Real Estate Transfer Tax Refund Clarity

At the close of 2015, Governor Snyder signed into law legislation providing clarity to Michigan's State Real Estate Transfer Tax. House Bill 4173, sponsored by Realtor®-member and Representative Dave Maturen (R-Brady Twp.) revises the State Real Estate Transfer Tax to clarify two items:

1. The party that paid the transfer tax may request the refund if a refund is due, and
2. Clarify that Exemption (u) applies when the SEV at the time of sale of a Principle Residence is less than or equal to the original SEV on the purchase.

The Michigan Supreme Court recently broadened the application of Exemption (u) by removing the requirement that True Cash Value be realized in a transfer. The legislation enshrines this change, offering important clarity and tax relief to distressed sellers. 

In addition, this legislation gives buyers the same refund rights as sellers when it is determined that the transfer tax was paid unnecessarily by a buyer. Refund rights under the Sate Transfer Tax are available up to 4 years and 15 days from a transfer.

To better aid members in reaching out to their former and current clients that may qualify, the refund application form is found here. (Please note that the current refund form does not reflect the change in law. The State Treasury will be updating the form in the coming weeks).

The following Q&A's are intended to illustrate exemption (u)'s applicability:
 
QUESTION: Some clients of mine sold their principal residence in 2013 and the SEV was lower at the time they sold it than when they purchased it. They just found out that they might be entitled to a refund of the state transfer tax they paid. They sold the house at a profit; will they still be entitled to the refund?
 
ANSWER: YES, to qualify for the state transfer tax refund, the SEV at the time of purchase must be higher than the SEV at the time of sale. The fact that they sold the house at a profit has no effect on their ability to get a refund.
 
QUESTION: Some clients of mine bought vacant land in 2011 on which they had a house constructed in 2012. They sold the house in late 2014. Will they be entitled to a state transfer tax refund if the SEV of their property at the time the house was completed was more than at the time of sale?
 
ANSWER: NO, since at the time of purchase, the land was vacant, they cannot claim a refund of the state transfer tax since the property was not their principal residence at the time of purchase.

Source: Greater Metropolitan Area Realtors

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.