Pick a State: Wife denied Michigan principal residence exemption because of her husband’s exemption in Illinois

In Levenfeld v County of Berrien, an unpublished opinion by the Michigan Court of Appeals, MCOA affirmed the Michigan Tax Tribunal's denial to grant Levenfeld a principal residence exemption due to adherence to the language in the statute.

Levenfeld was originally granted an exemption, but the county revoked it when it was discovered that Levenfeld did not file a Michigan state income tax return. She claimed that she had no income, so she was not required to file a state income tax return. However, she and her husband filed a joint tax return, and his residence was listed as Illinois. There is a similar homeowner's exemption in Illinois, and her husband had property in Illinois which received the exemption. In Illinois, the exemption is automatic, unlike in Michigan where it must be applied for.

MCL 211.7(c)(3) excludes exemptions if a person files an income tax return in another state or if the person or her spouse owns property in another state and either of them claims a similar exemption. The MTT referee found that despite the Illinois exemption granting $290 in tax savings and the Michigan exemption granting $9,000 in tax savings, those were substantially similar since the exemption purpose and requirements for the exemptions were substantially similar. Difference in cost, especially when based on the value of the property, is not an appropriate measure for comparison.

While the referee recommended the MTT grant the exemption because Levenfeld had no interest in her husband's Illinois property, the MTT denied the exemption because of the language of the statute and the facts that Levenfeld and her husband filed a joint Illinois state income tax and claimed a homestead exemption on the Illinois property.

MCOA agreed with Levenfeld that the portion of the statute that required the person not to file an income tax return in another state was not applicable because there was no evidence that her inclusion in the joint income tax listed her as a resident of Illinois. However, the exemption can be denied if the tax payer violates any of the listed conditions. Levenfeld violated another condition when her husband claimed a similar exemption in Illinois.

While MCOA felt that the language of the statute is somewhat "doubtful and obscure," the court did not find the "cogent reasons" necessary to meet the standard of review for overturning a MTT case.

Categories: Tax Law