Updated March 2018

Wisconsin Court Of Appeals Holds That Agricultural Land Classification Does Not Require That Crops Be Grown For A Business Purpose

In a decision issued on March 7, 2018, State of Wisconsin ex rel. The Peter Ogden Family Trust v. Board of Review, the Wisconsin Court of Appeals rejected the assessor’s position that crops must be grown for a business purpose for land to qualify for agricultural classification, which requires assessment at significantly below market value.

Beginning in 2012, the land at issue was classified as agricultural and agricultural forest based upon pine trees, apple trees, and hay the landowners planted on the property. In 2016, the assessor concluded that the property failed to meet the agricultural and agricultural forest classifications and reclassified the property as residential.  This resulted in an increase in the assessed property value from $17,100 as agricultural land to $886,000 as residential land.

The landowners objected to the 2016 assessment, and the board of review upheld the residential classification. The landowners filed an action for certiorari review, arguing that the change was erroneous because it was based upon the mistaken belief that for land to qualify as agricultural land, crops grown on the property must be grown for a business purpose. The circuit court upheld the assessment, and the landowners appealed.

The Court of Appeals examined Wisconsin statutes defining “agricultural land” and “agricultural use,” as well as the relevant Department of Revenue rule, and concluded that the plain language of the statutes and rule refers to “growing” the relevant crops, not marketing, selling, or profiting from them. The Court found that the board of review’s position that the land could not be “devoted primarily to agricultural use” without “minimal sales,” “valid economic activity,” and crops being “marketed for sale” was unsupported and contrary to law. The Court further rejected the board’s argument that the assessor did not impose a “business standard” when evaluating the use of the property, concluding that a review of the transcript of the board hearing demonstrated that the assessor and the board clearly—and erroneously—equated “agricultural use” with growing crops for a business purpose.

The Court thus held that to qualify for agricultural classification, it is sufficient that the land be devoted primarily to growing qualifying crops, whether or not those crops are grown for a business purpose.

Marie Bahoora
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)

Wisconsin Property Tax Update Archive

Updated June 2016

Wisconsin Tax Appeals Commission Issues Major Decision Rejecting the Department of Revenue's Method for Assessing Manufacturing Property

In a major decision issued on April 12, 2016, Thermo Electron v. Wisconsin Department of Revenue, the Wisconsin Tax Appeals Commission rejected the method the Wisconsin Department of Revenue has used for decades to value manufacturing property, concluding that it was insupportable under either Wisconsin law or professionally acceptable appraisal practices.

Under that unorthodox method, which the Department called the “building residual” method, sales which the Department determined to be valid were placed into the Department’s database, after first being “fielded” by a Department assessor. The “fielding” assessor would allocate the overall sale price into land and improvements components, but with no indication of how the allocation was made or how either component of the overall sale price was derived.

Department assessors would then assess manufacturing properties based on comparable sales in the Department’s database; however, instead of making adjustments to the comparable properties in the traditional manner, based on the overall sale price, the Department’s assessors would consider only the amount allocated to improvements by the fielding assessor; would make adjustments to that amount to determine an indicated value for the assessed property’s improvements; and would then add in a land value for the property being assessed to determine an overall assessment. The assessor valuing a given property (and testifying to that value as the Department’s expert at trial) would thus have no idea how the fielding assessor had determined the land (or improvements) value for any of the comparables the testifying assessor claimed to have relied on.

The Tax Appeals Commission soundly rejected that method as unsupported under either Wisconsin law or professionally acceptable appraisal practices. The Commission held that the fielding assessor’s separate allocation of sales prices into land and improvements components could not be used in a valid comparable sales analysis, since the parties to the sale had not separately negotiated prices for the land and improvements, and thus the fielding assessor’s allocation was based on factors wholly unrelated to the sale transaction itself.

Since the Commission decision invalidated the assessment method the Department has used for decades, the Department has, not surprisingly, appealed.  

Robert L. Gordon, Esq.
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)

Updated December 2014

Wisconsin Court Of Appeals Rejects Attempt To Sidestep Supreme Court Decision Prohibiting Assessment Of Above-Market Contract Rent

In a decision issued on December 17, 2014, Walgreen Co. v. City of Oshkosh, the Wisconsin Court of Appeals soundly rejected attempts by Wisconsin assessors to circumvent a 2008 Wisconsin Supreme Court decision, which prohibits assessors from including above-market contract rent in real estate assessments of leased property.

In 2008, the Wisconsin Supreme Court unanimously held, in Walgreen Co. v. City of Madison, that value attributable to contract rent which exceeds market rent represents contract value, not real estate value, and thus cannot be included in an assessment of real estate subject to such a lease. The Court held that a lease can never increase the value of real estate above its fee simple market value.

In response to that decision, the state’s assessors tried to get the Wisconsin Legislature to overturn the Supreme Court decision, but failed. Instead, they had the Wisconsin Property Assessment Manual changed, to essentially permit assessment of the above-market contract rent which the Supreme Court had prohibited. They then argued that the Supreme Court decision had to be reinterpreted in light of the changes to the Manual.

In its recent Oshkosh decision, the Court of Appeals rejected the assessors’ arguments, holding that the changes to the Manual did not and could not overturn the Supreme Court’s prohibition on assessing above-market contract rent. The case is significant in that it definitively rejects attempts Wisconsin assessors have been making since the Supreme Court decision was issued in 2008 to disregard or circumvent that decision.

Robert L. Gordon, Esq.
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated September 2013

Wisconsin Tax Appeals Commission Addresses A Critical Manufacturing Issue In A Case Involving (What Else?) Cheese

In Wisconsin, personal property used during the manufacturing process is exempt from property tax, while personal property used for storage of finished product is not exempt. The question of when the manufacturing process ends and storage begins is thus critical. The Wisconsin Tax Appeals Commission has addressed this question, and the related question of whether the manufacturer itself has any input in determining when the manufacturing process ends, in a case involving the aging of cheese, Selkey, LLC v. Wisconsin Department of Revenue.

The taxpayer in that case was in the business of aging cheese for other cheese manufacturers. The Department of Revenue argued that the manufacturing process ends for each type of cheese as soon as the aging process reaches the earliest point when Federal regulations would permit the cheese to be labeled by someone as that type of cheese. The taxpayer argued that the determination should be based on the totality of circumstances, including the manufacturer’s own determination of when the cheese has aged sufficiently for it to be acceptable as that type of cheese for the manufacturer’s own product line.

In a nonfinal opinion issued to resolve a pretrial dispute, the Tax Appeal Commission sided with the taxpayer, holding that “like wine or bourbon or tobacco or meats, a [cheese] manufacturer is selling a specialized good, one aspect of which is flavor,” and that flavor “is a function of the manufacturer’s decisions on such variables as aging.”  The Commission thus appears to have been persuaded that a manufacturer’s own requirements are relevant to the question of when the manufacturing process ends.

Robert L. Gordon, Esq.
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated June 2013

2013 Assessments of Manufacturing Property To Be Issued By Wisconsin Department of Revenue and Proposed Expansion of Manufacturer Appeal Rights

All commercial and residential property in Wisconsin is assessed by the local municipality, except for property used in manufacturing and property owned by telephone companies and certain other utilities, which is assessed by the Wisconsin Department of Revenue.

Manufacturing property includes real and personal property used for manufacturing activities. Machinery and equipment actually used in the manufacturing process is exempt from taxation. For this reason, manufacturers should ensure that their property is recognized as manufacturing property and is assessed by the Department of Revenue, because if the property is classified as commercial property and assessed by the local assessor, the machinery and equipment used in the manufacturing process will not be exempt.

More information can be found on the Wisconsin Department of Revenue's website at http://revenue.wi.gov/manufacturing/index.html, which includes the current manufacturing tax rolls

The Department of Revenue generally issues assessments of manufacturing property in May and June. The manufacturer then has 60 days to appeal to the State Board of Assessors, a body comprised of Department of Revenue employees. The State Board of Assessors usually decides appeals in the fall, but can take until April 1st of the following year to issue its decision. Manufacturers who are unsatisfied with the decision of the State Board of Assessors can appeal to the Wisconsin Tax Appeals Commission, an independent, quasi-judicial tribunal, which will conduct a trial on the manufacturer's objection. Manufacturers who are still unsatisfied with the decision of the Tax Appeals Commission can only appeal to the circuit court of Dane County, where the State Capital is located.

However, there is proposed legislation currently before the Wisconsin Legislature that would significantly expand the appeal rights of Wisconsin manufacturers. Under the proposed legislation, manufacturers will be able to appeal the decision of the Tax Appeals Commission to the circuit court of the county in which the manufacturer is domiciled, owns property, or conducts business.

Nicholas J. Boerke
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated June 2011

Wisconsin Supreme Court Requires Statewide Uniform Property Tax Assessment Appeals

The Wisconsin Supreme Court has held that amendments the Wisconsin Legislature enacted in 2008, which allowed individual municipalities to restrict the rights of property owners to challenge their tax assessments in court, were unconstitutional under the Equal Protection clauses of the Wisconsin and United States Constitutions. In the March 25, 2011 decision in Metropolitan Associates v. City of Milwaukee, 2011 WI 20, 796 N.W.2d 717, the Court held that the Legislature had no constitutional basis under the Equal Protection clause to provide one class of Wisconsin citizens with significantly fewer assessment appeal rights than all other Wisconsin citizens, based only on the municipality in which they live or own property. This major decision vindicates the rights of all commercial, industrial and residential property owners in Wisconsin, and will help property owners throughout the state obtain tax assessments that are fair and equitable.

In 2001, the Supreme Court held that an earlier statute that prevented Milwaukee County citizens from fully contesting their assessments in court was unconstitutional under the Equal Protection clause. In 2008, at the request of a number of state assessors, the Legislature attempted to circumvent the 2001 decision by enacting new legislation that gave each municipality in the state the option to eliminate its citizens' rights to fully contest their assessments in court. In the Metropolitan decision, the Court held that the new legislation violated the Equal Protection clause for the same reasons that the earlier legislation was held unconstitutional. The Court reiterated the important principle that all taxpayers and property owners throughout Wisconsin are entitled to the same set of rights to challenge their assessments in court.

Daniel A O’Callaghan
Michael P. Screnock
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated March 2011

Property Tax Bills Provide A Good Reminder To Consider 2011 Reporting, Notice And Appeal Deadlines

Property owners in Wisconsin are reminded that property is assessed for real estate tax purposes as of its value on January 1, but the assessment notice and appeal deadlines in Wisconsin are not uniform and are generally set by the local municipality. Property owners who receive assessment notices during 2011 will be advised in those notices of the municipality’s deadlines for meeting with the assessor, filing objections and appearing before the Board of Review; however, municipalities are only required to provide assessment notices when the assessment is changed. The receipt of the property tax bill in December can act as a good reminder to start thinking about analyzing and potentially challenging the 2011 assessment, because property owners whose assessments were not changed do not receive notices but are still subject to the same deadlines.

Property owners should contact their municipality in mid-February to obtain the relevant 2011 dates, including the date when assessment notices will be issued. The one municipality in which the assessment deadline is set by statute is the City of Milwaukee, where objections must be filed by the third Monday in May, i.e., May 16, 2011.

Manufacturing property is assessed by the Wisconsin Department of Revenue, not local assessors, and is not subject to these same rules. The Department of Revenue generally issues manufacturing assessments in late spring, subject to appeal to the State Board of Assessors, and then to the Wisconsin Tax Appeals Commission.

Non-manufacturers must report their personal property to the municipality by March 1, 2011. Manufacturers must report both their real and personal property to the Department of Revenue by March 1, 2011.

Daniel A O’Callaghan
Michael P. Screnock
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated September 2010

Wisconsin Supreme Court Begins New Term With Two Major Assessment Cases

The Wisconsin Supreme Court began its new term in September with two major tax assessment cases on its docket.

In Nestlé USA, Inc. v. Wisconsin Department of Revenue, the Court will consider the assessment of specialized manufacturing plants. The case involves the assessment of a whole protein powdered infant formula plant in Eau Claire which was built to comply with exacting standards mandated by the United States Food and Drug Administration. The Wisconsin Department of Revenue assessed the property based on its cost to Nestlé, on the theory that there was no functional obsolescence since the plant was fully functional for Nestlé's manufacture of powdered infant formula. Nestlé, supported by an independent appraiser, claimed a significantly lower value on the ground that there was no real estate market for the extremely expensive features which only had value to Nestlé's specialized manufacturing business. The Wisconsin Tax Appeals Commission and lower appellate courts sustained the Department's assessment, but the Supreme Court agreed to review the case.

In Metropolitan Associates v. City of Milwaukee, the Court will consider a constitutional challenge to legislation which allows municipalities to exempt themselves from the statute which provides property owners with an independent court review of their assessments. In municipalities electing that exemption, property owners are limited to an administrative hearing before the local board of review, and a limited judicial appeal of the board of review decision. A circuit court held the legislation unconstitutional under the Equal Protection clause, but the Wisconsin Court of Appeals reversed that decision. The Supreme Court agreed to review the case and heard argument in April; however, the Court asked for additional briefing and has scheduled additional argument in October on the issue of whether taxpayers have a constitutional right to a jury trial on property tax refund claims. A finding that there is such a right could provide an additional basis for finding the challenged legislation unconstitutional.

Robert L. Gordon
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)


Updated March 2010

Wisconsin Department of Revenue Revamps Proposal To Overhaul State Assessment System

Last fall, the Wisconsin Department of Revenue proposed a substantial overhaul of the state's assessment system, under which all assessment functions for locally assessed property would be transferred from the municipal level to the county level over a five-year period. The goals of the overhaul were to eliminate inefficiency and duplication, and achieve uniformity in the application of statewide assessment standards. Currently there are 1,851 municipal taxation districts in Wisconsin, far more than in any other state.

The Department's proposal was vehemently opposed by the state's municipalities, and the Department withdrew the proposal.

The Department has now issued a new proposal under which municipalities would be required to join newly created assessment districts, which would take over all assessment functions for all locally assessed property in the municipalities making up those assessment districts. Under the Department's proposal, there would be a maximum of 400 assessment districts.

The Department believes that consolidation of assessment functions through this new proposal would still meet the goals of the initial proposal, i.e., creating efficiency and achieving uniformity in assessment practices, while permitting local governments to retain control over all assessment and board of review functions. Ceding such control to county government was one of the main bases for the municipalities' objections to the Department's original proposal.

Under the new proposal, as under the original proposal, annual full value assessment of all state property would be mandated. The changes, if enacted by the Legislature, would be phased in over five years. Manufacturing and utility property would continue to be centrally assessed by the Department, as under current law.

The new proposal also creates a Board of Tax Exemptions, which would assist local assessors on property tax exemption issues, in an effort to provide statewide consistency on exemption issues.

Information on the Department's proposal is available at the Wisconsin Department of Revenue website, at http://www.revenue.wi.gov/news/PAR031010.pdf.


Updated December 2009

Wisconsin Department of Revenue Proposes Change From Municipal to County Assessment

The Wisconsin Department of Revenue has recently proposed a fundamental change in Wisconsin assessment law, under which assessment functions for locally assessed property would occur at the county level rather than the municipal level.

Under current law, all assessment functions for locally assessed property, including both the valuation process and the appeal process, are conducted at the municipal level. Locally assessed property in Wisconsin includes all residential and commercial property, with the exception of manufacturing and utility property which is centrally assessed by WDOR.

Because all assessment functions occur at the municipal level, there are 1,851 separate and independent taxation districts in Wisconsin. Since most states conduct assessment functions at the county level, no other state has even close to that number of taxation districts. According to WDOR, moving to a county assessment system would eliminate issues of duplication, lack of uniformity and inconsistency in applying assessment standards, and would permit full value assessment of all state property on an annual basis. The change would also permit full transparency by having all assessment data easily accessible to the public online.

The change, if enacted by the Legislature in the form proposed by WDOR, would be phased in over a five year period. Information on the WDOR proposal is available at the WDOR website under "County Assessment" at http://www.revenue.wi.gov/html/local.html.


Updated March 2009

Wisconsin Court Holds A New Statute Limiting Assessment Challenges To Be Unconstitutional

On January 20, 2009, the circuit court for Milwaukee County struck down as unconstitutional a statute the Wisconsin Legislature enacted in 2008 which limited the rights of certain property owners to challenge their assessments.

Under a longstanding Wisconsin statute permitting challenges to excessive assessments, property owners dissatisfied following review of their assessments by the local board of review can file a claim against the municipality and then file a suit in circuit court, which proceeds as an independent civil action. In 2001, the Wisconsin Supreme Court struck down on Equal Protection grounds a provision in the statute which made it inapplicable in the state's most populous county, Milwaukee County. The Supreme Court found that the challenge procedures available under the statute were so far superior to the more limited procedures available within Milwaukee County that it was an equal protection violation to provide those procedures to some citizens while denying them to others.

In 2008, the Wisconsin Legislature enacted a new law which permitted municipalities to opt out of the excessive assessment statute by ordinance. In any municipality which enacted such an ordinance, property owners were left without resort to the broader challenge procedures available under the excessive assessment statute, just as Milwaukee County citizens were unable to access those procedures prior to the 2001 Supreme Court decision.

The City of Milwaukee, among other municipalities, enacted such an ordinance, and a Milwaukee property owner challenged the statute on the same Equal Protection grounds as in the earlier suit. On January 20, 2009, the circuit court struck down the statute, finding that it suffered from the same constitutional flaws as the provision the Supreme Court struck down in 2001.

The City of Milwaukee is appealing the decision to the Wisconsin Court of Appeals.


Updated September 2008

Wisconsin Supreme Court Rejects Assessment Based On Above-Market Contract Rents

In a major decision rejecting an assessment theory which had been used by assessors across Wisconsin, Walgreen Company v. City of Madison, the Wisconsin Supreme Court unanimously held in July 2008 that property subject to a lease which provides for above-market rent cannot be assessed on the basis of the above-market income stream.

The taxpayer in Walgreen implemented a business model under which it leased the real estate for its retail locations rather than purchasing it. The taxpayer worked with developers who acquired the real estate and then built the stores to the taxpayer's specifications. The leases contained contract rent payments designed to reimburse the developers' land acquisition, construction, development and financing costs, and to provide a profit margin for the developers. The contract rent payments thus far exceeded market rent.

The Madison assessor, along with other assessors across the state, assessed the properties based on the above-market income stream under the leases, on the theory that a purchaser of the real estate would acquire the income stream under the leases and thus the income was attributable to the real estate.

The Supreme Court rejected that theory, however, holding that additional income attributable to an above-market lease represents a contract benefit and not increased real estate value. The Court held that a lease can never increase the value of real estate above its fair market fee simple value.


Updated December 2007

Wisconsin Legislature Proposes Limits To Assessment Challenge Procedures

A proposal introduced in the Wisconsin Legislature in November 2007 would limit the ability of property owners (other than manufacturers) to challenge their assessments in de novo proceedings in circuit court.

Under present law, a non-manufacturing property owner must appeal its assessment to the local board of review. If the property owner is not satisfied following the board of review hearing, the property owner can file a claim against the municipality and then file a suit in circuit court, which proceeds as an independent civil action without regard to what occurred at the board of review.

Under the proposed legislation, municipalities will have the option of adopting an ordinance which somewhat expands the procedures before the board of review, and somewhat expands the scope of a certiorari appeal of the board decision to circuit court, in which the court has traditionally been limited to a review of the board of review record with no new evidence permitted. In any municipality which enacts such an ordinance, property owners would be limited to a certiorari appeal and would no longer have the option of filing a de novo refund suit.

The Wisconsin Assembly passed a version of the legislation in December 2007, and the Wisconsin Senate is scheduled to take up the legislation early in 2008. As currently drafted, the legislation would take effect for assessments beginning in 2008.


Updated September 2007

Two Wisconsin Courts Reject Assessors' Attempts To Overassess Golf Properties

In two recent decisions, Wisconsin circuit court judges have rebuffed attempts by assessors to assess private golf courses at more than their fair market value.

In North Hills Country Club v. Village of Menomonee Falls, a country club was located on land zoned for park use. The assessor disregarded the zoning and assessed the property as if it were available for commercial and residential development. At trial, the assessor argued that the court should disregard the actual zoning, on the theory that the property owner could apply for a zoning change and that the Village would be likely to grant it. The court rejected the assessor's argument, concluding that the Village "engages in a game" by "tax[ing] its citizens for a use expressly not allowed" by its own zoning code.

In Lac La Belle Golf Club v. Village of Lac La Belle, the court held that the assessor had failed to take into account the significant recent downturn in the market value of golf properties, which has resulted from an oversupply of newly built golf courses and the change in economic demand from golf-only facilities to family-friendly facilities which offer fitness centers, swimming and tennis in addition to golf.