State Reps. Dave Pagel, R-Berrien Springs, and Kim LaSata, R-Bainbridge Township, introduced legislation last week to stop out-of-state residents from taking advantage of property tax exemptions when they buy second homes in Michigan.
“Closing this loophole will help make sure public schools and local governments get their proper amount of tax revenue,” Pagel said. “Every day, this improper practice takes resources away from schools and local services.”
It is a critical issue for communities where out-of-state residents buy second homes, such as in southwest Michigan near Lake Michigan, the lawmakers said.
Some property owners intentionally and illegally declare a homestead property tax exemption on their second home in Michigan, while at the same time claiming a similar exemption on their primary residence in another state. Between being discovered and their hearing with the Michigan Tax Tribunal, these property owners have been allowed to retroactively rescind their homestead exemption on their primary out-of-state residence and keep a substantially larger tax exemption in Michigan.
The legislation sponsored by Pagel and LaSata would close the loophole and prohibit property owners from retroactively rescinding their out-of-state homestead exemption after being discovered, but before their tax tribunal hearing. Financial penalties would apply for intentional violators.
“We welcome people who want to invest and buy second homes here in Michigan,” LaSata said. “But we can’t allow our schools and local governments to be cheated out of money in the process. This legislation closes a loophole that has existed for far too long.”