PILT Payments

Payments in Lieu of Taxes are State of Michigan payments to local units of government in lieu of property taxes for the land owned by the State and administered by the Department of Natural Resources (DNR). The payments are made by the Department of Treasury, and only on those public lands administered by the DNR.

DNR PILT Web page

Subpart 14 of the Natural Resources and Environmental Protection Act governs the PILT process for DNR lands.

Clearing up confusion over PILT payment processing 
Special Feature from October 2008 Michigan Township News by MTA Legislative Liaison David Bertram, with contributions from the Michigan Department of Natural Resources and Michigan Department of Treasury

If your township contains land owned by the state of Michigan, your township treasurer has likely been dealing with the Michigan Department of Natural Resources (DNR) in recent years related to billing statements for payments in lieu of taxes (PILT). Local governments receive PILT payments in lieu of property taxes for land owned by the state. A distinction should be noted between state-owned land that is considered state-purchased land versus state-owned land that is under the “swamp tax” designation. This article focuses on state-purchased land.

Townships receive PILT payments from the state in a similar manner to how private property owners pay real property taxes. The township treasurer prepares the tax roll and sends annual statements by Dec. 1 to all property owners. The taxes for private land owners are due by Feb. 14 of each year. Traditionally, the state of Michigan has provided PILT payments to local governments in a similar timeframe. However, in recent years, these property-related payments from the state have been delayed several months—sometimes until as late as June.

There are a variety of reasons why PILT payments have been delayed to local governments. At times, funds appropriated by the state for the PILT program have fallen short of the state’s PILT obligations. And, in 2004, Public Act 513 became law, creating some confusion about the new billing process for PILT payments. In administering the new act, decisions were made within the DNR that until all billing statements were received in the correct manner from each local unit of government, no payments would be made to any local unit of government.

Purchased land owned by the state is granted significant property tax breaks versus private property. State property is reassessed at the lowest possible tax rate—it is viewed as agricultural property class, regardless if the property is waterfront property, a stand of trees or an open field. The state does not pay any special assessments or administrative fees.

A Better Understanding of PA 513

Changes made to the PILT process under PA 513 were highlighted by a provision that the taxable value of DNR-purchased land would be frozen at the 2004 level for five years. Thus, PA 513 will still have effect through the 2008 tax collection process. However, beginning in 2009 and every year thereafter, the valuation of property will be adjusted using the standard percent increase applied to real property. The increase would be limited to not more than the increase in the U. S. consumer price index in the immediately preceding year or 5 percent, whichever is less.

PA 513 established that any additional property purchased by the state would have its value fixed at the value in the year in which it was purchased. The act also requires treasurers to submit a single annual statement for all state-purchased land. Additionally, PA 513 requires that DNR obligations on purchased lands related to school districts, intermediate school districts and community colleges come from the state school aid fund.

Generating Payments

PA 513 changed the way PILT bills are to be submitted to the state. These statutory changes define the type of taxes that can be included on these bills. The DNR has noted that many taxing authorities are not currently complying with the statutory requirements. To help clarify some of the current billing issues, the following is a list of what a PILT bill should—and should not—include.

A PILT bill should include:

• A single billing per year containing all state properties, with all applicable millage rates for the entire tax year (summer and winter).
• Each parcel must be listed separately with a taxable value, total millage rates billed and amount due.
• A detailed breakdown of the millage rates per parcel, including total rates levied per parcel. Under the statute, total millage rates must be less than or equal to total millage rates from 2004. The millage rate detail can be on a supplemental report and does not have to be included on the bill, however, it must be provided.
• The taxable value set by the State Tax Commission.
• A remittance address on the bill with a contact name and phone number.

A PILT bill should not include:

• Six mills of State Education Tax.
• Administrative fees.
• School operating mills.
• Special assessments, including special assessment millage rates.
• Total millage rates levied per parcel greater than the 2004 total millage rates per parcel.
• The taxable value set by the local assessor.
• All parcels combined as one parcel with one amount due.
• Separate bills for each parcel.
• Separate bills for summer and winter billings.

All parcels in a taxing authority are to be submitted on one PILT statement when taxing authorities send their 2008 PILT tax bills. Each parcel should be listed separately. There have been common misinterpretations of this requirement. The following are incorrect ways of submitting bills: combining all parcels into one parcel and submitting one bill, sending one bill per parcel, submitting summer and winter PILT bills for each parcel, or sending bills late. Any incorrect billing slows the processing of PILT bills and delays payments for every local government in the program.

PA 513 also requires that if the funds appropriated by the Legislature do not cover the total PILT expenditures, then payments must be prorated. In order to determine if sufficient appropriations are available, all PILT expenditures are totaled and compared with the amount appropriated before payments are processed. Therefore, when PILT bills are not received or they are not prepared in compliance with PA 513, the processing takes longer and delays payments to recipients.

Another change created by PA 513 is that some of the funding for the PILT bills comes from the Department of Education (DOE). The determination of which millage rates are charged to the DOE happens before PILT payments are processed. Therefore, a detailed breakdown of millage rates used for calculations needs to be included with the PILT bill. If all millage rates are combined together, additional time is needed to obtain the detailed information, slowing down payment processing.

Treasury Takes Over PILT

Beginning with the state’s 2009 fiscal year, commencing Oct. 1, 2008, the state Legislature appropriated PILT payments in the Michigan Department of Treasury budget, rather than in the DNR budget. The Department of Treasury will process all bills received and issue the payments starting with the tax year 2008 bills—ie., PILT bills that will be sent in December 2008.

PILT bills must be submitted for payment no later than Jan. 15. Language included in the 2008-09 state budget requires the state to make PILT payments by Feb. 14 for correct PILT statements received from local governments by Jan. 15.

PILT bills should be sent to: Michigan Department of Treasury, Attn. PILT Program, P.O. Box 30722, Lansing, MI 48909.

For more on the PILT program, including a sample bill, visit the DNR PILT Web page link at the top of this page.