Delta Business Center LLC v. Delta Charter Township

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

DELTA BUSINESS CENTER, LLC, FOR PUBLICATION

June 20, 2019

Petitioner-Appellant, 9:05 a.m.

v No. 343386

Oakland Circuit Court

DELTA CHARTER TOWNSHIP, LC No. 2017-161231-AA

Respondent-Appellee,

and

DEPARTMENT OF TREASURY,

Intervening Respondent-Appellee.

Before: SAWYER, P.J., and O’BRIEN and LETICA, JJ.

PER CURIAM.

Petitioner, Delta Business Center, LLC (Delta), appeals as of right the trial court’s

opinion and order affirming the State Tax Commission’s (STC’s) denial of Delta’s application

for a tax exemption under the Plant Rehabilitation and Industrial Development Districts Act (the

PRIDDA), MCL 207.551 et seq. On appeal, we are asked to decide under what circumstances

leased property can qualify as “industrial property” under the PRIDDA. We conclude that for

leased property to qualify as “industrial property” under the PRIDDA, a lessee must be liable for

property taxes and must furnish proof of that liability. We further conclude that this means that a

lessor cannot receive a tax exemption under the PRIDDA when the leased property must qualify

as “industrial property.” Because Delta is strictly a lessor of the property at issue, and because

that property must qualify as “industrial property” for Delta to receive its requested tax

exemption, the STC properly denied Delta’s application. We affirm.

I. BACKGROUND

Under the PRIDDA, local governmental units may establish “plant rehabilitation

districts” and “industrial development districts.” MCL 207.554(1). After such a district is

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established, “the owner or lessee of a facility may file an application for an industrial facilities

exemption certificate [IFEC] with the clerk of the local governmental unit that established the

plant rehabilitation district or industrial development district.” MCL 207.555(1). If approved by

the local government, the application goes to the STC for review. MCL 207.557(1). If the STC

grants the IFEC application, the applicant gets a tax advantage: in place of ad valorem taxes, an

“industrial facility tax” is levied on the exempt property. MCL 207.561. If the STC had granted

Delta’s IFEC application, Delta’s “industrial facility tax” for up to the next 12 years would have

been calculated using the taxable value of the at-issue property in the year before the effective

date of the IFEC, essentially freezing the taxable value of the property. MCL 207.564(1); MCL

207.566.

Delta is the owner of a 93,000-square-foot industrial park that it leases to tenants. The

building on Delta’s property was originally intended for printing newspapers, but, by 2017, that

use was no longer economically feasible. So in an agreement between Delta Charter Township

(the Township) and Delta, the Township agreed to grant Delta a 10-year IFEC; in return, Delta

would invest $3,900,000 in the property.

After being approved by the Township, Delta’s IFEC application went to the STC for

review. For Delta to receive the IFEC that it requested, it had to establish, among other things,

that its property would constitute “industrial property” under MCL 207.552(7) after it was

renovated. That definition provides a detailed explanation of all the activities that can be

performed on a property for it to qualify as “industrial property.” The STC interpreted MCL

207.552(7) as requiring that the IFEC applicant engage in one of the activities listed in that

statute for the applicant to qualify for the exemption. Though Delta’s tenants were allegedly

engaging in listed activities, Delta was using the property for an unlisted activity—real estate

development. The STC therefore denied Delta’s IFEC application, concluding that Delta “does

not qualify for the exemption because it does not engage in any of the activities listed within the

definition of industrial property as outlined in MCL 207.552.”

Delta appealed to the circuit court.1 The circuit court affirmed the STC’s decision, but on

other grounds.2 The trial court reasoned that for leased property to be considered “industrial

property” under MCL 207.552(7), “the lessee must be liable for the payment of property taxes

and must furnish proof of that liability.”3 The court concluded that because Delta “offered no

1

Under MCL 207.570, any party “aggrieved by the issuance or refusal to issue” an IFEC “may

appeal from the finding and order of the” STC in accordance with the Administrative Procedures

Act (APA), MCL 24.201 et seq. The APA, in cases like this, allows an aggrieved party to appeal

an agency’s final decision to the circuit court. MCL 24.301.

2

The Department of Treasury filed a motion to intervene, which was granted by stipulation of

the parties. The Township declined to file a brief in the circuit court, and has likewise declined

to file a brief on appeal.

3

MCL 207.552(7) states, in relevant part, “Industrial property may be owned or leased.

However, in the case of leased property, the lessee is liable for payment of ad valorem property

taxes and shall furnish proof of that liability.”

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proof of [its] lessees’ liability for payment of property taxes,” the STC was authorized by law to

deny Delta’s application.

Delta now appeals by right.

II. STANDARD OF REVIEW

Delta appealed the STC’s decision in accordance with the Administrative Procedures Act,

MCL 24.201 et seq. Under that act, the circuit court was required to set aside the STC’s decision

if, among other reasons, it was in violation of a statute or was affected by a substantial and

material error of law. MCL 24.306.

This Court reviews the circuit court’s decision “to determine whether the circuit court

applied correct legal principles and whether it misapprehended or grossly misapplied the

substantial evidence test to the agency’s findings.” Sterling Heights v Chrysler Grp, LLC, 309

Mich App 676, 681; 873 NW2d 342 (2015) (quotation marks and citation omitted). “This Court

reviews de novo questions of statutory interpretation.” Id.

III. ANALYSIS

On appeal, Delta argues that the STC’s denial of Delta’s IFEC application was a material

error of law or otherwise violated the PRIDDA. We disagree.

“A court’s primary task when interpreting a statute is to discern and give effect to the

intent of the Legislature.” Tomra of North America, Inc v Dep’t of Treasury, 325 Mich App 289,

299; 926 NW2d 259 (2018). This Court must “first consider the statutory language itself; if the

language is unambiguous, we conclude that the Legislature must have intended the clearly

expressed meaning and we enforce the statute as written.” Id. Tax exemptions are disfavored

and are therefore strictly construed against the taxpayer in favor of the taxing unit. Id. at 296.

It is undisputed that for Delta to receive an IFEC, its building had to qualify as a

“replacement facility” under the PRIDDA. A “replacement facility” must, among other things,

be used as “industrial property” after it is renovated. See MCL 207.552(4)(a) and (b); see also

Orion Twp v State Tax Comm, 195 Mich App 13, 16; 489 NW2d 120 (1992). Under MCL

207.559(2)(d), the STC “shall not grant” an IFEC application unless it relates to a “replacement

facility within the meaning of this act,” with exceptions not applicable here. Thus, the STC had

to deny Delta’s IFEC application if Delta’s building would not constitute “industrial property”

after it was renovated.

The STC concluded that Delta’s building would not constitute “industrial property”—and

therefore denied Delta’s application—because Delta did “not engage in any of the activities

listed within the definition of industrial property as outlined in MCL 207.552.” The circuit court

affirmed the STC’s decision that Delta’s building would not constitute “industrial property,” but

on other grounds. The circuit court believed that for leased property to qualify as “industrial

property,” MCL 207.552(7) required that the lessee (1) be liable for the property tax and (2)

furnish proof of that liability. And because Delta had not provided proof that its lessees would

be liable for the payment of property taxes, the circuit court concluded that Delta’s leased

property could not qualify as “industrial property.”

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We will address the STC’s and the circuit court’s differing reasons for denying Delta’s

application, but first address Delta’s argument that MCL 207.555(1) dictates the outcome of this

case. That statute provides, in relevant part, that “the owner or lessee of a facility may file an

application for an industrial facilities exemption certificate . . . .” This statute establishes that, as

an owner of property, Delta was entitled to file an application requesting the IFEC. But the fact

that Delta could file an IFEC application does not resolve whether Delta is entitled to an IFEC.

MCL 207.555(1) is therefore not dispositive to the outcome of this case.

Turning to the STC’s decision, MCL 207.552(7) gives the definition of industrial

property as follows:

“Industrial property” means land improvements, buildings, structures, and other

real property, and machinery, equipment, furniture, and fixtures or any part or

accessory whether completed or in the process of construction comprising an

integrated whole, the primary purpose and use of which is the engaging in a high-

technology activity, operation of a strategic response center, operation of a

motorsports entertainment complex, operation of a logistical optimization center,

operation of qualified commercial activity, operation of a major distribution and

logistics facility, the manufacture of goods or materials, creation or synthesis of

biodiesel fuel, or the processing of goods and materials by physical or chemical

change; property acquired, constructed, altered, or installed due to the passage of

proposal A in 1976; the operation of a hydro-electric dam by a private company

other than a public utility; or agricultural processing facilities. Industrial property

includes facilities related to a manufacturing operation under the same ownership,

including, but not limited to, office, engineering, research and development,

warehousing, or parts distribution facilities. Industrial property also includes

research and development laboratories of companies other than those companies

that manufacture the products developed from their research activities and

research development laboratories of a manufacturing company that are unrelated

to the products of the company. For applications approved by the legislative body

of a local governmental unit between June 30, 1999 and December 31, 2007,

industrial property also includes an electric generating plant that is not owned by

a local unit of government, including, but not limited to, an electric generating

plant fueled by biomass. For an industrial development district created before

July 1, 2010, industrial property also includes an electric generating plant that is

fueled by biomass that is not owned by a unit of local government if the electric

generating plant involves the reuse of a federal superfund site remediated by the

United States environmental protection agency and an independent study has

concluded that the electric generating plant would not have an adverse effect on

wood supply of the area from which the wood supply of the electric generating

plant would be derived. An electric generating plant described in the preceding

sentence is presumed not to have an adverse impact on the wood supply of the

area from which the wood supply of the electric generating plant would be

derived if the company has a study funded by the United States department of

energy and managed by the department of energy, labor, and economic growth

that concludes that the electric generating plant will consume not more than 7.5%

of the annual wood growth within a 60-mile radius of the electric generating

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plant. Industrial property also includes convention and trade centers in which

construction begins not later than December 31, 2010 and is over 250,000 square

feet in size or, if located in a county with a population of more than 750,000 and

less than 1,100,000, is over 100,000 square feet in size or, if located in a county

with a population of more than 26,000 and less than 28,000, is over 30,000 square

feet in size. Industrial property also includes a federal reserve bank operating

under 12 USC 341, located in a city with a population of 600,000 or more.

Industrial property may be owned or leased. However, in the case of leased

property, the lessee is liable for payment of ad valorem property taxes and shall

furnish proof of that liability. For purposes of a local governmental unit that is a

next Michigan development corporation, industrial property includes only

property used in the operation of an eligible next Michigan business, as that term

is defined in section 3 of the Michigan economic growth authority act, 1995 PA

24, MCL 207.803. Industrial property does not include any of the following:

(a) Land.

(b) Property of a public utility other than an electric generating plant that

is not owned by a local unit of government as provided in this subsection.

(c) Inventory.

Nowhere does this lengthy definition suggest that, for property to be considered “industrial

property,” the IFEC applicant must engage in one of the activities listed. Thus, the STC’s

interpretation of MCL 207.552(7) improperly read a requirement into the statute that does not

exist. See Book-Gilbert v Greenleaf, 302 Mich App 538, 542; 840 NW2d 743 (2013)

(explaining that it is inappropriate to “read into [a] statute a requirement that the Legislature has

seen fit to omit”).

But this does not necessarily entitle Delta to relief. The trial court upheld that the STC’s

decision because it believed that MCL 207.552(7) places conditions on when leased property can

be “industrial property,” and that Delta’s leased property did not satisfy those conditions.

In reaching its conclusion, the trial court relied on language in MCL 207.552(7) that

states, “Industrial property may be owned or leased. However, in the case of leased property, the

lessee is liable for payment of ad valorem property taxes and shall furnish proof of that liability.”

Clearly, leased property can be “industrial property.” But the statute’s unambiguous language

places conditions on when leased property can be “industrial property”: for leased property to be

considered “industrial property” under the PRIDDA, the lessee must be liable for the payment of

ad valorem property taxes, and must furnish proof of that liability. MCL 207.552(7).

Delta contends that the requirements placed on lessees by MCL 207.552(7) are not

relevant here because Delta, not its tenants, is seeking the exemption. Delta is correct that MCL

207.552(7) only imposes responsibilities on the lessee of industrial property. But this, in our

opinion, is because the Legislature intended for only lessees to receive an IFEC in cases where

the at-issue leased property must qualify as “industrial property” for the applicant to receive the

exemption. MCL 207.552(7) uses the phrase “in the case of leased property.” This language in

no way restricts what follows. The Legislature’s use of this broad language shows it intended

that in all cases where an IFEC applicant seeks to have leased property classified as “industrial

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property,” the lessee must always be liable for property taxes. If a lessee must be liable for

property tax, then only the lessee is able to receive the exemption under the PRIDDA4; the

PRIDDA grants a property-tax exemption that an individual or entity can claim only if it is liable

for property tax. See Herman Brodsky Enterprises, Inc v State Tax Comm, 204 Mich App 376,

384; 522 NW2d 126 (1994) (holding that the owner of property “was not entitled to an

exemption” under the PRIDDA because it had “placed responsibility for paying the ad valorem

property taxes upon its tenants”).

As Delta would have us read the phrase “in the case of leased property,” the requirements

that follow—that the lessee be liable for the property tax and furnish proof of that liability—are

only applicable when the lessee seeks the exemption. In other words, Delta would have us read

the phrase “in the case of leased property” to mean “in the case of leased property where the

lessee seeks the IFEC,” or similar. If the Legislature had intended this latter result, it would have

used language to make that intent clear. See Kar v Nanda, 291 Mich App 284, 291; 805 NW2d

609 (2011) (explaining that “it is well-settled that the Legislature is presumed to mean what it

says in a statute”).

Our interpretation of MCL 207.552(7) finds further support in the statute’s history.

When the PRIDDA was first enacted by 1974 PA 198, the definition of “industrial property” was

found in MCL 207.552(6). The original definition was:

“Industrial property” means land improvements, buildings, structures, and other

real property, whether leased or owned, and owned machinery, equipment,

furniture, and fixtures or any part or accessory thereof whether completed or in

the process of construction comprising an integrated whole, the primary purpose

and use of which is the manufacture of goods or materials or the processing

thereof by physical or chemical change. Industrial property shall not include any

of the following:

(a) Land.

(b) Property of a public utility.

(c) Inventory. [MCL 207.552(6), as enacted by 1974 PA 198.]

This definition has undergone several changes throughout the years. 1981 PA 211 removed the

phrase “whether leased or owned” from the main paragraph and, in its place, added the following

language:

4

We recognize that there is no clear reason why the Legislature decided to only allow lessees of

industrial property to receive an IFEC. But whatever the reason, it is not this Court’s role to

question the Legislature’s policy decision. See O’Donnell v State Farm Mut Auto Ins Co, 404

Mich 524, 542; 273 NW2d 829 (1979) (“The responsibility for drawing lines in a society as

complex as ours of identifying priorities, weighing the relevant considerations and choosing

between competing alternatives is the Legislature’s, not the judiciary’s.”).

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Industrial property may be owned or leased if in the case of leased

property, the lessee is liable for payment of ad valorem property taxes and

furnishes proof of that liability. [MCL 207.552(6), as amended by 1981 PA 211.]

In 1982 PA 417, our Legislature added a single comma to this phrase, so it read:

Industrial property may be owned or leased if, in the case of leased

property, the lessee is liable for payment of ad valorem property taxes and

furnishes proof of that liability. [MCL 207.552(6), as amended by 1982 PA 417.]

The definition of “industrial property” was not altered again until 1999 PA 140, where the

Legislature changed the language about leased property to its current form:

Industrial property may be owned or leased. However, in the case of leased

property, the lessee is liable for payment of ad valorem property taxes and shall

furnish proof of that liability. [MCL 207.552(6), as amended by 1999 PA 140.]

These two sentences have remained unaltered in every subsequent amendment to the statute.5

Reviewing this history, the definition of “industrial property” as originally enacted did

not differentiate between owned or leased property; “industrial property” was certain types of

property that could be owned or leased. MCL 207.552(6), as enacted by 1974 PA 198. This

changed seven years later when the Legislature added requirements for when leased property

could be deemed “industrial property”: “if . . . the lessee is liable for payment of ad valorem

property taxes and furnishes proof of that liability.” MCL 207.552(6), as amended by 1981 PA

211. It is presumed that these additions reflect a conscious decision by the Legislature to change

the definition of “industrial property” when the at-issue property is leased. See Bush v

Shabahang, 484 Mich 156, 167; 772 NW2d 272 (2009) (“[A] change in statutory language is

presumed to reflect either a legislative change in the meaning of the statute itself or a desire to

clarify the correct interpretation of the original statute.”). That is, the Legislature purposefully

changed the definition of “industrial property” to require that, if the property is leased, the lessee

be liable for ad valorem property taxes and prove that liability. While the statute has undergone

numerous amendments over the years, the requirements placed on leased property have been

retained in every version of the statute since 1981. The Legislature’s actions—changing the

definition of “industrial property” and then retaining those changes—show that it intended for

leased property to qualify as “industrial property” only under certain circumstances: when the

lessee is liable for ad valorem taxes and furnishes proof of that liability. And as explained, if the

lessee must be liable for property taxes for leased property to qualify as “industrial property,”

5

See 2000 PA 247; 2002 PA 280; 2004 PA 5; 2005 PA 118; 2005 PA 267; 2007 PA 12; 2007

PA 146; 2008 PA 170; 2008 PA 457; 2008 PA 581; 2009 PA 209; 2010 PA 273; and 2011 PA

154.

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then only the lessee of that property may receive an IFEC.6 See Herman Brodsky Enterprises,

204 Mich App at 384.

In sum, we conclude that the Legislature intended for “industrial property” as used in the

PRIDDA to include leased property only when “the lessee is liable for payment of ad valorem

property taxes” and “furnish[es] proof of that liability.” MCL 207.552(7). We further conclude

that because the lessee must be liable for property taxes in order for leased property to qualify as

“industrial property,” only the lessee of that property can receive the exemption under the

PRIDDA.7 Because (1) Delta’s property must qualify as “industrial property” for Delta to

receive the exemption, (2) Delta’s property is leased, and (3) Delta is strictly a lessor of its

property, the STC properly denied Delta’s IFEC application.

Affirmed.

/s/ David H. Sawyer

/s/ Colleen A. O’Brien

/s/ Anica Letica

6

Delta could argue that, under MCL 207.555(1), it is still entitled to seek the exemption. Again,

that statute provides the general proposition that an “owner or lessee of a facility may file an

application” for an IFEC. MCL 207.555(1). That statute, however, says nothing about leased

property, and we believe that our understanding of MCL 207.552(7) is entirely consistent with

MCL 207.555(1). When property is not leased, the owner would seek the exemption. When

property is leased, the lessee would seek the exemption. Thus, as MCL 207.555(1)

contemplates, either an owner or lessee may apply for the exemption. But whether the

exemption should be sought by an owner or a lessee in a particular case depends on whether the

property is leased.

7

It could be possible for an owner to lease part of its property and use the other part as

“industrial property” under MCL 207.552(7). In such a situation, this opinion should not be

construed as necessarily denying the owner—who is a lessor—the ability to receive an IFEC for

the unleased portion of the property.

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