Changes to Automatic Investment Deduction

In 2005, legislation was adopted which created automatic investment deductions to phase in property taxes on eligible new projects for small businesses. The original legislation established eligible improvements as those assessed before March 2, 2009. The most recent legislative session limited the eligibility to improvements assessed before March 2, 2007.

For eligible real and personal property, the automatic investment deduction is determined as the lesser of: 1) $2 million of assessed value; or 2) the assessed value of improvements multiplied by the percentages in the table below:

Overview of Traditional Abatements

New businesses planning to expand can still apply to the municipal legislative body for the traditional property tax abatements of up to ten years. This application must be approved before improvements are constructed. A Statement of Benefits (SB1) showing the benefits of the project must also be completed.

After the improvements are completed and the business receives the assessment notice (Form 11), the business must then file abatement deduction forms (322 RE and 103 ERA). During the term of abatement, qualified businesses must complete annual compliance forms and provide them to all local government jurisdictions to monitor whether the investment and jobs (the benefits) match the SB1. If they do not, the tax abatement incentive may be rescinded or reduced.

If you have any questions on the process for tax abatements or need any assistance, please contact us at footnotes@umbaugh.com.