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Court of Appeals of Michigan.

Rhonda FERRERO, Plaintiff–Appellant, v. TOWNSHIP OF WALTON, Defendant–Appellee.

Docket No. 302221.

    Decided: February 23, 2012


The single issue presented in this case is whether monies plaintiff received in 2009 pursuant to MCL 206.520 should be counted as income for the purposes of her qualification for an exemption under MCL 211.7u for property taxes in 2009. Plaintiff appeals as of right from the Michigan Tax Tribunal's (MTT) decision that the monies received should be treated as income for purposes of MCL 211.7u. We reverse and remand because monies received pursuant to MCL 206.520 is a rebate of property taxes paid and is not income for purposes of MCL 211.7u.


Plaintiff, 63 years old, has been permanently disabled since 1998. She owns a home and in 2008 paid property taxes. When filing her 2008 state income tax return in early 2009, plaintiff claimed a homestead property tax credit pursuant to MCL 206.520. It is not disputed that her 2008 property taxes were paid and that she qualified to receive the homestead tax credit for 2008 pursuant to MCL 206.520. Because plaintiff had no state income tax liability, the amount of the credit against her property taxes paid could not be returned to her as a reduction in her income tax. Pursuant to the mandates of subsection (3) of MCL 206.520, therefore, the sum, after examination and review, was paid to her, without interest, after she filed her 2008 income tax return in 2009.1

In 2009, plaintiff requested an exemption from property taxes under MCL 211.7u which provides that persons with income below a defined poverty level during the relevant year are exempted from having to pay that year's property taxes. In order to qualify for the exemption, for Walton Township, the property owner's income must be no more than $10,400.

For the 2009 tax year, plaintiff received $9,732 in social security disability income. Thus, if her other income exceeded $668, she would be ineligible for the exemption. If it did not exceed $668, she would qualify for the exemption.2 The Walton Township Board of Review (the Board) denied her application for the exemption because it considered her 2008 homestead property tax credit as income which, when added to her social security, placed her above the $10,400 limit. Plaintiff appealed the denial to the Small Claims Division of the Michigan Tax Tribunal, which affirmed the Board's denial.


“In the absence of fraud, review of a decision by the Tax Tribunal is limited to determining whether the tribunal erred in applying the law or adopted a wrong principle; its factual findings are conclusive if supported by competent, material, and substantial evidence on the whole record.” Mich Bell Tel Co v. Dep't of Treasury, 445 Mich. 470, 476; 518 NW2d 808 (1994).

Issues of statutory interpretation are questions of law that are reviewed de novo. Brown v. Detroit Mayor, 478 Mich. 589, 593; 734 NW2d 514 (2007). The primary goal of statutory interpretation is to give effect to the Legislature's intent, focusing first on the statute's plain language. Sun Valley Foods Co v. Ward, 460 Mich. 230, 236; 596 NW2d 119 (1999). “The words of a statute provide ‘the most reliable evidence of its intent․’ “ Id., quoting United States v. Turkette, 452 U.S. 576, 593; 101 S Ct 2524; 69 L.Ed.2d 246 (1981). When construing a statute, a court must read it as a whole. People v. Jackson, 487 Mich. 783, 791; 790 NW2d 340 (2010). [Klooster v. City of Charlevoix, 488 Mich. 289, 295; 795 NW2d 578 (2011) ].


The homestead property tax exemption for persons unable to pay because of poverty is governed by MCL 211.7u which provides in pertinent part:

The principal residence of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges is eligible for exemption in whole or in part from taxation under this act. This section does not apply to the property of a corporation.

While State Tax Commission (STC) bulletins are not binding,3 the STC has defined income as including: wages and salaries, net receipts from self-employment, regular payments from social security or public assistance, alimony, pensions, scholarship, and dividends, interest. STC Bulletin No. 5 of 1995, “Poverty Exemptions Under MCL 211.7U, New Requirements,” January 23, 1995.4

A tax refund is not income because a refund returns money to the taxpayer that need not have been paid; it is not an independent payment to the taxpayer. Although there is a distinction between a tax refund and a tax credit, a tax credit can function like a tax refund in some cases. Universal Oil Products Co v. Campbell, 181 F.2d 451, 478, cert den 340 U.S. 850; 71 S Ct 78; 95 L Ed 623 (CA 7, 1950) (concluding that “tax credits ․ do amount to refunds of the taxes ․ paid”).5

The tax credit involved here plainly functions as a refund. As held in Butcher v. Dept of Treasury, 425 Mich. 262; 389 NW2d 412 (1986), “[u]nlike the federal government, the state is not exempting certain property taxes from the base of the tax; rather, it is refunding them.” Id. at 275. The Butcher Court further explained that “[t]he property tax ‘credit,’ ․ is in effect a property tax rebate that employs the income tax as a vehicle for its reconciliation. Therefore, art. 9, § 7, which is concerned only with income taxes, is inapplicable to what is clearly a property tax rebate.” Id. at 276 (emphasis added); see also In re Request for Advisory Opinion Regarding Constitutionality of 2011 PA 38, 490 Mich. 295, 344; ––– NW2d –––– (2011).

The homestead property tax credit does not confer income nor is it a program to transfer new monies to individuals; rather, as Butcher makes clear, it is to rebate a portion of the property taxes a person has already paid. This is easily seen in the context of a taxpayer whose income tax liability exceeds the amount of the homestead credit for which they qualify. In such a case, the taxpayer does not receive a refund check; rather they receive their rebate in the form of an equivalent reduction in the amount of income tax due. The amount of money received and the basis upon which it is received is identical whether it is received as a reduction in income taxes due or payment of the amount of the rebate that exceeds the individual's income tax liability.

Because the $1,093 received by plaintiff via the property tax credit was in fact a tax refund and refunds are not considered income, the MTT should not have counted this money towards plaintiff's income.6 When plaintiff's income is properly calculated, it falls below the threshold amount for the poverty exemption.

Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

I respectfully dissent from the majority's opinion stating that the Michigan Tax Tribunal (MTT) erred when it concluded that the money received from a property tax credit under Michigan's Homestead Property Tax Credit, MCL 206.520(1), should be treated as income for purposes of her qualification for a poverty exemption from property taxes. I agree with the decision of the MTT and would affirm the denial of plaintiff's poverty exemption.

In reviewing a decision of the tax tribunal, we consider “whether the tribunal erred in applying the law or adopted a wrong principle.” Klooster v. City of Charlevoix, 488 Mich. 289, 295; 795 NW2d 578 (2011). Findings of fact are taken as final as long as they are supported by more than a scintilla of the evidence. Fairplains Twp v. Montcalm Co Bd of Comm'rs, 214 Mich.App 365, 372; 542 NW2d 897 (1995). Resolution of this appeal involves a question of statutory interpretation, which we review de novo. Klooster, 488 Mich. at 295.

“In general, tax exemption statutes are to be strictly construed in favor of the taxing authority.” Michigan United Conservation Clubs v. Lansing Twp, 423 Mich. 661, 664; 378 NW2d737 (1985). With regard to interpreting statutory exemptions:

“ ‘An intention on the part of the legislature to grant an exemption from the taxing power of the State will never be implied from language which will admit of any other reasonable construction. Such an intention must be expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for it is a well-settled principle that, when a specific privilege or exemption is claimed under a statute, ․ it is to be construed strictly against the property owner and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation. Exemptions are never presumed, the burden is on a claimant to establish clearly his right to exemption[.] ․ In other words, ․ taxation is the rule, and exemption the exception․ Moreover, if an exemption is found to exist, it must not be enlarged by construction, since the reasonable presumption is that the State has granted in express terms all it intended to grant at all․’ “ [Stege v. Department of Treasury, 252 Mich.App 183, 188–189; 651 NW2d 164 (2002), citing Guardian Industries Corp. v. Dep't of Treasury, 243 Mich.App 244, 249–250; 621 NW2d 450 (2000), quoting Detroit v. Detroit Commercial College, 322 Mich. 142, 148–149; 33 NW2d 737 (1948), quoting 2 Cooley, Taxation (4th ed), § 672 at 1403.]

The property tax exemption for persons unable to pay because of poverty is governed by MCL 211.7u. Section 7u(1) provides in relevant part that:

(1) The principal residence of persons who, in the judgment of the supervisor and board of review, by reason of poverty, are unable to contribute toward the public charges is eligible for exemption in whole or in part from taxation under this act.

(1) To be eligible for exemption under this section, a person shall do all of the following on an annual basis:

* * *

(e) Meet the federal poverty guidelines updated annually in the federal register ․ or alternative guidelines adopted by the governing body of the local assessing unit provided the alternative guidelines do not provide income eligibility requirements less than the federal guidelines.

* * *

(4) The governing body of the local assessing unit shall determine and make available to the public the policy and guidelines the local assessing unit uses for the granting of exemptions under this section. The guidelines shall include but not be limited to the specific income and asset levels of the claimant and total household income and assets.

Under the Homestead Property Tax Credit, MCL 206.520(1), “[s]ubject to the limitations and the definitions in this chapter, a claimant may claim against the tax due under this act for the tax year a credit for the property taxes on the taxpayer's homestead deductible for federal income tax purposes.” MCL 206.520(3) allows the credit to be paid directly to the taxpayer if the credit exceeds their tax liability. Butcher v. Dep't of Treasury, 141 Mich.App 116, 122; 366 NW2d 15 (1984).

The Homestead Property Tax Credit is not a “tax refund” under MCL 205.30, which states in part:

(1) The department shall credit or refund an overpayment of taxes; taxes, penalties, and interest erroneously assessed and collected; and taxes, penalties, and interest that are found unjustly assessed, excessive in amount, or wrongfully collected with interest at the rate calculated under section 23 for deficiencies in tax payment.

Defendant characterizes the homestead property tax credit as a “tax refund.” Were this an actual “tax refund,” this money would not be used to calculate plaintiff's income, as it would merely be a return of plaintiff's own money which had been improperly paid to the state.

However, the homestead property tax credit is not a “tax refund;” rather it is a “refundable tax credit.” Unlike a tax refund, where the taxpayer has already overpaid or incorrectly paid the tax with her own money and is simply reclaiming that money which was erroneously paid out, a refundable tax credit pays a taxpayer from state funds a sum equal to a portion of, in this case, property taxes that were properly paid to a local government. As such, the homestead property tax credit is an age-and means-tested program to distribute money to recipients based on their need, as determined by the formulas in MCL 206.522, in order to ameliorate the burden of their homestead property taxes, and is not a refund of taxes incorrectly paid. Thus, the homestead property tax credit is income for purposes of calculating eligibility for the poverty exemption under MCL 211.7u.

In sum, I would conclude that the MTT did not err by upholding defendant's denial of plaintiff's request for a poverty exemption. Plaintiff's income was properly calculated by including money she received from the Michigan homestead property tax credit.

I would affirm.


1.  MCL 206.520(3) provides that “if the credit claimed under this section ․ exceeds the tax liability for the year or if there is no tax liability for the tax year, the amount of the claim not used as an offset against tax liability shall, after examination and review, be approved for payment, without interest to the claimant. In determining the amount of the payment under this subsection, withholdings and other credits shall be used first to offset any tax liabilities.”

2.  Plaintiff also received $564 in food stamps. However, it is not disputed that food stamps do not qualify as income for purposes of the exemption.

3.  Moshier v. Whitewater Twp, 277 Mich.App 403, 408 n 2; 745 NW2d 523 (2007).

4.  A new bulletin on this topic was released in 2010. STC Bulletin No. 7 of 2010, “Poverty Exemptions,” May 24, 2010. Its definition of income is consistent with the 1995 bulletin.

5.  The hearing board's Proposed Opinion cites page 5 of the Bulletin as the sole authority for its holding that “Petitioner's homestead property tax refund credit shall be counted as available income” (emphasis added). Page 5 of the Bulletin contains no such statement, however. Indeed, the Bulletin actually states, on page 6, that “[i]ncome does not include [t]ax refunds.”

6.  The hearing referee's proposed opinion and judgment that was adopted by the MTT noted that there was evidence that plaintiff had other unreported income. However, that evidence was disputed and the findings of fact set forth by the referee plainly do not include any finding that plaintiff actually received any unreported income, nor if so, how much. The MTT's Final Opinion bases its ruling solely on its conclusion that “when adding Petitioner's 2008 property tax credit to Petitioner's 2009 Social Security Income, Petitioner's annual household income exceeds the $10,400 threshold established by Respondent.” MTT Final Opinion and Judgment, p3, ¶ 4. We decline to uphold the MTT's ruling on the basis of disputed allegations, the evidence of which the MTT itself did not find convincing enough to include in its official findings of fact.


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