Hotels Are Deemed Essential During Governor’s Stay-at-Home Executive Order

The MRLA has been in constant communication with Governor Whitmer’s office all day to secure clarification on hotels being deemed essential, meaning they may remain open during the Stay-At-Home Executive Order.

HOTELS ARE DEEMED ESSENTIAL with the following guidance from the Governor:

 In general, hotels and motels may remain open, but should limit functions.

Under the order, workers at hotels and motels are critical infrastructure workers to the extent they “provide temporary or permanent housing for… shelter … for … otherwise needy individuals.” For purposes of the order, the term “otherwise needy individuals” includes anyone currently residing in a hotel or motel or anyone seeking shelter during the current pandemic. Hotels and motels may also remain open to the extent they are used for COVID-19 mitigation and containment efforts and to serve critical infrastructure workers.

Hotels and motels may therefore remain open, but should limit guest-to-guest, guest-to-staff, and staff-to-staff interactions, and may only engage in activities providing shelter and basic needs (carry out/delivery/room service food, laundry, etc.). They may not provide additional in-house amenities such as gyms, pools, spas, entertainment faculties, meetings rooms or like facilities, or provide in-house dining.


We have created a response team to the rapidly changing COVID-19 situation, and will continue to post any new developments. You can view the page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Employers & COVID-19: New Legal Requirements under the Families First Coronavirus Response Act

These are unprecedented times and ensuring health and safety of the world’s population is certainly on everyone’s mind. For those running and operating businesses, a whole separate challenge exists. 

Due to the various orders and advisories to self-quarantine, school closings, and far-reaching spread of the COVID-19 pandemic, employers are faced with a rapidly changing workforce. They are grappling with how to continue business while dealing with the safety of their workers. It is a moral and financial dilemma. As employers of all sizes must consider how to manage this ever changing situation, new laws, requirements, and relief are being released just as quickly.

Given the economic downturn spurred by the recent turn of events, additional legal requirements are undoubtedly daunting for employers who face uncertainty or are weighing difficult decisions regarding their workforce. To help provide some clarity on these new obligations, this Client Alert discusses the emerging laws affecting employers and their health plans, including expanded benefits under FMLA, as well as additional required paid sick days.

 

Families First Coronavirus Response Act (“FFCRA”)

This past Wednesday, March 18, 2020, the Families First Coronavirus Response Act (“FFCRA”) was signed into law. The FFCRA applies numerous requirements and obligations to employers. In addition to expanding unemployment benefits, lessening financial obstacles for COVID-19 testing, and setting forth funding to assist with domestic nutrition programs, the FFCRA’s affects employers by amending the Family and Medical Leave Act (FMLA) to provide a new type of leave relating to the COVID-19 pandemic and separately requiring that employers provide paid sick days to employees for COVID-19 related matters.

The FFCRA becomes effective on April 1, 2020. Therefore, employers must understand its provisions and act quickly.

Emergency Family and Medical Leave Expansion Act

The FFCRA modifies FMLA under the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion Act”). While the FMLA, in general terms, applies to employers with 50 or more employees and protects employees who have worked at least 12 months with that employer, the FFCRA now changes that with respect to COVID-19 related issues and adds a new section titled “Public Health Emergency Leave.”

In summary, FMLA leave now also applies to employees who have been employed at least 30 days by employers who employ fewer than 500 employees (and public agencies) if those employees are unable to work (or telework) because they need to care for their under age 18 children due to the closure of schools or unavailability of day care due to a government declared COVID-19 public health emergency. The first 10 days of the 12-week job-protected leave is unpaid; however, subsequent days must be paid leave in an amount of not less than two-thirds of regular pay, capped at $200 per day with a maximum cap of $10,000 per employee.

Effective Dates:

The FMLA Expansion Act is applicable from April 1, 2020 to December 31, 2020.

Qualifying Leave:

Specifically, the FMLA Expansion Act applies to qualifying needs related to a public health emergency, as set forth below:

  • “Qualifying need related to a public health emergency” is when an employee is “unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider … is unavailable, due to a public health emergency.”  The terms “child care provider” and “school” are also defined.
  • “Public health emergency” is an emergency with respect to COVID-19 declared by a Federal, State, or local authority.
 
Affected Employers:
The leave requirements apply to employers with fewer than 500 employees, as well as public agencies. 

Exemptions may apply for employers with less than 50 employees if complying would jeopardize the viability of the business as a going concern and if regulations are so issued. See: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus. We expect such regulations to be issued in April of 2020.

Special rules apply in cases of employment under multi-employer bargaining agreements.

Eligible Employees:

Employees who have been employed for at least 30 calendar days by the employer are eligible for the leave if they have a qualifying need related to a public health emergency. Certain health care providers and emergency responders may be excluded from this additional protection, if regulations are so issued. Additionally, an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee.

Employees must provide the employer with notice of leave as practicable.

Special rules apply in cases of employment under multi-employer bargaining agreements.

Unpaid and Paid Leave Components:

The 12-week FMLA leave has both unpaid and paid components.

Unpaid leave applies for the first 10 days; however an employee may substitute accrued vacation, personal, medical or sick leave time.

Paid leave must be provided by the employer for days in excess of 10 days, calculated based on at least two-third’s of an employee’s regular rate of pay and the number of hours the employee would otherwise be scheduled to work.

The amount shall not exceed $200 per day and $10,000 in the aggregate. However, for an employee whose schedule varies from week to week and an employer is unable to determine with certainty the number of hours the employee would have worked, the employer must instead average the number of hours the employee was scheduled per day over the 6-month period ending on the date the employee took such leave (or if the employee did not work, the employer must use a reasonable expectation the employee’s average hours at the time of hiring).

Small Employer Partial Exception:

FMLA’s restoration to work provisions will not apply to employers with fewer than 25 employees if:

  • The employee takes leave pursuant to a public health emergency;
  • The position held by the employee no longer exists due to economic conditions or operation changes that affect employment and are caused by a public health emergency during the leave;
  • The employer makes reasonable efforts to restore the employee to an equivalent position (with equivalent benefits, pay, and other terms and conditions of employment); and
  • If the above efforts of the employer to restore the employee fail, the employer makes reasonable efforts to contact the employee if an equivalent position becomes available for a period of 1 year beginning on the day the qualifying need related to the public health emergency concludes (or the date that is 12 weeks after the date the employee’s public health emergency leave starts).
Significantly, small employers who are not accustomed to FMLA must now comply with the FMLA Expansion Act for COVID-19 related leaves.  However, in a joint news release issued late in the day of Friday, March 20, 2020, the U.S. Treasury Department, Internal Revenue Service, and the U.S. Department of Labor stated that small businesses with fewer than 50 employees will be eligible for an exemption in cases where the viability of the business in threatened. See: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus.
Additionally, unless otherwise specified, all covered employers must apply FMLA’s typical protections for these public health emergency leaves, including job-protection and restoration, and the continuation of group health plan coverage with employer contributions during such leaves. 

Emergency Paid Sick Leave Act

The FFCRA also requires employers to provide up to 80 hours of paid sick time for COVID-19 related issues under the Emergency Paid Sick Leave Act (“EPSLA”).

Effective Dates:

The EPSLA is effective from April 1, 2020 to December 31, 2020.

Affected Employers:

The EPSLA applies to virtually all private employers with fewer than 500 employees and to virtually all public agencies employing 1 or more employees. Exemptions may apply for employers with less than 50 employees if complying would jeopardize the viability of the business as a going concern and if regulations are so issued.  Additionally, future regulations may allow an employer of an employee who is a health care provider or an emergency responder to opt out.

Eligible Employees:

The EPSLA requires no hour or service requirement to receive paid leave, which may be immediately used. However, employers of employees who are health care providers or emergency responders may elect to exclude these employees from the above.

Special rules apply for multi-employer bargaining agreements.

Reason for Paid Sick Leave:

Under EPSLA, employers shall provide employees with paid sick time if they are unable to work (or telework) due to a need for leave because:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a health care provider to self-quarantine due to concerns relating to COVID-19;
  3. The employee has COVID-19 symptoms and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to quarantine or isolation or advised to self-quarantine as described in paragraphs (1) or (2) above;
  5. The employee is caring for his/her child if the school or place of care has been closed or the child care provider is unavailable due to COVID-19 precautions; and
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
 
Amount of Paid Sick Time:
Paid sick time is calculated based on the employee’s required compensation and the number of hours the employee would otherwise be scheduled to work capped at:
  • $511 per day and $5,110 in the aggregate for reasons (1)-(3) under Reason for Paid Sick Leave above; and
    • For Reasons (1)-(3), compensation shall not be less than the greater of the employee’s regular rate of pay under the Fair Labor Standards Act (“FLSA”), minimum wage rate under the FLSA, or the minimum wage rate in the applicable State or locality (whichever is greater) in which the employee is employed.
  • $200 per day and $2,000 in the aggregate for reasons (4)-(6) under Reason for Paid Sick Leave above
    • For Reasons (4)-(6), compensation shall be two-thirds of that described for Reasons (1)-(3).
However, for any part-time employee whose schedule varies from week to week and an employer is unable to determine with certainty the number of hours the employee would have worked, the employer must instead average the number of hours the employee was scheduled per day over the 6-month period ending on the date the employee took such leave (or if the employee did not work, the employer must use a reasonable expectation the employee’s average hours at the time of hiring). The Department of Labor is expected to issue additional information and guidelines regarding calculation of this paid sick time.
 
Duration of Paid Sick Leave:
For full-time employees, 80 hours of paid sick time must be provided.  For part-time employees, paid sick time will be the number of hours that the employee works, on overage, over a two-week period. There will not be a carryover from one year to the next.  Paid sick time is terminated with the employee’s next scheduled work shift immediately following the point when leave is no longer needed as defined under EPSLA. 

Notice Requirement:

Employers must post, in conspicuous places where employer notices are customarily posted, an approved notice describing the requirements of the EPSLA. The Secretary of Labor will make a model notice availability no later than March 25, 2020.  It must be posted by April 1, 2020.

Prohibited Acts:

Employers cannot discharge, discipline, or otherwise discriminate against employees who take leave under the EPSLA or have filed a complaint, instituted (or caused to be instituted) any proceeding or has testified or is about to testify in any proceeding related to the EPSLA.

Additionally, the EPSLA states that employers cannot require that an employee be involved in a search or find a replacement to coverage his/her hours during the leave.

Employers also cannot require that an employee use other employer provided paid leave prior to using leave under the EPSLA.

Enforcement:

Employers who fail to comply will be subject to stiff penalties under the Fair Labor Standards Act.

Tax Credits for Paid Sick and Paid Family and Medical Leave

While the FFCRA requires employers to comply with additional paid FMLA and sick leave relating to the COVD-19 pandemic, it also provides some relief for employers in the form of tax credits.

Employers will be allowed a quarterly tax credit equal to 100 percent of the qualified sick leave wages paid under the EPSLA and equal to 100 percent of the qualified family leave wages paid under the FMLA Expansion Act, subject to limitations and requirements. For example, the sick leave wages taken into account shall not exceed $200 per day (or $511 per day for leaves associated government order quarantine or isolation due to COVID-19, self-quarantine as advised by a health care provider due to COVID-19 concerns, or if an employee has COVID-19 symptoms and is seeking a diagnosis) up to a limited number of days. The family leave wages taken into account shall not exceed $200 per day or up to $10,000 in the aggregate and is limited to certain employment taxes.

The credits also include a portion of the health plan cost allocable to the paid leave.

Tax credits are also available for eligible self-employed individuals.

However, these tax credits are subject to additional restrictions and requirements. As the law continues to evolve and new guidance is to be issued this week, an in-depth discussion is beyond the scope of this Client Alert.

Concluding Thoughts:

While aspects of the FFCRA are not completely clear, we certainly hope to see more guidance from the Department of Labor prior to the law’s April 1st effective date.

Current actions for employers include analyzing the interplay between the FFCRA’s new leave and paid sick time requirements, their own policies, as well as other federal, state, and local laws. Questions to ask include whether the employer’s leave of absence provisions should be amended and whether paid time off polices need to be rewritten.

Benefits are also a key component in this analysis. Depending on potential layoffs or leaves of absence, even if unaffected by the FFCRA, will benefits be continued? What do the applicable employee benefit plans, insurance policies, and/or other governing documents provide? How will monthly payments by the employee continue?  Is there a risk of insurers denying continued benefits? Does COBRA apply? What are the Affordable Care Act or Pay or Play consequences if coverage is terminated, or if coverage is continued but the employer contribution ceases for non-FMLA leaves?  Do benefit documents require amendments to comply?

A plethora of questions are mounting and the rapid nature of legal changes is not helping. However, as always, careful consideration of options and benefits is paramount.

Of some relief, good faith efforts toward compliance will be considered.  In a subsequent IRS News Release issued on Friday, March 20, 2020, the Department of Labor stated that it will be issuing a temporary non-enforcement policy in order for employers to come into compliance with the Act. “Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.” See https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus.

Again, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

COVID-19 Mortgage Relief

Homeowners who have reduced income or lost their jobs because of the coronavirus pandemic are being offered some relief.

Federal regulators, through the mortgage giants Fannie Mae and Freddie Mac, are ordering lenders to offer homeowners flexibility. Fannie and Freddie guarantee about half of all home loans in the U.S.

Depending on their situation, homeowners who are current on their mortgage should be eligible to have their mortgage payments either reduced or suspended for up to 12 months.

This is not a forgiveness of debt or free money. Homeowners must be proactive and contact their mortgage servicer to work out a repayment plan or a forbearance (suspension) once they recover financially. This might entail just extending the term of the loan, but it will likely vary by lender and each homeowner’s situation.

Homeowners can find out if they have a Fannie Mae-owned mortgage and access to the Disaster Response Network* by visiting www.KnowYourOptions.com/loanlookup.

Fannie and Freddie are also directing lenders to suspend foreclosures for the next 60-days, though this is more of a public health move because anyone facing foreclosure already would have run into serious financial trouble before the coronavirus started to spread in the United States.


We have created a response team to the rapidly changing COVID-19 situation, and will continue to post any new developments. You can view the page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Governor Whitmer Orders Halt to Many Medical and Dental Services

Governor Gretchen Whitmer today signed Executive Order 2020-17, restricting non-essential medical and dental procedures in hospitals, surgery centers, clinics and medical offices. The order is wide-ranging and specific and provides examples of actions that may not be taken, and exceptions if applicable.

Many medical and dental providers have already initiated contact with patients to defer many scheduled appointments even prior to the Governor’s order, but these steps are no longer optional.

The stated purpose of the Order is “To mitigate the spread of COVID-19, protect the public health, provide essential protections to vulnerable Michiganders, and ensure the availability of health care resources, it is reasonable and necessary to impose temporary restrictions on non-essential medical and dental procedures.”

For more information regarding the Executive Order, follow the link here.


We have created a response team to the rapidly changing COVID-19 situation, and will continue to post any new developments. You can view the page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

COVID-19 and Business Interruption Coverage

COVID-19 has already caused severe disruption to the economy in every state, our nation, and the world. In the United States, government entities as well as the private sector are implementing more and more drastic measures to respond to COVID-19. While these efforts may be wise in light of the substantial public health concerns, they threaten to bring parts of the economy to a virtual halt, adversely impacting most every business and resulting in substantial losses.

These losses for businesses, coupled with having to fully close or halt nearly the vast majority of the scope of services they provide, are detrimental to the longevity of their operations. If there is an expectation that these events caused by COVID-19 would trigger their business interruption coverage, this might not be the case.

Insurance companies over nearly the past two decades have begun to quietly remove infectious diseases from the coverage, starting with the SARS epidemic in 2003, followed by the H1N1 virus in 2009.

Some states are aware of this, and are in the process of passing legislation to ensure that insurers pay businesses interruption claims during this pandemic.

While COVID-19 presents a unique and difficult situation for all of us, this presents a great opportunity to review your own business interruption coverage policy to fully understand your coverage and exceptions to such coverage.


We have created a response team to the rapidly changing COVID-19 situation, and will continue to post any new developments. You can view the page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Governor Whitmer Executive Order Allows Public Bodies To Meet Electronically

UPDATE: On April 14, 2020, Governor Gretchen Whitmer signed Executive Order 2020-48, extending the duration of relief through May 12, 2020 for public bodies that are subject to the Open Meetings Act to use telephone or video conference methods to continue meeting and conduct business. With this new order, EO 2020-15 is rescinded.

With Executive Order 2020-48, public bodies that are subject to the Open Meetings Act can use telephone or video conferencing methods to continue meeting and conduct business. This will be allowed provided there is two-way communication for members and the public to hear and address each other.

This is a brief summary and does not constitute legal advice. We encourage you to review Executive Order 2020-48 as there are many terms which address how a public body meeting must be conducted.


March 19, 2020: Governor Whitmer through an executive order is temporarily allowing public bodies to meet electronically until April 15, as long as the method used facilitates public participation.

With Executive Order 2020-15, public bodies that are subject to the Open Meetings Act can now use telephone or video conferencing methods to continue meeting and conduct business. This will be allowed provided there is two-way communication for members and the public to hear and address each other.

This Order does not apply to nonprofit corporations that do not meet the definition of a “public body.” Nonprofit corporations that are not public bodies may conduct meetings by conference telephone or similar communications equipment provided all participants can communicate with each other, unless the articles or bylaws restrict such participation.


Fraser Trebilcock Business Tax Attorney Edward J. CastellaniEdward J. Castellani is an attorney and CPA with Fraser Trebilcock and serves as Chair of the Firm’s Business and Tax Department. He may be contacted at ecast@fraserlawfirm.com or 517-377-0845.

IRS Extends Tax Filing and Payment Date by 90 Days

Update: March 20, 2020: The Treasury Secretary Steven Mnuchin announced that the IRS is now extending the federal income tax filing deadline to July 15.  Earlier this week, the Treasury Department released guidance that pushed back just the deadline for making federal tax payments — not for filing tax returns — to July 15.

As part of its coronavirus response, the federal government is giving taxpayers a three-month reprieve to pay their 2019 taxes.

2019 tax returns and payments were originally due on April 15. Treasury Secretary Steven Mnuchin announced on March 17 that a 90-day grace period to pay applies to taxpayers who owe up to $1 million and covered many pass-through entities and small businesses, according to the Treasury Secretary.

Corporate filers will get the same 90-day extension to pay on amounts due up to $10 million.

During this three-month grace period, taxpayers won’t be subject to interest and penalties if their 2019 taxes are paid on or before July 15, 2020.

The 90-day grace period applies only to the payment of 2019 taxes. The tax return due date remains April 15. Taxpayers should get their 2019 federal income tax return filed as soon as possible, especially if expecting a refund and in need of cash.

As of this afternoon, the State of Michigan has not announced any adjustments to its tax filing and payment deadlines; those remain April 15, 2020.


Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Addressing Coronavirus (COVID-19) in the Workplace

Addressing Coronavirus (COVID-19) in the Workplace

Experts and commentators now predict that the coronavirus will spread throughout our state and nation. Employers stand at the forefront of efforts to contain the illness.

The United States Department of Labor has issued several alerts and advisories to guide Employers.  These can be found at:

A few key points in connection with the above authorities include:

  • The OSHA “general duty” clause, as a reminder, requires the employer to provide a workplace that is “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”
  • Consider limiting the opportunities for at-work contacts involving large groups of workers or where “social distancing” is not feasible.
  • Workers who contract coronavirus or must remain at home to care for a covered family member who is incapacitated are FMLA eligible provided they meet normal eligibility criteria.
  • Workers are not entitled to FMLA leave to avoid exposure.
  • Educate your workers about personal hygiene, safe work practices and other safety measures.
  • Consider issuance of personal protective equipment.
  • Provide sanitizers and supplies near all work stations.
  • Encourage use of sick leave and isolate and send home workers who exhibit symptoms while at work.
  • Be cautious not to violate other anti-discrimination provisions in selecting workers for lay-off or similar work reductions.

Fraser Trebilcock expects that given the unprecedented scope of the challenge, employers who seek to limit situations where the virus may be spread will be less likely to have those proactive decisions second-guessed than employers where modest or no action is taken.

Due to the scope of the impact of the health and employment issues, and individual workplace circumstances, we urge you to consult your Fraser Trebilcock Law Firm Employment Lawyer for specific advice.


Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

Downtown Lansing New Parking Tutorial

Beginning in late 2019, Downtown Lansing installed solar-powered pay stations for on-street parking, moving away from the previous parking meters. This tutorial from the City of Lansing will assist you on how to use these new pay stations. You can visit the City of Lansing’s website here to read more.

How it works:

  1. Park your vehicle as usual.
  2. Make a note of your license plate number.
  3. Look for any conveniently located pay station.
  4. Press the start key to “wake” the unit up from power save mode.
  5. Using the key pad enter your license plate number and zone number your vehicle is located in, then press the green check mark button to confirm.
  6. Insert your pay method of change or credit/debit card.
  7. Select your stay time using the blue “-” and “+” buttons shown on the keypad. Press the red cancel button if you need to start over.
  8. Press the green button on the keypad to confirm stay time and your receipt will be printed.
  9. Take your receipt with you. The time your parking expires is printed right on the receipt.

Uncapping of Commercial Real Estate Assessments

Most are aware that the taxable value assessment of a commercial property is uncapped on its sale, but it can also uncap in the event of certain other transfers which do not involve the sale of property and the recording of a deed.

By way of background, Michigan real property taxable value assessments are “capped” and can only increase year-to-year at the lesser of 5% or the rate of inflation. Section 211.27a(6) of the General Property Tax Act defines “transfer of ownership” generally as the conveyance of title to or a present interest in property, the value which is substantially equal to the value of the fee interest. Section 211.27a(6) provides a variety of examples of what constitutes a transfer of ownership for taxable value uncapping purposes.

Many are unaware that the sale or transfer of an ownership interest in an entity which owns real property is a transfer of ownership of the entity’s real estate for tax purposes if the ownership interest sold or transferred is more than 50% of the total ownership interest in the entity. In other words, if you sell or transfer more than half of the ownership interest in an entity owning real property, you have created a “transfer of ownership” of the entity’s real property for real estate tax purposes. This provision is applicable to stock in a corporation, membership interests in a limited liability company and percentage ownership in a partnership. Such a sale or transfer will result in the “uncapping” of the property tax assessment of all real property owned by the entity. By way of example, suppose John Doe owns a majority of the ownership interest in Universal Widget and transfers it as a gift to his son, Peter Doe. The transfer will result in the uncapping of the property tax assessment on all real property owned by Universal Widget. If the transfer occurs in increments over time, the lifting of the taxable value cap occurs at the point John Doe no longer owns the majority interest in Universal Widget.

When a majority ownership interest in an entity has been sold or transferred, a Real Estate Property Transfer Affidavit must be filed with the local assessor. Section 10 of the Affidavit states “Type of Transfer: Transfers include, but are not limited to, deeds, land contracts, transfers involving trusts or wills, certain long-term leases and business interest.” Failure to timely file the Affidavit permits the assessor to go back and increase prior tax assessments (after the transfer took place) to adjust the property tax assessment, possibly resulting in (i) an increased assessment resulting in increased property taxes, (ii) interest on the difference on the tax that was paid and the tax that should have been paid and (iii) penalties.

Any time you are contemplating a sale or transfer of an ownership interest in an entity which owns real estate you should consult with your attorney about the means and ramifications of your proposed transaction.


Fraser Trebilcock’s Real Estate team has a depth of experience in advising clients on all issues of property law, and they strive to have their clients’ interests protected. You can contact them at (517) 482-5800, or by filling out the contact form here.