- Conveying Property From a Partnership to One of the Partners Constitutes a Transfer of Ownership for Purposes of Uncapping the Property¿s Taxable Value
- November 15, 2010
- Law Firm: Mika Meyers Beckett Jones PLC - Grand Rapids Office
In the case of Schwass v Township of Riverton (September 30, 2010), the Michigan Court of Appeals upheld the respondent-township’s reassessment of certain real property owned by the petitioners. The property at issue was conveyed to the petitioners by two partnerships, of which the petitioners were the only partners.
The Michigan Constitution and statutory law permit real property’s taxable value to be reassessed according to the following year’s state equalized value upon the transfer of ownership of the property (known as “uncapping” the taxable value). However, MCL 211.27a(7) identifies certain types of conveyances that do not trigger uncapping, including conveyances involving joint tenancies. The petitioners argued that there was no functional difference between a joint tenancy and a partnership and, therefore, the conveyance at issue should not have uncapped the taxable value of the property.
In rejecting the petitioners’ argument, the court found that the “statutory scheme unambiguously identifies the types of conveyances that do not trigger uncapping, and conveyances involving tenancies in partnership are not among those listed.” The court also held that it could not assume that the Legislature intended to include tenancies in partnership when it used the term “joint tenancy” in the exception provided for in MCL 211.27a(7)(h):
“Although joint tenancies and tenancies in partnership are similar, they remain legally distinct forms of ownership, and the Uniform Partnership Act does not identify property held by a partnership as property held in ‘joint tenancy.’ Moreover, because [the Uniform Partnership Act] was enacted long before the process of ‘uncapping’ was devised by the Legislature, it cannot be said that the Legislature was unaware of tenancies in partnership at the time it enacted MCL 211.27a(7) in 1982.”
Accordingly, under the decision issued in the Schwass case, the conveyance of real property from a partnership to one or more of its individual partners uncaps the property’s taxable value, thereby allowing a tax authority to reassess the property’s taxable value according to the following year’s state equalized value.