The term Taxable Value was used in the 1994 constitutional amendment known as Proposal A to replace State Equalized Value (SEV) in the property tax equation to calculate property tax bills. The first step in the process of determining Taxable Value is to calculate the Capped Value of every parcel of assessable property using the following formula:
Prior Taxable Value − Taxable Value of Losses × Lesser of 5% or Consumer Price Index (CPI) Multiplier + Taxable Value of Additions = Capped Value
CPI is the Consumer's Price Index (Inflation rate) as calculated by the State of Michigan each fall. The legislature has defined Taxable Value to be the lesser of SEV or Capped Value. Assessors are required to annually calculate a Capped Value for each individual parcel of real property. The Capped Value is then compared to the SEV of that property, and the lower of the two will be its Taxable Value upon which taxes are levied. The year following an eligible transfer of ownership, the SEV of the transferred property set in that year is its Taxable Value.