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Taxation FAQ 7
Can a municipality grant a full or partial property tax exemption to a property owner or a business?
No. Article VIII, sec. 1. of the
Wisconsin Constitution provides that "The rule of taxation shall be
uniform...." This provision, which applies only to the property tax, Gottlieb v. Milwaukee,
33 Wis.2d 408, 427-28, 147 N.W.2d 633 (1967), does, however, contain
language which allows the legislature to classify and exempt property. Nash Sales, Inc. v. Milwaukee,
198 Wis. 281, 224 N.W. 126 (1929). The provision contains certain
exemptions, such as the language specifying that the taxation of
agriculture and undeveloped land need not be uniform with the taxation
of other property, but it should be noted that this language only
enables the state legislature to enact certain non-uniform provisions.
Unlike the state, municipalities do not
have the power to create full or partial exemptions and a municipality
may not lawfully grant a property tax break because such action would
violate the uniformity clause of the Wisconsin Constitution. Thus, the
assessment of property cannot be frozen as an incentive for businesses
to locate in a community, nor can a municipality agree to give tax
rebates to property tax owners or rebates of tax increment financing
(TIF) to businesses in a TIF district. In a similar vein, property that
is destroyed after the January 1 assessment date is still subject to
full taxation for that year; no adjustment can be made for the damage.
Taxation 961 and Taxation 953.
It does not follow, however, that a
municipality cannot give any incentives to property owners or renters.
Municipalities may install public improvements without levying special
assessments. Municipalities may also rent out unneeded land or buildings
to others and there is no property tax due for the municipally owned
property. Wis. Stat. sec. 70.11(2).
Moreover, there are accepted methods of
encouraging economic development. The tax increment financing (TIF) law,
Wis. Stat. 66.1105, with its allowance of land acquisition write down
expenses as a project cost, Wis. Stat. sec. 66.1105(2)(f)1c, is one
example. The authority of municipalities to benefit industry by
installing roads and utilities (but not buildings) pursuant to Wis.
Stat. sec. 66.1101(3), is another.
Finally, there is some old case law
upholding municipal agreements with property owners that establish
payments by the municipality to a property owner of an amount based on
taxes for continuing services. The amount to be paid must still be in
accord with the value of the services. See Monroe Water Works v. Monroe,
110 Wis. 11, 85 N.W. 685 (1901). However, it is not always easy to fit
an agreement into this category and avoid invalidation by the courts.
See Ehrlich v. Racine, 26 Wis. 2d 352, 132 N.W.2d 489 (1985) and Cornwell v. City of Stevens Point, 159
Wis. 2d 136, 464 N.W. 2d 33 (Ct. App. 1990). Accordingly, even where
continuing services are clearly involved, it may be more prudent to base
the payment on something other than taxes so that the payment reflects
the value of the services.
In the end, this means that
municipalities may provide certain benefits and incentives to property
owners and businesses, but municipalities cannot grant total or partial
property tax breaks to property owners or businesses.