By: Rob Harris
The former owner of Michigan’s Northport Creek Golf Course wanted to donate the course to the local village. The village, eager to see the course remain in operation but unable to assume operations, accepted the donation while an affiliate of the owner agreed to manage the facility for five years.
While municipally owned property ordinarily would be freed from property taxation, the tax authority refused to remove the property from the tax rolls, arguing that the former owner was subject to tax under a statute that encompassed a lessee or user of the property who was engaged in a business conducted for profit.
According to the tax man, the former owner was indeed a “for profit” user of the property and thus would be liable for property taxes.
The tax tribunal agreed, however, the Michigan Court of Appeals took a different view. In an opinion just issued, the Court emphasized that the former owner did not lease back the property. Rather, it was acting as a manager, and nothing under the tax statute made it liable for property taxes on the golf course it was managing. As the court explained, “we conclude that a governmental entity may contract with a private, for-profit business to manage property owned by the governmental entity without the private business necessarily becoming a “user” under [the tax statute].”