Village of Lannon v. Wood-Land Contractors, Inc.

SHIRLEY S. ABRAHAMSON, C.J.

¶ 49. {concurring). I agree with Judge Nettesheim's dissent that summary judgment is not appropriate in the present case. I, like Judge Nettesheim, agree with the test set forth by the court of appeals. He and I conclude that competing reasonable inferences can be drawn on the question of whether Wood-Land's primary business activity is logging or whether it is the clearing of land with timbering as an ancillary activity. Like Judge Nettesheim, I would remand the cause to the circuit court for trial on that question.

¶ 50. Wisconsin Stat. § 70.111 provides a conglomeration of numerous tax exemptions. The statute does not set forth a seamless web of tax exemptions.1 The exemptions do not divulge a pattern or theme. Subsection (20) of § 70.111 provides a personal property tax exemption for "[a] 11 equipment used to cut trees, to *175transport trees in logging areas or to clear land of trees for the commercial use of forest products."2

¶ 51. The statutory language to be interpreted in the present case is the phrase "for the commercial use of forest products." The phrase "for the commercial use of forest products" modifies each of the three uses of equipment specified in the statute: cutting trees, transporting trees in logging areas, and clearing land of trees.3 Wood-Land focuses on the phrase "to clear land of trees for the commercial use of forest products."

¶ 52. The sole issue before the court is whether "for the commercial use of forest products" means that the primary business purpose of the entity claiming the exemption is cutting, transporting or clearing land of trees for the commercial use of forest products or whether, as the majority opinion puts it, the entity merely utilizes its equipment for some commercial use of forest products.4

¶ 53. That the statute requires equipment to be used for the commercial use of forest products rather than a commercial use of forest products suggests that the first, highest, or foremost purpose of the business using the equipment, or of the use of the equipment itself, is for the commercial use of forest products.5 Use of the definite article in the statute rather than the *176indefinite article, coupled with the various references to "logging" in both the title and body of the statute, and general rules of interpreting tax exemptions lead me to believe that the legislature sought to craft a very narrow exemption limiting the business entities capable of claiming an exemption to those that are part of the logging industry.

¶ 54. The court of appeals read the title of the statute, which refers to "logging equipment,"6 along with the text, including the provision referring to the transport of trees in logging areas, and concluded that the legislature intended that the exemption apply to entities involved in the logging industry.7 The court of appeals concluded on review of a summary judgment that the primary purpose of Wood-Land was to clear the land for development, not to make commercial use of forest products.8 The dissent in the court of appeals agreed with the test expressed by the majority but concluded that the summary judgment record supported competing inferences drawn by both parties as to whether Wood-Land is engaged in the logging business and urged that the matter should go to trial.9

¶ 55. I agree with the court of appeals that the legislature crafted a narrow exemption for those in the *177business of clearing forest land for the express purpose of using the fruits of their labor for eventual commercial use. The legislature did not intend to grant the exemption to businesses outside the logging industry. The question for me, then, is whether Wood-Land is engaged in the systematic business of logging and using this equipment in that business.

¶ 56. The majority opinion rejects this approach,10 concluding that the statute need not consider Wood-Land's motivation or purposes for using its logging equipment and looks only to determine whether the use of the equipment is for a commercial use of forest products.11

¶ 57. The majority opinion states it is-adopting a "use of equipment test" but never explains the test. It remands the matter to the circuit court to decide the exemption but merely reiterates the words of the statute in instructing the circuit court on remand. According to the majority opinion, on remand the circuit court should consider "what equipment of Wood-Land's is used: (1) to cut trees for the commercial use of forest products, (2) to transport trees in logging areas for the commercial use of forest products, or (3) to clear land of trees for the commercial use of forest products."12

¶ 58. The only guidance the majority opinion gives to the circuit court in applying the statute on remand is that sham claims involving de minimis use of *178equipment for commercial use of forest products are not sufficient to sustain an exemption. The majority opinion thus interprets the statute to exclude from the exemption inconsequential uses of the designated equipment for the commercial use of forest products.13

¶ 59. In doing so, the majority opinion injects a quantity element into § 70.111(20) at the same time as it objects to the court of appeals' insertion of a quantity element into the statute. The majority opinion carefully avoids commenting on how de minimis is de minimis and how equipment used for dual purposes should be treated.14 Indeed, this case may very well present a case in which much of Wood-Land's equipment is used for dual purposes. If one of the majority's criticisms is that the court of appeals decision is difficult to apply, the same criticism can be levied against the majority opinion's interpretation.

¶ 60. Perhaps the tests set forth in the majority opinion and in the decision of the court of appeals are distinctions without a difference. Regardless of whether courts are required to determine whether an entity is a logging enterprise and has as its primary business purpose cutting, transporting, or clearing land of trees for the commercial use of forest products, or whether courts must evaluate whether the equipment is used solely, partly, or de minimis for a commercial use of forest products, the tests ultimately require a determination of how much use must be for commercial use of forest products in order to qualify for a tax exemption.

*179¶ 61. Having concluded that both tests introduce a quantity element into the statutory language, I am not persuaded that the "use" interpretation adopted by the majority opinion is any better than the "primary purpose" interpretation adopted by the court of appeals. Indeed I think the majority opinion may be more difficult to apply.

¶ 62. To determine under the "primary purpose" test whether a business entity is in the logging industry will require consideration of several factors. These factors include, but are not limited to, whether an entity holds itself out as being a logging business and the amount or percentage of revenue generated from the entity's cutting trees, transporting trees in logging areas, and clearing of land for commercial use of forest products.

¶ 63. The majority opinion acknowledges that its holding "may appear to run contrary to the legislative directive."15 In light of the legislature's explicit command in Wis. Stat. § 70.109 that exemptions "shall be strictly construed. . . with a presumption that the property in question is taxable,"16 and our interpretive rule that tax exemption statutes be given a strict but reasonable interpretation,17 I conclude that the majority opinion is contrary to the legislature's intent and our interpretive rule.

¶ 64. The burden is on the taxpayer to show that its construction is supported by clear evidence of legislative intent; "any doubt under the 'strict but reasonable' construction rule must be resolved against the *180party seeking the exemption."18 The court of appeals' interpretation of § 70.111(20) to include a "primary purpose" of the business test more accurately effectuates the language of the statute and the intent of the legislature than does the majority opinion's. Accordingly, I concur and would, for the reasons set forth by Judge Nettesheim, remand the cause to the circuit court for trial.

As the court explained in Columbus Park Housing Corp. v. City of Kenosha, 2003 WI 143, ¶ 35, 267 Wis. 2d 59, 671 N.W.2d 633, chapter 70 "is not a comprehensive, perfectly woven web of tax exemptions ... rather it represents a conglomeration of exemptions granted to specific and well-delineated entities and property used in a certain fashion." The majority opinion's or the concurring opinion's comparison of this exemption with other statutory exemptions and other tax cases is not persuasive.

See Wis. Stat. § 70.111(20).

Majority op., ¶ 19.

The court of appeals concluded that "the statute was designed to give an exemption for those systematically involved in the logging business, not to those who incidentally cut logs and sell the products as a small part of an altogether different kind of business." Village ofLannon v. Wood-Land Contractors, Inc., 2003 WI App 7, ¶ 1, 259 Wis. 2d 879, 659 N.W.2d 95.

See Bluebird Partners, L.P. v. First Fid. Bank, N.A., 731 N.E.2d 581 (N.Y. 2000).

The title of a statute may be persuasive of the interpretation to be given the statute and legislative intent. Mireles v. LIRC, 2000 WI 96, ¶ 60 n.13, 237 Wis. 2d 69, 613 N.W.2d 875 (quoting Pure Milk Prods. Coop. v. Nat'l Farmers Org., 64 Wis. 2d 241, 253, 219 N.W.2d 564 (1974)).

Wood-Land, 259 Wis. 2d 879, ¶¶ 13, 16.

The income Wood-Land derived from the sale of forest products in the present case was less than 10% of its business revenue.

Wood-Land, 259 Wis. 2d 879, ¶ 20 (Nettesheim, J., concurring).

Majority op., ¶ 34.

The tax cases the majority opinion relies on and distinguishes do not interpret the tax exemption in the present case. All the cases the majority opinion cites, including Owens-Illinois, Inc. v. Town of Bradley, 132 Wis. 2d 310, 392 N.W.2d 104 (Ct. App. 1986), which reject a "primary purpose" test, relate to different exemptions with different focuses.

Majority op., ¶ 43.

Majority op., ¶¶ 45-46.

Wood-Land's equipment is, at best, used for a dual purpose: to clear land at the request of persons who hire it and to obtain forest products for commercial use. Brief and Appendix of Defendant-Appellant-Petitioner Wood-Land Contractors, Inc., at 22.

Majority op., ¶ 47.

See Wis. Stat. § 70.109.

Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 80, 591 N.W.2d 583 (1999).

Deutsches Land, 225 Wis. 2d at 80-81.