Uncapping the taxable value (TV) of real property; The General Property Tax Act (GPTA); Const 1963, art. 9, § 3; Klooster v Charlevoix; Effect of the transfer of shares in petitioner-property owner (a cooperative); “Transfer of ownership” (MCL 211.27a(6)); Exemptions (MCL 211.27a(7)); The Tax Tribunal (TT); Board of Review (BOR)

In an order in lieu of granting leave to appeal, the court affirmed the Court of Appeals’ judgment (see eJournal # 80510 in the 11/27/23 edition). It concluded that the BOR, the TT, and the Court of Appeals correctly determined that the “conveyances of more than 50% of” petitioner-domestic nonprofit corporation’s “shares presented an uncapping event under the GPTA.” Petitioner’s sole purpose is to hold “a family cottage on behalf of its members. The corporation was formed with five distinct memberships, some held individually and some as joint tenancies between spouses. In 2021, existing members [nonparties-DB and WB] bought two different interests from several of their fellow members, totaling a 48% interest in the business. Later that year, they sold a portion of their ownership interest in the property—20%—to one existing and two new members.” The issue was whether these conveyances constituted “an uncapping event under the GPTA. The [BOR] and the [TT] answered yes, and the Court of Appeals affirmed.” The court held that their interpretations were “consistent with the canons of statutory interpretation and the Legislature’s intent as derived from the statute’s text.” It noted that to determine if an uncapping event occurred here, the law directed it “to determine whether a conveyance has occurred; whether it conveyed title or a present interest ‘the value of which is substantially equal to the value of the fee interest,’ MCL 211.27a(6); and whether, more specifically, the ownership interest’ conveyed was ‘more than 50% of the corporation,’ MCL 211.27a(6)(h).” In this case, 68% “of the corporation was conveyed, although not all at once. The [Bs] themselves went from an equal-share minority interest of 24%, up to a supermajority of 72%, down to a simple majority of 52%. A ‘transfer of ownership’ occurred, both as a matter of common sense and under the plain language of MCL 211.27a(6).” Petitioner asserted “that a conveyance of the ‘same’ ownership interest across multiple transfers should not be considered an uncapping event. But if the Legislature meant to reach that outcome, it could have done so. In fact, the Legislature did provide for both exclusion of cumulative conveyances for some types of corporations—not including petitioner—and also exceptions for when transfers of ownership do not occur for purposes of uncapping.” It further noted that “MCL 211.27a(7) expressly exempts certain conveyances from the definition of ‘transfer of ownership.’”

Dissenting, Justice Bernstein (joined by Justice Zahra) believed that the Court of Appeals and the TT erred in concluding that the TV of petitioner’s property had been uncapped. “A cumulative conveyance can result in a transfer of property ownership—but only if [it] is of more than 50% of the corporation’s ownership interest.” The dissent found that “simply adding together individual shares that have been conveyed in a series of transactions and concluding that the sum is more than 50% of the total shares does not necessarily mean that more than 50% of the ownership interest has been conveyed.”