Damakant Jayshi
Amid differences over which case law applied to determine the tax-exempt status of a nonprofit organization, the Wausau City Council on Tuesday rejected a claim for recovery of alleged unlawful taxes by two entities by a majority vote.
The Leigh Yawkey Woodson Art Museum has retained a law firm, Ruder Ware, whose attorney argued this week that the nearly $17,500 in taxes was collected in error. The city attorney rebutted each of the arguments presented in a letter from the firm and said the assessor was correct in his determination. A majority of the City Council concurred.
The City Council also rejected claims from the Vistas at Greenwood Hills in their attempt to recover nearly $9,500 in taxes paid. The Finance Committee disallowed the recovery two weeks ago after both the organizations wrote to the committee. Both entities can choose to appeal within 90 days through the court system, as Alder Lisa Rasmussen pointed out two weeks ago.
The museum can also refile for tax exempt status in the future.
On Tuesday, Attorney Ian Colby from Ruder Ware said that the museum-owned property, on 601 N 12th St., was tax exempt from 2016 through 2022. But City Assessor Richard Rubow reversed that position in January 2023, Colby said. He had sent a letter to the council before its meeting on Tuesday. The museum completed construction last year for its Glass Box Studio on that property.
In the letter, Colby said that Rubow erred in his claim that the museum was not actively operating the new Glass Box Studio and that the property was not being used for a tax-exempt purpose.
“Assessor Rubow’s rationale for suddenly assessing the Glass Box Studio property is not supported by Wisconsin law nor the authoritative guidance of the Wisconsin Property Assessment Manual,” the letter said.
In response, Assistant City Attorney Tegan Troutner cited different case laws, their applicability or non-applicability in the studio’s case, and the alleged unfilled mandatory requirements on the part of the museum while seeking an exemption.
Alders Carol Lukens and Lou Larson voted to allow the tax recovery for the museum, a motion that failed by a 2-9 margin. On the Greenwood Hills matter, Alder Becky McElhaney cast the sole vote in favor on a motion that failed 1-10.
Which case law is applicable – 1977 or 2004?
The museum and its attorneys have said that the “Readying Rule” as determined in a Wisconsin Supreme Court case, Family Hospital Nursing Home, Inc. v. City of Milwaukee of 1977 applies. In that case, the state Supreme Court ruled that since the nursing home was “readying” itself for use, it could claim a tax-exempt status. The attorneys for the city and the museum disagree over whether it applies in this instance.
Denying the museum’s claim, Ruder Ware’s attorney argued, would “cast a chill on nonprofits in Wisconsin.”
However, City Assessor Rubow, citing ta 2004 opinion, wrote in his memo to the Finance Committee that the “Readying Rule” does not apply to buildings under construction because during the time of assessment, the building on the property was being constructed. The museum’s attorney rejects that argument.
At the Finance Committee two weeks ago, Rubow said that the organization was given a building permit in 2022. That same year, the museum combined the two vacant parcels into a new parcel.
“That itself triggers the property to become taxable on the assessment roll unless the taxpayer files an exemption request,” Rubow said then. “No exemption request was filed. So therefore, the assessment is legit.”
The law firm’s letter said the consolidation of two lots was somehow taken as “change of use” by the assessor. The museum’s attorneys reject that interpretation.
“A property’s ‘use’ is not changed by the consolidation of lots,” the firm said. “The ‘use’ of a property for tax assessment purposes involves an assessment of ‘the primary or actual use made of the property’.”
Troutner sided with the city assessor.
Quoting two Wisconsin statutes. Troutner said one required levying taxes unless the property is exempt. Under a second statute, Troutner said, the presumption is that a property is taxable, and the burden is on the taxpayer who claims the exemption. “In this case, it is my understanding that the taxpayer did not meet their burden.”
In response to the idea that there was no change in how the land was used, the city lawyer said that was not true. Originally, the land had nothing on it, but then a building was put up. However, the building wasn’t finished when the land was checked for tax purposes. Also, nobody had asked for the land to be free from taxes at that time.
The “Readying Rule” is all about whether a certain rule applies to a situation or not. In this instance, Troutner mentions that the museum is using a rule from Wisconsin law that talks about public art galleries. According to this law, if an art gallery is only used for showing art and teaching about art, and if it’s open for free at least three days each week, then the rule applies to them. However, Troutner points out that the city believes there is no proof that this is true for the museum in this case.
Troutner also drew a distinction between the 1977 Family Hospital case and the Glass Box Studio. Troutner said the nursing home was fully constructed and ready for use at the time of assessment, unlike the studio, and the only thing left was staffing. The court thus accepted that the nursing home was readying for use. This 1977 opinion was cited by the Appeals Court in 2004, saying that unlike in the Family Hospital case, there was no indication that the “FHHD building was fully constructed and equipped and in the final stages of readying itself for an exempt purpose.”
Troutner also emphasized that the museum did not file for tax exempt status for the property prior to being taxed.
“So it is our position that the assessment was not made in error and the museum failed to provide the information necessary to claim the exemption.”
