PRE Exemption Not Lost By Renting Residence for More than 14 Days

In Rentschler v Twp. of Melrose, a published Michigan Court of Appeals opinion, the taxpayer claimed a principal residence exemption on property located in Boyne City.  The township issued a notice of disallowance of the exemption on the basis that the owner had rented the property out for more than 14 days in any calendar year, relying upon guidelines issued by the Michigan Department of Treasury.  The owner filed an appeal with the Michigan Tax Tribunal, which found that the owner used the property as his principal residence, that it was residential property, and that he had occupied the property for the majority of the years in question.  Nevertheless, based upon the guidelines, the Tribunal found that the owner did not qualify for the exemption based upon the guidelines.

The Court of Appeals reversed, finding that the owner met all of the requirements of the statute.  The court also found the guidelines, which do not have the force of law, to be in error.  The guidelines were based in part on federal tax laws, which allow a homeowner to deduct rental expenses against rental income if the homeowner’s principal residence is rented for more than 14 days in any calendar year.  However, the federal statute does not disqualify the home as residential; it merely creates a dual character (residential and rental use) for the property.  Because the guidelnes attempt to impose a requirement not contained in the statute, the guidelines fail and the owner was entitled to the exemption.

© Steve Sowell 2017