The state’s funding sources for education come from a variety of places, including sales tax, use tax, tobacco taxes and the lottery. But agricultural properties in the state are given exemptions from certain local school operating taxes, which can tax up to 18 mills — or $18 for every $1,000 in taxable value.
The state has more than 10 million acres of farmland, with one out of six acres in the state designated as farmland. It’s unclear how much in total taxes are exempt due to agricultural land.
The Michigan Association of School Boards did not respond to inquiries on the matter.
But it’s clear the Cass County ruling is going to lead to more property classification challenges for local communities come March 2024, when companies are able to appeal their property tax assessment again.
Mike Elias, CEO of Common Citizen, which operates a 40,000-square-foot grow operation in Marshall, located in Calhoun County, called the Cass County ruling “a cornerstone” for the industry in an emailed statement to Crain’s.
“As a leading cannabis cultivator, we believe this ruling is not only appropriate but also a critical step forward for the normalization of the industry,” Elias wrote in a statement. “Given the significant economic challenges our sector has faced, punctuated by artificial and steep price declines due to various factors, the industry is in dire need of such supportive legal precedents. The Cass County Circuit Court’s decision to rule in favor of HRP Cassopolis, clarifying the legal classification of cannabis cultivation and confirming its eligibility for agricultural tax-related benefits, is a watershed moment that couldn’t come at a more needed time.”
Crain’s reached out to several other cannabis cultivators, but all declined to comment on the record.
However, whether the ruling in Cass County is indeed a watershed moment or just an anomaly remains to be seen.
Gerald Fisher, distinguished professor emeritus at Western Michigan University Cooley Law School and local government law consultant, said while the circuit court ruling is favorable for the industry, it does not set a precedent for the entire state.
“Owners are certainly going to cite this case, but what one circuit court does in one county is not a precedent-setting ruling,” Fisher said. “This sounds like a hometown ruling to me. Cannabis is not considered food and fiber like most agribusinesses. While I can certainly see the rationale for why they would want to be considered agriculture, there’s a completely different marketing pattern and network than food and other vegetation the state considers agricultural. The better interpretation, from my view, is that cannabis would be industrial because it’s part of a network between grow operations and ultimately to a dispensary, not for traditional consumption of calories.”
Washington state and Massachusetts legislators carved cannabis out of being included in agricultural tax exemptions to protect school funding in recent years. There’s currently no legislation in the state of Michigan to remove marijuana from exemption considerations.
“Policy decisions are for the legislature,” Rashid Jr. said. “We provided those two examples in court … but in Michigan no such law exists.”
But the village of Cassopolis and LaGrange Township, where the village is located, are now seeking to intercede in the case brought against the State Tax Commission. They are seeking to become parties of the case so they can file an appeal. A ruling on whether they can intercede has not yet been made.
Lawyers for both municipalities declined to comment.
So while Sunset Coast may save on their tax bill this year, it’s unclear whether that will continue. Though it may not make a difference statewide, as others are prepping their own cases in 2024.
Sobczak said he’s referred clients to the Dykema team, and Rashid Jr. said several clients have begun to reach out to begin preparing their own challenges to property classification.
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