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HB 5236

AN ACT RELATING TO TAXATION -- LEVY AND ASSESSMENT OF LOCAL TAXES

2025 Regular Session Introduced by David Bennett and 7 co-sponsors

HB 5236 tightens Michigan homestead credit by letting the treasury adjust nonarmslength gross rent and clarifying homestead, land adjacency, and mobile-home rules.

03/04/2025 Committee recommended measure be held for further study
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Bill Summary · HB 5236

Summary — HB 5236 (2025)

Status: Introduced March 14, 2025; electronically reproduced 11/06/2025; referred to committee (most recently Committee on Judiciary, 11/06/2025).
Subject: Amendments to section 508 of the Income Tax Act of 1967 (MCL 206.508) — definitions used for the property tax credit, especially “homestead” and “gross rent.”

Purpose

Clarify and modify statutory definitions used to determine eligibility and the calculation of the individual income tax property tax credit (homestead credit). The bill updates the definitions of “gross rent,” “homestead,” and “total household resources,” and restates rules that affect how adjacent land, agricultural land, and mobile homes are treated for credit purposes.

Key provisions and changes

  • Gross rent (sec. 508(1))

    • Clarifies that when the landlord and tenant have not dealt at arm’s length and the department finds the rent excessive, the department may adjust gross rent to a reasonable amount for purposes of the chapter. (Affirms enforcement authority to correct non–arm’s-length rents.)

  • Homestead (sec. 508(2))

    • Defines “homestead” to include a dwelling or unit subject to ad valorem taxes (or certain service-charge-in-lieu arrangements) that is owned and occupied by the owner or occupied by a renter/lessee.
    • Reaffirms that unoccupied real property generally included as homestead is excluded where that unoccupied property is leased/rented by the owner to another person and is not adjacent and contiguous to the owner’s home (effective beginning with the 1990 tax year per statutory language).
    • Adds/clarifies three subrules:
    • (a) When a homestead is part of a larger assessed unit, the homestead’s property tax for credit purposes is prorated by the share of value the homestead represents in the total assessment.
    • (b) Treatment of adjacent/contiguous agricultural or horticultural land: if agricultural gross receipts do not exceed household income (or there are no gross receipts), then
      • If claimant has lived on land ≥10 years → all adjacent/contiguous ag land is treated as homestead;
      • If claimant has lived on land <10 years → up to 5 acres of adjacent/contiguous ag land may be treated as homestead.
    • (c) Mobile homes/trailer coaches in a trailer park are treated as homesteads, site rent is treated as gross rent, and a specific tax levied under MCL 125.1041 is considered a property tax.

  • Household and resources (secs. 508(3)–(4))

    • “Household” defined as claimant and spouse.
    • “Total household resources” means all income received by household members while members of the household in the tax year, with a statutory exclusion (wrongful imprisonment compensation for tax years beginning after 12/31/2018) and with specified federal deductions added back to income for purposes of this credit calculation:
    • Net business loss after netting business income/loss;
    • Net rental or royalty loss;
    • Carryback/carryforward of net operating losses as described by IRC section 172(b)(2).

Who is affected

  • Homeowners and renters who claim the Michigan homestead/property tax credit.
  • Owners of unoccupied property leased to others (particularly non-adjacent parcels) — may be excluded from homestead treatment.
  • Agricultural property owners who rely on contiguous acreage being included in homestead for credit calculation (tenure-based rules differ by length of residence).
  • Mobile home park residents and mobile-home owners (site rent treated as rent; certain taxes counted as property tax).
  • Department staff (Department of Treasury) responsible for administering and adjusting gross rent and applying the clarified rules.

Procedural / timeline notes

  • Introduced: March 14, 2025. Read first time and referred to committee in April 2025 (Agriculture & Livestock); later reproduced and referred to Committee on Judiciary (11/06/2025). Still at introductory/committee stage as of the last listed action.

Potential impact

  • Clarifies administrative authority to adjust non–arm’s-length rents, which could reduce opportunities to inflate rent to increase credit amounts.
  • Narrows circumstances under which unoccupied leased parcels (not adjacent/contiguous) can be treated as part of a homestead, potentially reducing credits for owners who lease out distant unoccupied parcels.
  • Codifies acreage and tenure rules for agricultural homestead treatment, which may change eligibility for some farm households.
  • Administrative effects: likely increased determinations by the department on rent reasonableness and property apportionment in multi-unit assessments. No direct fiscal figures included in the bill text.

Compiled from official sources — confirm details with the bill’s official record.

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