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November/December 2021 Issue

Also in this issue: New Law Governs Police Officer Hiring and Record Retention     |     Financing Opportunities for Local Governments under the Infrastructure Investment and Jobs Act     |     Anita Gallucci Wins Distinguished "Friend of Public Power Award"

Milwaukee Wins Tax Exemption Challenge When Plaintiff Files Claim Too Soon

12.07.21

The City of Milwaukee recently won a tax appeal when the taxpayer failed to properly file its claim for a tax refund. The case instructs municipalities and their lawyers to look closely at the technical requirements for tax appeals, as a minor mistake may doom the appeal.

In St. John’s Communities, Inc. v. City of Milwaukee, 2020 AP 1696 (Oct. 4, 2021), St. John’s had operated a retirement community that the City found to be tax exempt. St. John’s then built a new retirement facility, a high rise building that it marketed as ​“luxury retirement units.” The City found that the new unit did not qualify for tax exemption. 

St. John’s objected and filed a claim against the City in November 2019. The city denied the claim, informing St. John’s that the claim was premature since no tax had been levied and collected yet. The City relied upon Wis. Stat. sec. 74.35(2)(a), which provides in part: 

“[a] person aggrieved by the levy and collection of an unlawful tax assessed against his or her property may file a claim to recover the unlawful tax against the taxation district which collected the tax.”

Emphasis added.

Because the tax had not yet been levied and collected, Milwaukee said the claim was too early.

St. John’s filed an additional claim in December, which the City again denied as being too soon. In January, St. John’s paid the first installment of the disputed tax on January 22, and sued the City that same day. 

The Circuit Court ruled that the tax appeal was proper, since St. John’s had filed a claim and had paid the tax before it brought suit. Milwaukee appealed, and the Court of Appeals reversed the Circuit Court and directed that the appeal should be dismissed because the claim was made before the tax was paid. 

The Court of Appeals reasoned, in part (¶ 21):

…[t]he legislature chose language that requires all claims regarding the recovery of taxes on an allegedly exempt property to be filed against the taxation district by the taxpayer who was aggrieved by the levy and collection of the challenged tax. … The language of the statute clearly anticipates a claim being filed with the taxation district after the taxpayer has paid the challenged tax. An interpretation of § 74.35(2)(a) as suggested by Saint John’s would render portions of the statute surplusage. (Emphasis in original)

In short, a taxpayer must first file a claim after the tax is levied and collected, and then it may sue the taxing district. Although this may seem to be a very technical application of the statutes, the rules regarding appeals of tax assessments are very technical. The tax is presumed to be proper, and the challenger bears the burden of proving the contrary. The challenger also bears the burden of following all the prerequisites to bringing the lawsuit. 

The decision is recommended for publication.

This newsletter is published and distributed for informational pur- poses only. It does not offer legal advice with respect to particular situations, and does not purport to be a complete treatment of the legal issues surrounding any topic. Because your situation may differ from those described in this Newsletter, you should not rely solely on this information in making legal decisions.

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