Suit filed over property taxes paid by Mich. lawmaker
Negaunee – Two Marquette residents have filed suit against Michigan Treasurer Nick Khouri in relation to a property tax investigation into a Republican U.S. congressman.
The Mining Journal of Marquette reports that a writ of mandamus was filed in Gogebic County Circuit Court on Oct. 5 to compel Khouri to conduct a “complete and comprehensive audit” of 1st Congressional District Rep. Jack Bergman’s eligibility to maintain his current principal residency tax exemption on property he owns in Watersmeet.
Marquette attorneys Brian Bloch and Robert Anderson filed the suit on behalf of Marquette residents William Jorns, a retired psychologist and U.S. Army veteran, and William Davis, who was listed as a Marquette County delegate for the Democratic Party in the August primary election, according to a Marquette County Clerk’s Office document.
The principal residency exemption, or PRE, exempts homeowners from paying up to 18 mills of the school tax portion of real property taxes.
Under the Michigan statute a principal residence is identified as “the one place where a person has his or her true, fixed and permanent home to which, whenever absent he or she intends to return and that shall continue as a principal residence until another principal residence is established.”
The suit alleges that the state treasurer’s office has not done an in-depth PRE audit, including a comparison of utility usage at Bergman’s Watersmeet Township residence to a home he owns in St. Francisville, Louisiana.
A Michigan Department of Treasury report published on Dec. 28 lists the 2017 property tax rate in Watersmeet Township at 44.94 mills, but with the homestead exemption the tax rate falls to 27.23 mills.
The difference can mean hundreds or even thousands of dollars shaved off an annual property tax bill. But the dollar amount Bergman is saving is not the point of the suit, Bloch said in an interview Tuesday.
“We are not claiming that Jack Bergman is not following the rules, but that the rules have been written to allow for this type of abuse,” Bloch said. “As a result, the people of Michigan have been denied their ability to choose their representation in Washington.”
In cases where the PRE exemption of a property is either being challenged or audited, the department conducting the investigation sends a letter and questionnaire to the owner to verify residency.
A copy of the letter sent from Gogebic County Treasurer Lisa Hewitt to Bergman on Sept. 11, which was obtained via a Freedom of Information Act request, required Bergman to prove that he is a Michigan resident, the owner or one of the co-owners of this property, occupies the property as his principal residence and he is not claiming a homestead exemption or similar exemption in any other location, whether in Michigan or another state.
Bergman confirmed the receipt of the letter during a phone interview on Oct. 17, indicating he provided copies of tax records, utility bills, his driver’s license and copies of canceled checks as proof of residency, and his PRE status at the Watersmeet residence had been upheld.
“I got a letter from the Gogebic County treasury, and they sent me a letter back that said, ‘We have reviewed all your material, and you’re valid,’” Bergman said. “So, as far as Gogebic County goes, I met their 30-day guideline.”
Bergman said the Watersmeet residence has been his home of record for more than 20 years.
“This is campaign shenanigans,” Bergman said. “I am an elected representative of the 1st District in Michigan and my home base is here.”
The Bergmans do meet the basic Michigan Department of Treasury guidelines for proof of residency based on the documents he provided, which included DirecTV bills and five individual We Energies bills ranging from January 2016 to July 2018, he holds a Michigan driver’s license, and is registered to vote in Watersmeet. He also provided his 2018 estimated property tax assessment for his home in St. Francisville, Louisiana, where he does not claim either a PRE or a homestead property tax exemption.
Michigan Department of Treasury Deputy Public Information Officer Ron Leix declined to comment on the case.
“The Michigan Department of Treasury cannot respond to inquiries about the lawsuit because it’s still in progress,” Liex wrote in an email on Monday.
While some counties rely on the state treasury to audit their PRE requests, Gogebic County has opted to audit their own PRE exemptions and have the authority to deny principal residency exemption claims for the current year as well as the three preceding years.
Treasurer Hewitt said the county is overseen by and is periodically audited by the state treasury.
The writ of mandamus is asking for an in-depth audit of the property’s utility use at the Watersmeet residence versus the utility use at Bergman’s Louisiana home.
“The best explanation of what the Legislature meant by the term “principal residence” comes from the decisions of the highest court in Michigan to decide these cases, being the Michigan Court of Appeals, which has required an assessment of the actual time spent residing in a subject dwelling-measured by utility usage in comparison with another dwelling used by the subject taxpayer,” the complaint states.
Petoskey resident Richard Wiles, who is named in the suit for evidentiary purposes only, launched an investigation into the Watersmeet address as well as a storage facility also owned by Bergman on South Cisco Lake Road after the August 2016 primary election.
Wiles said in an email that he began looking into the matter after Bergman defeated Tom Casperson, who, according to Wiles, had raised questions about Bergman’s residency on his campaign Facebook page.
After visiting both of the Bergman properties, Wiles reported his findings to the Gogebic County treasurer and to Patrick Huber, the manager of Michigan Department of Treasury Property Exemption Section, the complaint states.
In response to Wiles’ inquiry, Huber refused to deny the existing PRE on the Bergman cottag because both Jack and Cynthia Bergman “are registered to vote and do vote in Watersmeet Township.”
Bloch and Roberts contend a 2013 Michigan Court of Appeals ruling in the case of Drew v. County of Cass sets a more stringent standard for property owners claiming PRE exemptions.
“In his 2016 decision, Mr. Huber failed to consider the pronouncements of the Michigan Court of Appeals that PRE determination should be based on the actual time spent by a landowner residing at a dwelling measured by utility usage rather than on cursory issues, such as where the landowner votes,” the writ states.
A subsequent request for PRE audit was submitted by Anderson to the Gogebic County clerk and Watersmeet Township Assessor on July 25. In an email to Hewitt, he specifically asked that the Bergman PRE claim be investigated using a utility bill comparison.
Referencing Drew vs. County of Cass, Anderson wrote: “The Tax Tribunal and the Court of Appeals found in favor of the county because ‘to accomplish the task (of proving that you occupy a home as your true, fixed permanent home) there would be substantial use of utilities.’”
Anderson’s request included an affidavit from Jorns, who, after visiting Watersmeet Township five times since 2016, “provides substantial investigative evidence that Jack and Cynthia Bergman do not in fact have any significant ties to Watersmeet Township and do not maintain a principal residence anywhere in Watersmeet Township.”
The Gogebic County treasurer has issued PRE denials in the recent past. An MLive article updated on Sept. 28, 2017, shows that the county issued 51 PRE denials in 2016, 47 of which were because the property was not owner-occupied.
When asked about a possible comparison of utility usage between his Watersmeet and St. Francisville residences, Bergman said his goal is transparency.
“I have no problem with anyone shining a light on all my activities. I am perfectly happy to stand in the spotlight,” Bergman said. “For anyone to impune my integrity, it’s deceitful and shame on them. We know better than that in this country.”
Bloch said the case is less about politics and more about doing the right thing by Michigan residents and school districts.
“It’s more about counties with multimillion-dollar summer homes getting (bilked) out of property taxes,” Bloch said, “and fixing our broken and corrupt system where rules are being written by the rich to benefit the rich.”