Stirling v. Cnty. of Leelanau

1

MACK C. STIRLING, Plaintiff-Appellant, v. COUNTY OF LEELANAU, Defendant-Appellee

No. SC 162961

Supreme Court of Michigan

March 24, 2023

Argued on application for leave to appeal October 12, 2022.

Syllabus

This syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.

Mack C Stirling filed a petition in the Tax Tribunal challenging Leelanau County's decision denying his application for a principal-residence exemption (PRE) for tax years 20162019. The county denied the application because petitioner's wife had claimed a property-tax exemption for a residence in Utah for the same tax years. Petitioner moved for summary disposition in the Tax Tribunal. The tribunal granted petitioner's motion, concluding that the Utah exemption was not substantially similar to the Michigan PRE because the Michigan PRE requires a person to be both an owner and occupier of the residence, while the Utah law allows owners who have tenants using the property as a primary residence to claim the exemption. The tribunal denied the county's motion for reconsideration, and the county appealed. The Court of Appeals, MURRAY, C.J., and M. J. KELLY and RICK JJ., reversed, holding that the Utah exemption was substantially similar to the Michigan PRE. 336 Mich.App. 575 (2021). The Michigan Supreme Court, in lieu of granting leave to appeal, ordered oral argument on the application. 509 Mich. 857 (2022).

In an opinion by Justice ZAHRA, joined by Chief Justice CLEMENT and Justices VIVIANO, CAVANAGH, and WELCH, the Supreme Court held:

The Utah tax exemption at issue, which is available to landowners who rent their property to tenants, was not substantially similar to Michigan's PRE, which is available only for a landowner's principal residence. Accordingly, petitioner was eligible to claim the Michigan PRE.

1. Michigan's PRE, which is part of the General Property Tax Act, MCL 211.1 et seq., and is found in MCL 211.7cc(1), permits taxpayers to exempt their principal residence from their local school district's property tax. The act defines "principal residence" as the one place where a property owner has their true, fixed, and permanent home to which, whenever absent, they intend to return and that continues as a principal residence until another principal residence is established. MCL 211.7cc(3)(b) provides that a taxpayer is not entitled to claim the PRE if they own property in a state other than Michigan for which they or their spouse claim an exemption, deduction, or credit substantially similar to the exemption available under MCL 211.7cc(1). A sister state's exemption is substantially similar if it is largely but not wholly alike in its characteristics and substance to the PRE. Michigan's PRE and the Utah exemption claimed by petitioner's wife are not alike in substance or characteristics. The relevant Utah exemption is found in Utah Code 59-2103(6), which is a broad section that contains several provisions about the rate of assessment on residential property. Utah Code 59-2-103(3) provides that, subject to Subsections (4) through (7), the fair market value of residential property located within the state is allowed a residential exemption equal to a 45% reduction in the value of the property. Subsection (6)(b) permits Utah taxpayers to claim a residential exemption for each residential property they own that is the primary residence of a tenant, as well as one exemption for their own primary residence. The Utah exemption that petitioner's wife claimed under this subsection was not substantially similar to the PRE for purposes of MCL 211.7cc(3)(b) because it does not require the subject property to be the owner's residence. The Utah exemption was in substance and character a landlord tax exemption. The PRE, by contrast was in substance and character a homestead exemption. Given that the touchstone of the PRE-owner residency-was not in any way relevant to the claimed Utah landlord exemption, these two provisions were not, as a matter of law, largely alike in characteristics or substance.

2. The Court of Appeals erred by joining together Utah's version of a homestead exemption (which is substantially similar to the PRE) with Utah's landlord exemption (which is not substantially similar to the PRE) and reading Utah's law as providing one indivisible "residential exemption." The fact that the two exemptions are subdivisions in the same section of the Utah Code was merely a stylistic choice of the Utah Legislature. In substance, Utah Code 59-2-103(6)(b) provides multiple types of residential exemptions, one of which is for a homeowner's primary residence. Although this exemption was not identical to the PRE, it was substantially similar. Another exemption, the one claimed by petitioner's wife, is for landlords who own property that is the primary residence of a tenant. This exemption was materially different from the PRE because it does not require the subject property to be the owner's residence. Therefore, petitioner was permitted to claim both the Utah landlord exemption and the Michigan PRE.

Court of Appeals judgment reversed; Tax Tribunal order reinstated.

Justice BERNSTEIN, dissenting, agreed with the majority's adoption of the definition of a "substantially similar" exemption for purposes of MCL 211.7cc(3) but would have affirmed the Court of Appeals judgment, reasoning that the overall effect of the Utah and Michigan statutes on property taxes was essentially the same: namely, to lower property taxes on homes being used as principal or primary residences. He noted that under the majority's construction of the Michigan statute, petitioner and his wife could claim residential exemptions on both the Utah and Michigan properties and, as a result, would benefit from a property tax break on two properties in the same calendar year, which seemed to be the exact sort of double-dipping that the Michigan statute aimed to preclude. He would have held that the Utah and Michigan exemptions were "substantially similar" within the meaning of MCL 211.7cc(3)(a), given their similarity in operation and effect.

Justice BOLDEN did not participate in the disposition of this case because the Court considered it before she assumed office.

Elizabeth T. Clement, Chief Justice, Brian K. Zahra David F. Viviano Richard H. Bernstein Megan K. Cavanagh Elizabeth M. Welch Kyra H. Bolden, Justices.

BEFORE THE ENTIRE BENCH (except BOLDEN, J.)

OPINION

ZAHRA, J.

Michigan law affords homeowners a tax exemption for their principal residence. A taxpayer, however, may claim only one principal residence, even if a second residence is maintained in another state. Specifically, Michigan's tax code precludes a taxpayer from claiming the Michigan principal residence exemption (PRE) if the taxpayer has claimed a "substantially similar" exemption in another state.^[1] At issue in this case is whether petitioner, who files Michigan taxes jointly with his wife, may claim Michigan's PRE if his wife received a Utah tax exemption for residential property that she owns and rents to tenants. We conclude that petitioner may claim the PRE because the Utah exemption at issue is fundamentally different in substance and character from the PRE. Simply put, the PRE is for homesteads while the Utah exemption is for landlords. Accordingly, we reverse the judgment of the Court of Appeals and reinstate the Tax Tribunal's order granting summary disposition to petitioner.

I. FACTS AND PROCEDURAL HISTORY

The relevant facts of this case are not in dispute. Petitioner, Mack Stirling, has lived in his Leelanau County home since 1990. Petitioner's wife, Dixie Stirling, owned two rental properties in Utah. The Stirlings filed joint tax returns for the pertinent tax years of 2016 to 2019. Neither Mack nor Dixie ever resided at the Utah properties. Instead, Dixie rented the properties to tenants who used the properties as their primary residences. Dixie Stirling claimed an applicable Utah tax exemption during the relevant tax years.

Petitioners applied for the PRE based on their Leelanau County home. Respondent Leelanau County denied the application because it concluded that the Utah exemption rendered the Stirlings ineligible for the PRE. Petitioner then filed this matter in the Small Claims Division of the Michigan Tax Tribunal and sought summary disposition on the undisputed facts. The Tax Tribunal granted the motion, explaining that the Utah exemption received by petitioner's wife was not "substantially similar" to the PRE, primarily because to be eligible for the PRE a person had to be both an owner and occupier of the residence, while under Utah law a person was eligible if they owned the residence and had tenants occupying the home as a primary residence. After the Tax Tribunal denied respondent's motion for reconsideration, the county appealed in the Court of Appeals. The Court of Appeals reversed in a published opinion.

Petitioner sought leave to appeal in this Court, and in lieu of granting leave, we ordered oral argument on the application to consider "whether the Court of Appeals erred by holding that the primary exemption claimed by the appellant's wife for a residence in Utah was based upon a 'substantially similar' exemption as the Michigan principal residence exemption, MCL 211.7cc."^[2]

II. STANDARD OF REVIEW

"This Court reviews de novo the tribunal's interpretation of a tax statute."^[3] "The role of this Court in interpreting statutory language is to ascertain the legislative intent that may reasonably be inferred from the words in a statute."^[4] Our analysis must focus on "the statute's express language, which offers the most reliable evidence of the Legislature's intent. When the...