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© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,

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Presentation on theme: "© 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced,"— Presentation transcript:

1 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Michigan Airport Personal Property Tax

2 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Overview Airports owned by a local unit of government are exempt from the application of property taxes. The local taxing entity, a township, city or county, may then assess property tax to lessees of tax exempt property leasing hangars or operating businesses for profit. There are certain exceptions to this tax including: –property owned by,... by a county, township, city, village, or school district used for public purposes and... is used to carry out a public purpose... is exempt from taxation under this Act. MCL 211.7m; and –property that is used as a concession at a public airport, park, market, or similar property and that is available for use by the general public is also exempt under the Act. MCL (2)(b). However, exceptions have been strictly construed by local taxing authorities.

3 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Exceptions Entities seeking an exemption for property tax assessed on a hangar located on airport premises must prove the following: 1.That the property in question is owned by the Airport Authority; and 2.That the property is used to carry out a public purpose itself or on behalf of a public subdivision or a combination. –Michigan Tax Tribunal in Brasseur v. Rutland Charter Township, 2004 WL (Mich. Tax Tribunal) (Feb. 5, 2004) (No ).

4 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Exceptions Under Brasseur, the lessee must be careful to include in its Lease Agreement stipulations regarding rent payments and retention of property rights by the Airport Authority at lease expiration, specifically a yield and deliver up provision. Brasseur recognizes that permitting the storing of private aircraft at a building owned by the Airport Authority is in line with the general public purpose of the airport, and ultimately the building increases the value of the publicly owned airport.

5 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Exceptions Entities such as airport concessions, FBOs, and other commercial aeronautical operators must prove the following: 1.That the property is an airport concession; and 2.That the property is open and available for use by the general public. –Michigan Court of Appeals in Skybolt Partnership v. City of Flint, 205 Mich. App. 597, 517 N.W. 2d 838 (1994).

6 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Exceptions Pursuant to Emery Worldwide v Township of Cascade, 2005 WL (Mich. App. Mar 10, 2005) (NO ), an entity must adequately demonstrate it is, indeed, a concession open to the public. The Court reasoned that something like a retail, walk-in business is required. To be a concession, the Supreme Court has previously established that that the services offered by the would-be concessionaire must bear a reasonable relationship to the purposes of the the airport – which the Emery court said was to provide a public hub for activities ordinarily associated with airplanes.

7 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Exceptions Thus, FBOs and other commercial aeronautical operators can be differentiated from Emery because significant control is exercised by the airport in their leases and through the airports minimum standards. Also, these entities, by definition, are available to serve the flying public. Airports traditionally require FBOs to offer specific services such as: flights, and aircraft maintenance and fuel. However, because the current trend is toward a higher level of scrutiny of an airport/tenants lease agreement, as well as its actual operations and a greater deference to the tax assessors, we recommend the following:

8 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Recommendations 1.Carefully analyze the Airport Lease Agreement. The Agreement must show specific provisions that comport to the airports minimum standards including: minimum hours of operation, strict control of improvements by the Airport Authority, and oversight of operations by the landlord (Airport Authority). The Agreement must have a clear imposition of obligations directed toward the fulfillment of a public purpose. Example: In Emery, the freight building leased by Emery Worldwide was used for cargo operations but it did not have minimum hours enforced by the airport or a public counter and it was never shown to have public purpose.

9 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Recommendations 2.Clearly demonstrate that the property is directly devoted to serve the general public. The general public definition does not just encompass individual consumers but it also includes business consumers. Example: In Skybolt Partnership v. City of Flint, 205 Mich. App. 597, 517 N.W. 2d 838 (1994), where the property appeared to be an FBO, but two of its hangars were subleased to Simmons Airlines for maintenance. The Court concluded that the FBO hangar was exempt but hangars sublet to Simmons were not exempt because they were not available to the general public.

10 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Recommendations 3.Show the business has a reasonable relationship to the purposes of the airport. Since a lessees is a concessionary, its services must be customarily and needfully required by the airport and these services should provide a public hub for activities ordinarily associated with airplanes. Example: In Teledyne v. City of Norton Shores, 1984 WL (Mich. Tax Tribunal), where Teledynes private corporate hangar, a portion of which was leased to another private business for office space, was held as not exempt. The Tribunal not only held that the property was not a concession because it was not open to the general public, but also concluded that office space was not customarily and needfully required by the airport.

11 © 2009 Barnes & Thornburg LLP. All Rights Reserved. This page, and all information on it, is the property of Barnes & Thornburg LLP which may not be reproduced, disseminated or disclosed without the express written consent of the author or presenter. The information on this page is intended for informational purposes only and shall not be construed as legal advice or a legal opinion of Barnes & Thornburg LLP. Questions Clifford G. Maine Barnes & Thornburg LLP 171 Monroe Ave. NW Suite 1000 Grand Rapids, MI Direct Dial: (616) Fax: (616)


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