What is the cap on taxable value after a property sells under Proposal A?

The correct choice reflects that after a property sells under Proposal A, the taxable value is capped such that the State Equalized Value (SEV) and the taxable value become the same. This occurs because Proposal A, enacted in Michigan in 1994, modifies how taxable values are calculated to prevent excessive increases in property taxes due to rapidly rising market values.

When a property is sold, its taxable value can reset to the SEV, especially if the sale price is higher than the previous taxable value. This adjustment ensures that the taxable value reflects the current market conditions at the time of sale. Under Proposal A, the taxable value cannot continue to increase by more than the rate of inflation or 5% per year, whichever is lower, unless there is a sale, which triggers a reassessment.

In this context, after the sale, if the market value is significantly higher than the previous taxable value, the taxable value resets to align with the SEV. Therefore, it simplifies the recovery of property taxes to match the new assessments, ensuring fair taxation in accordance with current market values while keeping assessments within reasonable limits in the years preceding the sale.