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HB 5872

Property tax: assessments; taxable value of transferred property; modify. Amends sec. 27a of 1893 PA 206 (MCL 211.27a).

2025-2026 Regular Session Introduced by Joe Aragona and 29 co-sponsors

HB 5872 aims to stop uncapping taxable value after 2025 when transfers go to a principal residence, aligning with HJR T and phasing in through constitutional change.

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Bill Summary · HB 5872

Summary: HB 5872 (Michigan, 2025-2026) – Property Tax Assessments; Taxable Value of Transferred Property

Note: The bill as described is tied to House Joint Resolution T (HJR T). HB 5872 amends the General Property Tax Act (1893 PA 206, as amended) to align with proposed constitutional changes under HJR T. The joint resolution must be enacted and approved by voters before HB 5872's changes take effect.

1. Purpose and Intent

  • The primary aim is to modify how property is taxed when ownership transfers occur. Specifically, it seeks to end or lessen the practice known as “uncapping” or “pop-up” in which a transferred property’s taxable value increases to reflect its market value (State Equalized Value, SEV) and then may rise further under existing caps.
  • HJR T would amend Article IX, Section 3 of the Michigan Constitution to prohibit uncapping after January 2027. HB 5872 complements this constitutional change by adjusting the statutory framework to implement the new approach when transfers occur.

2. Key Provisions (as they relate to the bill text)

  • General tax assessment baseline remains the 50% of true cash value requirement (as currently stated in the constitution and the act).
  • Taxable Value Calculations (Section 27a):
    • Under current law, after a transfer of ownership (post-1994 transfers), the property’s taxable value would typically “uncap” and become the SEV for the following year, subject to various exemptions and adjustments.
    • Subsection (3) provides scenarios where a transfer would trigger a taxable value adjustment to the SEV in the year after transfer, plus the limited-caps on subsequent increases (per Subsection (2)).
    • The major change is the prospective effect that, beginning after December 31, 2025, transfers to an owner who will use the property as their principal residence would no longer trigger the uncapping if the transfer occurs after that date (and the property remains continuously owned and used as principal residence by the transferee or a subsequent transferee).
    • This aligns with the HJR T premise that uncapping should not occur post-constitutionally defined 2027 threshold, and it extends similar protections to transfers under life estates, land contracts, foreclosures, and other transfer forms (subject to the constitutional framework).
  • Transfers Defined (Subsection 6) and Exceptions (Subsection 7):
    • The bill enumerates many forms of transfers that do and do not count as transfers for uncapping purposes, including deeds, land contracts, trusts, wills, distributions from trusts, stock transfers within affiliated groups, foreclosures, partnerships, conversions, and more.
    • It also details certain exemptions (e.g., transfers between spouses, life estates, certain judicial transfers) and imposes penalties or notification requirements in specific circumstances.
  • Specific Transfers Not Subject to Uncapping (New Policy Emphasis):
    • After December 31, 2025, property transferred to a transferee who uses it as their principal residence would avoid uncapping if continuously owned and used as principal residence by the transferee or an immediate successor.
    • A broad set of other transfer types includes portions of parcels, qualified agricultural/forest properties with recapture provisions, and certain inter-entity transfers (with conditions and disclosures).
  • Administrative and Compliance Provisions (Subsection 10 and related definitions in Subsection 11):
    • Requires timely notification of transfers by deed registries and transferees, with standard forms and data (parties, date, consideration, parcel ID).
    • Board of Review corrections and clerical error treatment are spelled out to ensure proper adjustments when adjustments occur under Subsection (3).

3. Affected Parties and Impacts

  • Property Owners:
    • Transfers of ownership after 2025 may not trigger uncapping if conditions (e.g., principal residence use) are met, reducing year-over-year property tax growth attributable to uncapping.
    • Those who do not meet conditions or whose transfers are subject to uncapping under current law could face different tax outcomes depending on the transfer type and timing.
  • Local Taxing Units and Schools:
    • The change would reduce annual property tax revenue growth associated with uncapping, shifting impact across schools, counties, cities, towns, and other local units.
  • State and School Aid Fund (SAF):
    • FISCAL analyses indicate a potential negative impact on SAF due to reduced property tax revenue, potentially increasing SAF costs to maintain per-pupil funding guarantees.
  • taxpayers generally:
    • Potentially lower state revenue, higher long-term costs for SAF, and changes to homestead and tax credit dynamics as effective property tax growth slows.

4. Procedural and Timeline Considerations

  • Constitutional Prerequisite:
    • HB 5872 is tied to HJR T, which would amend Section 3 of Article IX to prohibit uncapping after January 2027. HB 5872 could only take effect if and when HJR T is approved by voters and part of the state constitution.
  • Effective Date:
    • The bill specifies changes would become effective only if HJR T is enacted into the state constitution; otherwise, unchanged current law applies.
  • Transition and Compliance:
    • The act includes detailed transfer classifications and notification requirements to implement the revised framework once constitutional changes are adopted.

5. Summary

HB 5872, in conjunction with HJR T, seeks to phase out uncapping of taxable value upon transfer of property after 2025, particularly where the transferee will use the property as a principal residence, and to align Michigan’s tax policy with a constitutional framework that caps uncapping after 2027. It also expands and clarifies various transfer scenarios, ensures administrative processes for transfer reporting, and outlines fiscal implications, including potential revenue losses to state and local governments and the SAF. The bill is contingent on the constitutional amendment’s adoption.

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

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