Opinion
No. 357568
05-26-2022
Keith W. DEFORGE, Petitioner-Appellant, v. ALLOUEZ TOWNSHIP, Respondent-Appellee.
Numinen, DeForge & Toutant, PC, Houghton (by Keith W. DeForge ) for Keith W. DeForge. Bensinger, Cotant & Menkes, PC, Marquette (by Roger W. Zappa ) for Allouez Township.
Numinen, DeForge & Toutant, PC, Houghton (by Keith W. DeForge ) for Keith W. DeForge.
Bensinger, Cotant & Menkes, PC, Marquette (by Roger W. Zappa ) for Allouez Township.
Before: Murray, P.J., and Sawyer and M. J. Kelly, JJ.
Sawyer, J. This dispute concerns the qualification of petitioner's property located in Keweenaw County for the principal residence exemption (PRE) under the General Property Tax Act, MCL 211.1 et seq . Petitioner had applied for and received the PRE in 2018, but respondent revoked it in 2020 on the basis that it determined the property to be a rental property. Specifically, respondent determined that over 50% of the property was used as an Airbnb, which respondent concluded disqualified the property from receiving the PRE. Petitioner appealed to the Michigan Tax Tribunal (the MTT), which concluded that only 30% of the property was used as an Airbnb and, therefore, petitioner was entitled to a 70% PRE. Petitioner now appeals in this Court, arguing that the MTT erred in its analysis and that petitioner should receive a 100% PRE. We agree and reverse and remand the matter to the MTT for entry of judgment in favor of petitioner. The subject property is located on Lake Superior. Petitioner resides in the home and rents out three rooms during the summer months. The MTT based its determination on which portion of the house is used by petitioner as a primary residence and which portion is rented out during the summer. The MTT's calculations appear to be based on the square footage devoted to the Airbnb rentals without adjustment for the portion of time that it is rented out.
Respondent argues that the MTT's calculations contain a mathematical error and that the correct percentage of use as an Airbnb under the MTT's analysis would be 35%. Given our conclusion in this case, we need not address that issue. Moreover, even if we agreed with the MTT's conclusion, respondent failed to cross-appeal, and therefore any such error is not before us. Kosmyna v. Botsford Community Hosp. , 238 Mich.App. 694, 696, 607 N.W.2d 134 (1999) (failure to file a cross-appeal generally precludes an appellee from raising an issue not raised by the appellant).
The MTT based its determination solely on the basis of MCL 211.7cc(16), which provides as follows:
Except as otherwise provided in subsection (30), if the principal residence is part of a unit in a multiple-unit dwelling or a dwelling unit in a multiple-purpose structure, an owner shall claim an exemption for only that portion of the total taxable value of the property used as the principal residence of that owner in a manner prescribed by the department of treasury. If a portion of a parcel for which the owner claims an exemption is used for a purpose other than as a principal residence, the owner shall claim an exemption for only that portion of the taxable value of the property used as the principal residence of that owner in a manner prescribed by the department of treasury.
The MTT's analysis was relatively brief:
The subject property is a dwelling unit and by utilizing a portion of the dwelling as an Airbnb is considered to be a multi-purpose structure by this Tribunal. The portion advertised and utilized as an Airbnb is 30%[;] Petitioner's PRE is therefore 70%.
Given the narrow nature of the MTT's decision, we view this case as presenting purely a question of statutory construction. Specifically, whether utilizing a portion of a principal residence as a short-term rental disqualifies, even partially, the PRE. As a question of statutory construction, we review the MTT's decision de novo.
Rentschler v. Melrose Twp. , 322 Mich.App. 113, 115 n 1, 910 N.W.2d 711 (2017).
The MTT's opinion provides no analysis or citation of authority for the proposition that use of a portion of the residence as a short-term rental turns the house into a "multiple-purpose structure" under the statute. We recognize the difficulty presented because the statute does not define a "multiple-purpose structure." Petitioner does refer us to the instructions on the Michigan Department of Treasury's affidavit form (Form 2368) used in applying for the PRE. Specifically, Form 2368 gives an example of a multiple-purpose structure as "a storefront with an upstairs flat." While this is hardly controlling, it does, in our opinion, provide a good example of a multiple-purpose structure. A storefront has little similarity to the residence located above it.
Respondent presents little argument regarding the multi-purpose structure analysis other than referring to four examples contained in the Michigan Department of Treasury's Principal Residence Exemption Guidelines. As noted in Rentschler v. Melrose Twp. , the guidelines do not have the force of law and, as was the case of the guideline considered in Rentschler , are not necessarily legally accurate. While we do not find some of the examples given legally accurate or particularly relevant to this case, one of them, Guideline 142, illustrates the same point as the example in the affidavit form. That guideline uses the example of a property owner who operates an auto repair business on the lower level of the building and lives in an apartment on the second floor. This example does, in fact, illustrate a case of a multi-purpose structure to which a 100% exemption is not applicable.
Id . at 120, 910 N.W.2d 711.
In the absence of a statutory definition of "multiple-purpose structure," we turn to a dictionary for guidance. The Random House Webster's College Dictionary (2d ed.) defines "multiple" as "consisting of, having, or involving several or many individuals, parts, elements, relations, etc." We simply do not see how allowing transient guests to stay in one's home is a sufficiently distinct purpose to lead to the conclusion that the structure now has multiple purposes. Indeed, the dictionary's first definition of "purpose" is "the reason for which something exists or is done, made, etc." It seems to us that the purpose for which the structure exists, whether it be for the property owner or for short-term renters, is to provide a place to sleep, rest, read a book, look out over the lake, etc. While there may be a pecuniary interest for the property owner, it is not sufficiently different from providing a room to a boarder who pays rent to deem it a separate purpose. And MCL 211.7dd(c) specifically allows for a principal residence to be partially rented "as long as that portion of the dwelling or unit that is rented or leased is less than 50% of the total square footage of living space in that dwelling or unit." This brings us to the Rentschler case, upon which petitioner largely relies. Rentschler is not directly on point. But it is sufficiently similar that it directs us to the same result. In Rentschler , the property owner was denied a PRE because, although it was the owner's principal residence, the owner rented out the property for more than 14 days during the year. This determination was based on a guideline that disallowed a PRE for property rented out for more than 14 days a year. The Court concluded that this guideline was contrary to the statute. Specifically, the Court stated that "[r]enting one's home for more than 14 days does not disqualify a homeowner from the PRE." Not only does respondent fail to distinguish Rentschler from the case before us, but it completely ignores the Rentschler decision. We can neither ignore nor distinguish it. If completely renting out a principal residence for a portion of the year does not disqualify it from the PRE, we cannot conclude that renting out a portion of the property for a portion of the year would disqualify the owner from claiming the PRE.
Kinder Morgan Mich, L.L.C. v. City of Jackson , 277 Mich.App. 159, 163, 744 N.W.2d 184 (2007).
Indeed, it is this "50% rule" that was the original basis for respondent revoking the PRE, which, of course, is not supported by the MTT's determination because the portion of the residence attributable to the Airbnb was determined to be 30%. Although the parties do spend some time discussing this rule, we decline to do so because the MTT did not base its ruling on this provision of the statute. Indeed, the fact that the MTT found that less than 50% of the property was dedicated to Airbnb use indicates that it implicitly rejected this argument. And while respondent does discuss this rule, as previously noted, it has not appealed the MTT's decision.
Rentschler , 322 Mich.App. at 116, 910 N.W.2d 711.
The specific example used in the guideline was for a residence located in a resort area occupied by the owner for a majority of the year but rented out during the summer months, at which time the owner took an apartment in town. Rentschler , 322 Mich.App. at 120-121, 910 N.W.2d 711.
Rentschler , 322 Mich.App. at 123-124, 910 N.W.2d 711.
We acknowledge that there might be a limit to what portion of the year the property may be rented out and still be eligible for the PRE. It is not clear from the Rentschler decision exactly how many days of the year the property was rented out, other than that it was rented out for more than 14 days and that the property owner occupied the home for a majority of the tax years in question. Rentschler , 322 Mich.App. at 116, 910 N.W.2d 711. In the case before us, the MTT's opinion reflects that only a portion of the home was rented out, generally on weekends, and that this portion of the home was available for rent five months out of the year. In the absence of a concrete argument regarding the maximum number of days allowed and a specific finding that the number of days in the case exceeds that theoretical maximum, that question remains hypothetical, and we decline to address it.
For these reasons, we conclude that when a property otherwise qualifies for the PRE, the fact that a portion of the property is rented out for a portion of the year as a short-term rental does not disqualify the property from a 100% PRE. We reverse the MTT's decision to the contrary and remand the matter to the MTT for entry of judgment in favor of petitioner.
Reversed and remanded for further proceedings that are consistent with this opinion. We do not retain jurisdiction. Petitioner may tax costs. MCR 7.219.
Murray, P.J., and M. J. Kelly, J., concurred with Sawyer J.