An ethnic intimidation charge would require physical contact, property damage or threats of such activity, said Wayne County Prosecutor Kym Worthy.
"I strongly encourage the Michigan Legislature to look, revise and create laws to protect citizens from this kind of horrible conduct," said Worthy, who is Black.
JeDonna Dinges, 57, of Grosse Pointe Park, said the klan flag was hanging next door in a window directly across from her dining room. The incident occurred two weeks ago.
The flag was removed after police with large cloths visited the home and made a switch, City Manager Nick Sizeland told the Detroit Free Press last week.
The man's girlfriend claimed they couldn't afford a curtain, Sizeland said.
"There is absolutely no question that what happened to Ms. Dinges was despicable, traumatizing and completely unacceptable," Worthy said. "But, very unfortunately in my view, not a crime. The KKK flag, while intending to be visible to Ms. Dinges, was hanging inside of her neighbor's house."
The klan was a secretive society organized in the South after the Civil War to assert white supremacy, often using violence.
Dinges said she understood Worthy's position.
"I hope the lawmakers are listening. ... The average person would not own a klan flag, which is a true symbol of hatred," Dinges said.
Dozens of people turned out for a Feb. 21 march and rally to support her.
Before the flag incident, Dinges said she was concerned about her safety after finding a full gas can inside her outdoor recycling bin.
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