McManus v. Department of Revenue

SUNDBY, J.

(dissenting). Because I conclude that sec. 71.09(11), Stats. (1977-78), violates the uniformity clause, I respectfully dissent.

The uniformity rule, as applied to agricultural land, is stated in Wis. Const. art. VIII, sec. 1, as follows: "The rule of taxation shall be uniform. . . . Taxation of agricultural and undeveloped land, both as defined by law, need not be uniform with the taxation of each other nor with the taxation of other real property." The attorney general has opined that whatever method of classification of agricultural property the legislature adopts, there still must be uniformity of treatment within the class of agricultural land. 68 Op. Att'y Gen. 179, 179-81 (1979). In sec. 71.09(11), Stats., the legislature established as a class of agricultural land, farmland which is subject to agricultural use restrictions. The Farmland Preservation Credit Act may result in an unequal tax burden on taxpayers owning farmland of equal value. For example, the amount of "credit" to which a claimant may be eligible depends on the extent to which his or her farmland is subject to agricultural use restrictions. Also, the department of revenue may disallow a claim if it determines *461that ownership of the farmland was transferred to the claimant primarily for the purpose of maximizing benefits under the law. Sec. 71.09(1 l)(f). Finally, the "credit" is dependent on the amount of "excessive property taxes" levied against the property, computed by a formula considering household income.

The inequality in tax burden is fatal to the law unless the Farmland Preservation Credit Act is a "relief" act, which is not subject to the uniformity clause, rather than a "tax" act.

In State ex rel. Harvey v. Morgan, 30 Wis. 2d 1, 139 N.W.2d 585 (1966), the Wisconsin Supreme Court held that the Homestead Tax Relief Act was a relief law in purpose and operation and was therefore not subject to the rule of uniformity. In State ex rel. La Follette v. Torphy, 85 Wis. 2d 94, 105, 270 N.W.2d 187, 191 (1978), the court said that the Harvey court rested its conclusion on the following grounds:

First, the stated purpose of the Act was to provide "relief" to certain persons. Second, the law provided relief even to renters who did not pay property taxes. Third, claimants who paid property taxes would pay them in full and receive a credit against their income taxes from the state's general fund. Fourth, the credit was tied to the individual's characteristics, those of shelter costs, age and income, and not to those of the property. Fifth, the administration of the law was tied to the income tax system and not to the property tax system.

In Gottlieb v. Milwaukee, 33 Wis. 2d 408, 426, 147 N.W.2d 633, 642 (1967), the court said that, "The clear implication of [Harvey] is that a payment that would constitute a rebate of property taxes would be a partial exemption and therefore void." The Farmland Preservation Credit Act clearly provides for rebates of "excessive *462property taxes," albeit by a sophisticated scheme of rebate credits paid from the state's general revenues.

In Torphy, where the court concluded that the Improvements Tax Relief Law violated the uniformity clause, the court compared the law with the Homestead Tax Relief Act considered in Harvey. First, the court pointed out that the Improvements Tax Relief Law gave "tax credits” to "offset increased property taxes." In contrast, the purpose of the Homestead Tax Relief Act was to provide "relief" to certain persons. Harvey, 30 Wis. 2d at 5, 139 N.W.2d at 586. The Farmland Preservation Credit Act gives "credit" for "excessive property taxes" to owners of farmland which is subject to agricultural use restrictions.

Second, the Torphy court found that the Improvements Tax Relief Act was "founded upon the characteristics of particular properties, not the characteristics of the individual owners." 85 Wis. 2d at 105, 270 N.W.2d at 191. In contrast, the Homestead Tax Relief Act took "shelter, a major cost-of-living item, as a factor upon which relief is predicated. . . . [Assistance is available to those elderly persons on the very verge of poverty . . .." Harvey, 30 Wis. 2d at 13-14, 139 N.W.2d at 591. Here, the Farmland Preservation Credit Act is founded upon the characteristics of the property. It must be subject to agricultural use restrictions. True, the amount of tax credit available to a farmland owner is subject to a limitation computed on the basis of household income; however, the Act does not attempt to ascertain whether a particular taxpayer/claimant is in need. The unabashed purpose of the Act is to provide an incentive to owners of farmland to preserve that land for agricultural uses. The claimant's age and need for "relief" are irrelevant. Further, no ’’relief" is available to renters. See Harvey, 30 Wis. 2d at 14, 139 N.W.2d at 591 ("[The *463Homestead Tax Relief Act] is in no way a property-tax law, for if the claimant does not in fact pay taxes, but instead pays rent, he is still entitled to relief.").

Third, as in Torphy, the act is integrated with the property tax process. The amount of any claim is based upon property taxes accrued in the preceding calendar year. Sec. 71.09(ll)(b), Stats. The accrual of property taxes depends on delivery of the tax roll to the local treasurer. Sec. 71.09(ll)(a)7. At the request of the department, the claimant shall present with his or her claim a copy of the property tax bill relating to the farmland. Sec. 71.09(ll)(h). In this case, of course, we have the additional involvement of the local zoning authority. The Farmland Preservation Credit Act is integrated with the local zoning process, and, in fact, is wholly dependent upon it.

As in Torphy, the only grounds relied on by the Harvey court that are present here are the payment of property taxes to the local authority and the receipt of a rebate credit from the general revenues of the state. The Torphy court discounted this factor. The court said that owners of homes with identical assessed valuations would bear an unequal tax burden even though they initially paid the same amount to the local taxing authority. 85 Wis. 2d at 111, 270 N.W.2d at 194. Likewise, in the present case, owners of farmland which is subject to agricultural use restrictions will bear an unequal tax burden even though they initially pay the same amount to the local taxing authority.

The intent of the Farmland Preservation Credit Act is laudable. Its purpose is twofold: "(1) to provide property tax relief to farmland owners and (2) to encourage local governments to develop farmland preservation policies." Farmland Preservation Program, Information Paper No. 25, Legislative Fiscal Bureau, at 1 (Jan. 1989).

*464Unfortunately, the property tax relief the Act provides is general and not specific. Every landowner, urban or rural, seeks relief from the burden of property taxes. The qualification for "relief" under the Act depends not upon an individuated demonstration of need but upon membership in an entire class of property owners. Individuated need is the kind of need which justifies legislative "relief." The constitutionally permissible "relief" is tied to the characteristics of the individual, such as shelter costs, age and income.1 The Farmland Preservation Credit Act, however, is tied to the characteristics of the land: Is it subject to appropriate agricultural use restrictions?

The Improvements Tax Relief Act likewise had a laudable objective. Its purpose was to stimulate improvement of real estate which would result in increased property tax values and, presumably, in a broader tax base which would redound to the benefit of all property taxpayers. Nonetheless, the Torphy court was forced to invalidate the tax because its result was to partially exempt some real estate from full taxation. The result under the Farmland Preservation Credit Act is no different. The Act results in a lower valuation for tax purposes for some owners than for other owners of property with equal fair market value. The uniformity clause does not permit such disparity.

Section 138, ch. 93, Laws of 1981, modified the Farmland Preservation Credit Program to provide a minimum credit, equal to ten percent of property taxes, to any farmer subject to an exclusive agricultural zoning ordinance, regardless of income. Thus, the legislature's modest gesture towards constitutionality has been removed. This modification does not affect this case because the taxpayer's claim is for a year prior to the amendment.