After years of working for personal property tax relief, Michigan rental operators who rent construction and other heavy equipment took a major leap forward in making that a reality when they went to the state Capitol in Lansing and testified June 9 in support of House Bills (HB) 4833 and 4834 before the Michigan Local Government and Municipal Finance Committee.
This opportunity came together thanks to the combined forces of rental operators in the state who comprise the Michigan Heavy Equipment Rental Tax Coalition and the American Rental Association (ARA). In addition to those testifying, many other Michigan rental operators came to Lansing to support the bills in person as well as write letters of support to the committee chair.
Scott Irwin, president, Delux Rental, Ypsilanti, Mich., who serves as president-elect on the ARA board, and Sue Irwin, vice president of the company, and ARA of Michigan president, both testified at the hearing along with other rental operators.
Scott shared how this tax has and will continue to have a negative impact on rental operators because of how the industry is changing in Michigan and across the country.
“I spoke about how membership in the ARA is growing and how branches are growing faster than new stores are now, so the need to be able to move our equipment from one location to the other is even more critical than what it has been in the past,” Scott says. “With the way our tax code reads, it is hard to do that and keep all the accounting straight because of Michigan’s personal property tax. It will continue to be harder and harder as the years go by to keep the system that we have,” he says.
Sue addressed how the tax has impacted her small rental business as well as others she represents as state chapter president — and how that impact was magnified last year during the worst of the coronavirus (COVID-19) pandemic.
“This tax has been hard on our business and others like us. It was made worse last year when the pandemic hit. The fact that we were coming off the winter season, which is our slowest time here in Michigan, and then just as our busiest season should have started, we were shut down for three months. Even with all of that, we still had to pay tax on that equipment. There was no relief from that,” she says.
“Others testified how equipment can be rented, and if that renter takes it to another jurisdiction, all of a sudden the rental business gets a bill for the tax from that district the equipment went to while also still being billed from the district where the equipment came from. There is a double-tax there. The onus is then put on the rental business owner to make sure the district in which the equipment lives knows that it was somewhere else and has to prove that,” she says.
Both felt the day went well. “We made good points and were able to counter with solid reasons those who were arguing against us,” Sue says. “Our testimony seemed to be received very well, I believe.”
“They really seemed to listen,” Scott adds. “They seemed to have interest in what we were saying. It also was neat to be able to testify as president-elect of the national association and sit by my wife, who is president of the state association. We both were able to testify on behalf of the rental industry. That was pretty cool.”
The Irwins and other rental operators support the passage of the two bills because they would exempt certain heavy equipment from property tax and replace it with a per-transaction tax.
For instance, HB 4832 would amend the general property tax act starting Dec. 31, 2021, to state that qualified rental personal property for which an exemption has been properly claimed is exempt from the collection of taxes under this act.
HB 4833 would create the “Qualified Heavy Equipment Rental Personal Property Specific Tax Act.” This bill, which is dependent upon the passage of HB 4834, would exempt certain heavy equipment from personal property tax beginning Jan. 1, 2022, and add a 2 percent tax to each rental invoice, which would then be collected and remitted four times annually to the state.
“This legislation follows what other states have done, including Indiana, which has exempted rental equipment from property tax and replaced it with a new tax to ensure revenue neutrality,” says Alysia Ryan, ARA director of state government affairs. “All of these Michigan rental operators should be proud. They took a significant step in moving these bills forward.”