held that the
property was not a concession because it was not open to the
general public, but also concluded that office space was not
“customarily and needfully” required by the airport.
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.
Questions
Clifford G. Maine
Barnes & Thornburg LLP
171 Monroe Ave. NW
Suite 1000
Grand Rapids, MI 49503
Direct Dial:
(616) 742-3944
Fax: (616) 742-3999
[email protected]
© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,
disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall
not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP.