Michigan Tax Tribunal (MTT) denial of petitioner’s claim for a principal residence exemption (PRE) under MCL 211.7cc(3)(b); MCL 211.7cc & 7dd; Drew v. Cass Cnty.; MCL 211.7cc(1) & MCL 211.7cc(3); Whether “separate income tax returns” were filed; Ashley Capital, LLC v. Department of Treasury; Penalty under MCL 211.7cc(3)(a); MCL 211.7cc(3)(b); “Owner”; MCL 211.7dd(a)(i); “Person”; MCL 211.7dd(b); Bush v. Shabahang

The court held that the MTT properly denied petitioner’s (Maureen) claimed PRE under MCL 211.7cc(3)(b), but improperly assessed her a $500 penalty under MCL 211.7cc(3)(a). Thus, it vacated the $500 penalty, but otherwise affirmed. The MTT held that Maureen was eligible to claim a PRE under MCL 211.7cc(1) for the property, but was disqualified from doing so under MCL 211.7cc(3)(b). While the court agreed “with the MTT that Maureen was disqualified from claiming a PRE under MCL 211.7cc(3)(b),” it disagreed with its reasoning. “The MTT’s interpretation of MCL 211.7cc(3)(b) erroneously conflated the first sentence of subsection (3) with the conditions for disqualification in subsection (3)(b).” The issue was not whether Maureen and her spouse, Francis (as “a married couple”) were entitled to multiple PREs, but whether Maureen (as “a person”) was entitled to a single PRE. Thus, whether they were required to file a joint return was “irrelevant to whether Maureen was disqualified from claiming a PRE under MCL 211.7cc(3)(b).” Despite the problems with its analysis, the MTT correctly determined that MCL 211.7cc(3)(b) barred her from claiming a PRE. Next, the court considered whether Maureen and Francis filed “separate income tax returns” as the term is used in MCL 211.7cc(3)(b) and held they did not. “Maureen and Francis filed separate state income tax returns, but they filed a joint federal income tax return.” The court held that ‘“separate income tax returns’ as used in MCL 211.7cc(3)(b) refers to both separate state and separate federal income tax returns.” Maureen and Francis did not file separate federal income tax returns, and, thus, “Maureen was disqualified under MCL 211.7cc(3)(b) from claiming a PRE.” Because the MTT held that Maureen was disqualified from claiming a PRE under MCL 211.7cc(3)(b), it reached the right result.