Economic development: downtown development authorities; exemption from real estate transfer taxes; modify to reflect repeal of the state real estate transfer tax act. Amends sec. 228a of 2018 PA 57 (MCL 125.4228a). TIE BAR WITH: HB 5880'26, HB 5874'26

2025-2026 Regular Session Introduced by Joe Aragona and 18 co-sponsors

HB 5875 aligns TIF laws with the RETT repeal, removing transfer tax treatment for conveyances and adjusting TIF earnings exemptions.

REFERRED TO COMMITTEE ON GOVERNMENT OPERATIONS

#economicdevelopment:downtowndevelopmentauthorities #taxation:staterealestatetransfer

Purpose and intent

HB 5875 amends the Recodified Tax Increment Financing Act (2018 PA 57) to reflect the repeal of the state real estate transfer tax (RETT) act. Specifically, it repeals or adjusts provisions to align with the elimination of the real estate transfer tax and related conveyance tax exemptions.

The bill is part of a package tied to HB 5874 (RETT repeal) and HB 5880 (proposed services excise tax). Passage of HB 5875 depends on enactment of both HB 5874 and HB 5880 (tie-bar).

Key provisions

Amends Section 228a of the Recodified Tax Increment Financing Act (MCL 125.4228a). The text included indicates:

Beginning January 1, 2010, the authority is exempt from all taxation on its earnings or property.
Instruments of conveyance from an authority are exempt from transfer taxes under prior law (1966 PA 134) and the state real estate transfer tax act (former 1993 PA 330, MCL 207.521 to 207.537).

Enacting sections:

Enacting section 1: The amendatory act takes effect 90 days after enactment.
Enacting section 2: The act does not take effect unless HB 5874 and HB 5880 are enacted (tie-bar).

Affected entities

Downtown development authorities operating under the Tax Increment Financing framework in Michigan.

Local governments and taxpayers indirectly, given changes to tax incentives and transfer tax treatment.

The Revenue/School Aid Fund (SAF) context is relevant due to underlying RETT repeal discussions (see fiscal notes), but HB 5875 itself focuses on TIF provisions and timing.

Procedural and timeline notes

Effective date: 90 days after enactment.

Tie-bar: HB 5875 cannot take effect unless HB 5874 (RETT repeal) and HB 5880 (services excise tax) are enacted.

Related fiscal considerations (from HB 5874 analysis):

RETT repeal would reduce SAF revenues substantially (estimated $475.0 million in FY 2027 and $488.3 million in FY 2028), assuming full-year impact starting in those fiscal years.
HB 5880 would create a services excise tax and a mechanism to fund SAF restitution, via a new property tax savings reimbursement fund, with targeted annual adjustments for inflation (up to CPI, not to exceed 3%).
Although HB 5874/related bills specify an intent to annually appropriate sufficient General Fund dollars to SAF to offset RETT losses, no statutory mandate requires such appropriations.

Summary of potential impact

Policy alignment: HB 5875 helps align TIF legislation with the planned repeal of the state RETT, removing conflicting tax treatment for conveyances and TIF-related earnings.

Fiscal implications: The overall package could result in substantial SAF revenue reductions due to RETT repeal, offset by proposed funding mechanisms in HB 5880 and annual General Fund appropriations, though statutory funding mandates are not guaranteed.

Operational impact: Downtown development authorities would continue to receive tax-related exemptions under TIF, with the legal framework adjusted to reflect RETT repeal.

Notes

The package includes several sponsor and co-sponsor details and passed through the Government Operations committee as of the latest available status.

For readers seeking precise language, the bill text amends MCL 125.4228a and references related sections in MCL 125.4228a, MCL 205.21, and MCL 700.3912 via companion bills (5875, 5876, 5877).

Bill