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Publications | July 10, 2015
2 minute read

Warner Resurrects Exemption for Homeowner Transfer Tax

Homeowners in Michigan are now entitled to a refund of transfer taxes – thanks to the work of the Appellate and Supreme Court Practice attorneys at Warner Norcross + Judd LLP on a Michigan Supreme Court decision handed down yesterday.

In Gardner v Dep't of Treasury/Ngo v Dep't of Treasury/Maselli v Dep't of Treasury, Nos. 150293-5, the Michigan Supreme Court reversed a 2014 Court of Appeals decision, which will effectively put money back in the wallets of every eligible seller who qualifies for a principal residence transfer tax refund under the exemption in MCL 207.526(u).

A little background is in order: The State Real Estate Transfer Tax Act tax on recorded written instruments provided an exemption for principal residences sold when the state equalized value, or SEV, was lower at the time of sale than it was at the time of purchase—so long as the price was not something other than “true cash value.” In 2014, the Court of Appeals interpreted the exemption in such a way that it only applied when the new sale price was exactly equal to the local assessor’s true cash value determination for that year.

The petitioners paid the real estate transfer tax at a time when the SEV was lower than when they purchased it. But when they requested a refund, the Department of Treasury denied the exemption on the basis that these homeowners had sold their property for more than the current “true cash value” as determined by the local tax assessor in that property tax year.

Yesterday, the Michigan Supreme Court reversed that decision, interpreting “true cash value” in this exemption to mean the price a buyer would pay for the property in an arm’s length transaction—not what the assessor deemed it to be for purposes of general property taxes. The Court rejected the Department of Treasury’s interpretation of SRETTA and, instead, adopted wholesale Warner’s interpretation of the Act. It further instructed the Tax Tribunal to enter judgment against the Department of Treasury, requiring Treasury to grant a refund to our clients.

If you have questions about the exemption change, please contact any of our attorneys in the following groups: Tax, Real Estate or Trusts & Estates.