January/February 2023 Issue

Also in this issue: Seventh Circuit Dismisses Challenge to Madison's Digital Sign Ordinance     |     Wisconsin Appellate Court Rules City of Milwaukee Violated Family Dollar’s Due Process Rights When it Denied the Renewal of Food Dealer and Weights & Measures Licenses     |     Welcome Joesph Hasler and Maximillian Buckner     |     Court Dismisses RLUIPA Challenge to City's Stadium Lighting Decision

Wisconsin Supreme Court Clarifies How Tax Assessment Claims Must Proceed

Storm B. Larson | 02.02.23

A recent decision from the Wisconsin Supreme Court clarifies how taxpayers must initiate tax claims against municipalities under Wis. Stat. § 74.35. The Wisconsin Supreme Court ruled that taxpayers must first pay the disputed tax prior to filing their claims. The case is captioned St. John’s Communities v. City of Milwaukee, 2022 WI 69, and a brief recitation of the facts will be helpful for context.

At issue in Saint John’s Communities, Inc. was a 501(c)(3) nonprofit which owned a parcel of property in the City of Milwaukee. This lot had previously been declared as tax exempt between the years 2010 – 2018. However, in 2018, the nonprofit chose to begin developing the lot into a luxury apartment complex for retired individuals.

When the City learned of this development, it asked the nonprofit to reapply for tax-exempt status. It asked the nonprofit to reapply because it was changing the use of the property, and the change in use made the property presumptively taxable under the relevant statutes. The nonprofit complied and submitted its new application in September 2019, but the deadline for applying for an exemption had already passed on March 1, 2019. Therefore, because the nonprofit missed the deadline and had begun developing the property in a taxable manner, the City determined that the property would be taxable for the year 2019.

On November 8, 2019, the nonprofit filed a claim with the City for recovery of unlawful taxes pursuant to Wis. Stat. § 74.35. However, the City advised the nonprofit that the claim was premature because the tax bill had not been levied or collected (paid) yet. The tax was due to be levied on November 27, 2019. The nonprofit then filed a second claim on December 5, 2019 after the tax was levied, but the City again advised that the claim was still premature because the nonprofit had not yet paid its bill. The City also advised that the nonprofit’s claim was defective for another reason: the March 1, 2019 tax exemption application deadline had long passed.

In response, the nonprofit filed suit in Milwaukee County Circuit Court and sought recovery of unlawful taxes against the City pursuant to Wis. Stat. § 74.35. The City filed a motion to dismiss that claim because, under Wis. Stat. § 74.35(2)(a), it had not paid its tax bill prior to filing its claim with the City. 

The circuit court denied the City’s motion to dismiss, but the court of appeals reversed that decision and adopted the City of Milwaukee’s reading of the statute, namely, that a tax bill must be paid before a claim against the tax authority can lie. The court of appeals held that the unambiguous meaning of Wis. Stat. § 74.35(2)(a) meant that the tax must be paid prior to the claim being filed and that failing to do so constituted procedural default. As the court of appeals explained: ​“The language of the statute clearly anticipates a claim being filed with the taxation district after the taxpayer has paid the challenged tax.” (emphasis in original). Therefore, the nonprofit’s claim was procedurally defective and was time-barred since the March 1 deadline had long passed.

The supreme court affirmed the court of appeals’ decision and largely adopted its analysis. Notably, the opinion was 7 – 0 with Chief Justice Ziegler writing for the court. Moving forward, the court made clear that taxpayers will procedurally default on claims if they fail to pay the challenged tax prior to filing their claims.

Tax assessment claims involve intricate procedural rules which can lead to default for noncompliant litigants. We encourage municipalities to reach out to a member of the Boardman Clark Municipal Practice Group with questions.