December 2024

An informative e-newsletter for the Real Property Law Section of the State Bar of Michigan.

Michigan Court of Appeals Finds that Municipality’s Building Department Fees are Impermissible Taxes

Impermissible Taxes

By Matthew Jane, Pear Sperling Eggan & Daniels, PC

In Bolt v City of Lansing, 450 Mich 152 (1998), the Michigan Supreme Court invalidated the imposition of user fees to fund the City of Lansing’s stormwater collection system. The court held the fees were not valid user charges but instead were unlawful taxes imposed by the city in violation of Section 31 of the Headlee Amendment to the Michigan Constitution. Section 31 prohibits units of local government from levying any new tax or increasing any existing tax above authorized rates without the approval of the unit’s electorate. However, a local unit of government can institute a user fee without voter approval. In general, a “fee” is exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists between the amount of the fee and the value of the service and benefit. In contrast, a “tax” is designed to raise revenue.

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Interested in writing an article for the e-Newsletter? Contact co-editors Samuel Kilberg at SKilberg@dykema.com or Glen Zatz at gzatz@bodmanlaw.com.

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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication.