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HB 5885

Property tax: exemptions; when to deny a disabled veteran’s exemption; clarify. Amends secs. 7b & 7c of 1893 PA 206 (MCL 211.7b & 211.7c)

2025-2026 Regular Session Introduced by Greg Alexander and 29 co-sponsors

Michigan HB 5885 tightens eligibility and auditing for disabled veteran property tax exemptions, with proration rules and potential refunds/interest if ineligible.

bill electronically reproduced 04/23/2026
#propertytax:exemptions #veterans:other
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Bill Summary · HB 5885

Summary of HB 5885 (Michigan, 2025-2026)

Purpose and intent

  • The bill amends the General Property Tax Act (1) to clarify and potentially tighten when a disabled veteran’s property tax exemption may be denied, and (2) to outline procedures for applying, auditing, and rescinding exemptions granted under the state’s property tax exemptions for disabled veterans and surviving spouses of disabled veterans.
  • Effective for taxes levied on or after January 1, 2025, the exemption rules, eligibility verification, audit procedures, and appeal mechanisms are codified or clarified.

Key provisions and changes

1) Exemption eligibility and scope (Section 7b)

  • Real property that is used and owned as a homestead by:
    • a disabled veteran; or
    • the surviving spouse of a disabled veteran who, immediately before death, was eligible for the exemption under this section, and who remains eligible as long as the spouse does not remarry.
  • The exemption applies to any homestead property owned by the qualifying spouse, including property acquired after the decedent’s death.
  • Eligibility is based on:
    • A disability determination by the U.S. Department of Veterans Affairs (VA), or
    • VA certification of pecuniary assistance for specially adapted housing, or
    • VA rating of “individual unemployable” (IU) status.

2) Application and documentation (Section 7b(2))

  • Eligible individuals or their legal designee must file an annual exemption application with the local assessing unit after January 1 and before December 31 of the tax year claimed.
  • The application is open to inspection.
  • If the eligible person has acquired title to exempt real property and submits VA documentation affirming eligibility, the taxes for that year are canceled.
  • Once granted (on or after Jan 1, 2025), the exemption remains in effect without reapplication unless rescinded by the individual or denied by the assessor under Sec. 7c.

3) Proration and treatment of exemption (Section 7b(3))

  • If the eligible individual does not use and own the property as a homestead for the entire tax year, the exemption is prorated using one of three methods:
    • (a) Pro rata based on closing/purchase documents (if provided).
    • (b) If no closing documents are provided, a 365-day-based daily proration using days of homestead use.
    • (c) A proration based on the effective date of removal of the exemption (conveyance/disposition date).
  • Closing/purchase documents must be provided to support method (a); otherwise, methods (b) or (c) apply.

4) Definitions (Section 7b(4))

  • Disabled veteran: VA-determined permanently and totally disabled at 100% or qualifying through special VA housing assistance or IU rating.
  • Own/owned: Legal title held by the individual alone or jointly with a spouse, depending on whether the individual qualifies under (a) or (b).
  • Veteran: Service in the U.S. Armed Forces with honorable discharge.

5) Ongoing exemption and rescission (Section 7c)

  • Exemptions granted on/after Jan 1, 2025 remain in effect until rescinded or denied as described.
  • Annulment or rescission procedures include:
    • File a form rescinding if ownership/use ceases or qualifications are no longer met (within 45 days).
    • An auditing program by the local assessing unit to verify eligibility (no more than once every 3 years unless there is reasonable belief of ineligibility).
    • If VA documentation confirms eligibility during an audit, the exemption remains, regardless of observations about physical abilities or employability.
    • If ineligible, the exemption may be denied or rescinded for the current year and up to the three preceding years, with related tax adjustments and interest.
  • Notification and appeal rights:
    • Denial notices must explain reasons and inform about appeal to the Tax Tribunal (within 35 days).
  • Tax bill adjustments:
    • If rescission occurs, the local or county treasurer must issue corrected or supplemental tax bills with interest (1% per month or fraction) from the date last payable. Delinquency timing is adjusted accordingly.

Who is affected

  • Homeowners who are disabled veterans (or surviving spouses meeting criteria) and use/own a property as a homestead.
  • Local assessing units and county treasurers that administer exemptions, audits, and billing.
  • VA documentation remains central to eligibility verification.
  • Taxpayers facing audits or denial of exemption, with rights to notice, appeals, and potential repayment of additional taxes plus interest.

Procedural and timeline aspects

  • Eligible individuals must file an annual exemption application (post-Jan 1, before Dec 31).
  • Exemption effective for taxes levied on or after Jan 1, 2025, and continues absent rescission.
  • Audits by assessing units occur at most every 3 years, unless there is reasonable belief of ineligibility.
  • If eligibility is challenged, tax bills can be corrected or supplemented with interest, and appeals are available within 35 days of denial notice.

Practical implications

  • Strengthens VA-based eligibility verification and imposes formal audit and denial processes.
  • Provides explicit proration methods for partial-year occupancy.
  • Ensures potential financial adjustments (with interest) if an exemption is found ineligible.
  • Aims to balance taxpayer protections with compliance and oversight.

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

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