LANSING, Mich. (Michigan News Source) – Some of Michigan’s summer resort destinations could be reclassified as domestic non-profits under new legislation passed in the Michigan House, to accommodate modern practices for private organizations.

The House passed House Bills 4312 and 4313 which would allow qualifying summer resorts to opt out of their classification under the 1897 Summer Resorts and Parks Associations Act and convert the origination to a domestic non-profit, under the Non-profit Corporations Act.

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A House Fiscal Analysis explores how changing the organization’s status addresses some “structural and procedural challenges that associations would not have to work around if they could reorganize under more flexible terms as modern nonprofits.”

“Reportedly, provisions of the 1897 act concerning voting shares and filling vacancies on the board of directors are especially outdated, hard to comply with, or otherwise problematic for associations and their members,” the report said. “Association shares have in many cases passed through several generations in the decades following the association’s organization, which means that more shareholders now live out of state and that ownership interests are now often held by a trust— circumstances that the 1897 act does not appear to have envisioned and does not easily accommodate.”

State Representative John Roth (R-Interlochen) led the effort alongside State Rep. Betsy Coffia (D-Traverse City) explaining the catalyst for the bills.

“As things currently stand, summer resorts must abide by archaic rules that limit representation on boards and disallow virtual meetings or proxy voting,” Rep. Roth said in a statement.

He explained that there are 40 summer resort facilities “anywhere from housing to golf courses to whatever,” Rep. Roth said in an interview with Michigan News Source, “They were formed under a 1897 bill that licensed them at the time. The problem it’s very antiquated, the rules in them are very small, the votes have to be 2/3 votes to pass anything inside their own resort.”

Rep. Roth also shared that a majority of the resorts had signed onto a letter expressing their desire to become a domestic non-profit.

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“About 25 out of the 40 resorts have gotten together and said we just want to get into a modern non-profit, that’s all,” Rep. Roth said in an interview.

He also addressed a question that he even received from other legislators regarding whether or not the facilities would receive change in their tax liability.

“It’s not changing their tax status, it doesn’t change anything that they can do as far as legalities with the state, it’s just a matter of they can form a modern non-profit and do their rules to more what today’s non-profit groups would do,” he said to Michigan News Source.

Rep. Roth highlighted how with some circumstances, like with housing resorts, the old rules pose challenges to new owners.

“If the property leaves the original family, the new family that moves in has no voting rights,” he said. “So if the rest of the group said we want to put in a million dollar playground, they’d have no say whatsoever so it would change that and everybody would have a voting right in the group.”

The Licensing and Regulatory Affairs (LARA) agency also weighed in on the bills according to Rep. Roth, regarding a caveat that would allow groups to leave the previous bill or choose to stay.

“In the bill, it did not give an opportunity to leave, so LARA asked that we put in the bill that they can actually leave the antiquated bill and get into a modern day non-profit so they can set their limits and who the board is more appropriate to today’s actions.”

The legislation previously passed the House in 2022 according to Rep. Roth but was not voted on in the Senate. The bills head to the Senate for further consideration.