Trending Content

Michigan rental operators need to follow guidelines to comply with new personal property tax law

by Connie Lannan and Alysia Ryan

Tax cut graphicAs of Jan. 1, 2023, Michigan rental operators of “qualified heavy equipment rental property” or QHERPP, are exempt from paying ad valorem taxes. Instead, they are required to collect a specific tax assessed an amount equal to 2 percent of the rental price.

This change, which rental operators in Michigan have spent years lobbying for, is a result of Michigan Gov. Gretchen Whitmer signing into law on March 23, 2022, Public Act 46, which created an exemption for those rental operators.

According to the Michigan State Tax Commission, a “qualified renter” must claim the exemption annually by filing the approved form with their local assessor/assessing unit — city or township — where the rental business is located by Feb. 20, 2023.

A “qualified renter” is defined as an individual, corporation, limited liability company, partnership, association or any other legal entity that meets all the following criteria:

  1. Is engaged in a line of business described in Code 532412 (Construction, Mining and Forestry Machinery and Equipment Rental and Leasing) or 532310 (General Rental Centers) of the North American Industry Classification System, published by the United States Census Bureau, 2017 edition. ARA members, other than those in the event rental industry, typically rent this equipment in their operations.
  2. Maintains in this state a qualified renter business location. Claimants must report both the real parcel number of the rental business location where the equipment is kept when not rented out as well as the personal property numbers under which the equipment is reported.
  3. Receives more than 50 percent of its annual gross receipts from the rental of qualified equipment to the public or has an affiliate that receives more than 50 percent of the affiliate’s annual gross receipts from the rental of such equipment to the public.

Equipment qualifying for the exemption includes any construction, earthmoving or industrial equipment that is mobile and rented to customers by a qualified renter, including attachments or other equipment. It does not include handheld tools or equipment solely for industry-specific uses in oil and gas exploration, mining or forestry. A more specific list of qualified equipment can be found here.

Once qualified for the new exemption, qualifying personal property will be exempt from ad valorem taxes and rental operators will instead need to collect the specific tax as outlined in Public Act 35 of 2022.

For definition of terms used on the form, go to the Instruction for Form 5819.

Note that all bulletins and forms are available on the State Tax Commission’s website (www.michigan.gov/statetaxcommission). Forms needed are: