Principal Residence Exemptions
A Principal Residence Exemption (PRE) exempts a residence from the tax levied by a local school district for school operating purposes up to 18 mills. To qualify for a PRE, a person must be a Michigan resident who owns and occupies the property as a principal residence. The PRE was at one time called the Homestead Exemption and was often confused with the Homestead Property Tax Credit, which is filed annually with your Michigan Individual Income Tax Return. The PRE is a separate program.
The Department of Treasury conducts the PRE Audit. The Department of Treasury works with a company to review the tax roll and look for properties that are claiming a questionable Principal Residence Exemption. They also receive referrals from other residents questioning someone’s PRE. First, a letter is sent to the property owner assuming that there is some reason for the discrepancy. In many cases, they respond and clear up the confusion.
However, many people do not respond at all. The Department of Treasury is required to deny those that are unable to be substantiated. The denied parcels are billed by the Cheboygan County Treasurer at a statutory rate of 1.25% interest per month from the date the taxes would have first been delinquent. When the bills are paid, the school taxes are distributed to the various schools and the local collecting unit. The interest collected is split between the local unit, the State and the County. Regardless who does the audit, the mandated interest amount is the same, but because this office conducts the audit, the majority of the interest stays in Cheboygan County.
Frequently Asked Questions
Why did I get a PRE Denial?
A letter was mailed requesting documentation to verify that you owned and occupied the property as your principal residence. Either no response to that letter was received, or the response received did not verify that the property was your principal residence for the year(s) being denied.
How do I appeal a denial of a PRE?
Submit your appeal in writing to the Residential Small Claims Division, Michigan Tax Tribunal, P.O. Box 30232, Lansing, MI 48909 within 35 days of the denial. Include a copy of the denial, state the reason(s) you disagree with the denial, and provide documentation showing you owned and occupied the property as your principal residence for each year denied.
What is acceptable verification of occupancy and Michigan residency to show I am entitled to the exemption?
Some examples of acceptable documents that show the property was occupied as the principal residence of the owner for the year(s) in question are:
-Both sides of your driver’s license with property address.
-Your voter’s registration record.
-A statement from a bank, charge account, medical billing, utility bills, etc. (Only the portion showing your mailing address and date need to be submitted.)
-Your income tax return showing the mailing address. (Black out any sensitive information.)
NOTE: This is not an all-inclusive list and no one item is particularly controlling.
How long will the appeal process take?
It may take several months to complete the review of the appeal.
Do I have to pay the additional taxes before I can appeal?
No. Taxes do not have to be paid at the time of the appeal. However, penalty and interest will continue to accrue. If your appeal is not successful and the denial is upheld, the penalty and interest will be charged from the original due date of the taxes.
Can I make a partial payment?
Most counties and local units require full payment. Cheboygan County does allow partial payments. Any funds received will be prorated between the tax, interest and fees. The remainder of taxes owed will continue to accumulate interest and could end up in foreclosure.
Where can I find more information about PREs?
Information regarding PREs can be found at Michigan Department of Treasury Principal Residence Exemption
Principal Residence Exemption (PRE) Audits
The Michigan Department of Treasury (Department) conducts yearly audits in accordance with Section 8 of Michigan Compiled Law 211.7cc to ensure that only persons eligible for a PRE receive the exemption. The Department is responsible for these audits in select counties. Audits generally cover the current tax year and the three immediately preceding tax years. During the audit process, the Department sends a PRE Audit Letter and a PRE Audit Questionnaire, Form 4632 regarding questionable PREs to obtain additional information on the property and/or owner(s). The Questionnaire must be completed and returned within 30 days. If you receive a Questionnaire but no longer own the property listed on the top of the Questionnaire, you must still complete it and return it within 30 days. If the Questionnaire is not returned in a timely manner, the PRE on the property may be denied. The denial of the PRE may require you to pay additional taxes and interest for the years you improperly received the exemption benefit, up to four years even if you no longer own the property. The frequently asked questions sheet regarding PRE Denials by the Department of Treasury provides additional information regarding the denial and appeal process.
If you have a question about how to complete the Questionnaire, please contact the PRE Audit Call Center at (888) 909-2799, between 9 a.m. and 5 p.m., Monday through Friday. You can also e-mail your question to PRE@tma1.com. However, if you have questions regarding general PRE issues or an appeal of a PRE denial, please contact the PRE Unit at (517) 373-1950 or e-mail your question to PTE-Section@michigan.gov. Your local assessor will not be able to respond to questions regarding Michigan Department of Treasury audits.