Pulsfus Poultry Farms, Inc. v. Town of Leeds

GARTZKE, P.J.

(dissenting). The majority’s analysis is incomplete. The majority agrees with the trial court’s conclusion that the "layer facility” is a farm machine. Like the trial court, the majority has not decided, however, whether the facility is a fixture. I conclude that the facility is a fixture and is not exempt from general property taxes under sec. 70.111(9), Stats. I reach the same conclusion as to the facility’s interior installations and two related feed storage bins. I would reverse the judgment.

The farm machinery exception in sec. 70.111(9), Stats., is ambiguous. A farm machine, such as a tractor, can operate completely free of the land. The statute undoubtedly exempts such farm machines. Other farm machines, such as motors and engines, may be fixtures and therefore land. Reasonable persons can conclude that because fixtures are traditionally treated as land, farm machinery which have become fixtures have lost their character as farm machinery and therefore are not exempt under sec. 70.111(9).

The milkhouse equipment exemption in sec. 70.111(14), Stats., recognizes but cures the same *738ambiguity. Subsection (14) contains the clarifying provision that the exemption "shall apply whether such equipment is deemed personal property or is so affixed to the realty as to be classified in the category of real estate.” The farm machinery exemption in sec. 70.111(9) contains no such curative provision. We must therefore determine whether the farm machinery exemption applies to machines which have become fixtures. I conclude it does not.

The supreme court recognizes that "[l]ong-stand-ing administrative construction of a statute is accorded great weight in the determination of legislative intent because the legislature is presumed to have acquiesced in that construction if it has not amended the statute.” Department of Revenue v. Exxon Corp., 90 Wis. 2d 700, 733, 281 N.W.2d 94, 112 (1979), aff’d, 447 U.S. 207 (1980). The Exxon court announced that principle in connection with an interpretation of a tax statute by the Department of Revenue. The same principle is recognized by other authorities. Thus, a standard text on statutory construction states, "One of the most significant aids of construction in determining the meaning of revenue laws is the administrative interpretation given such acts by the agency that is responsible for its administration and enforcement.” 3A Sutherland, Statutory Construction sec. 66.04 (4th ed. 1986).

The farm machinery exemption in sec. 70.111(9), Stats., is 77 years old. It was created by sec. 6, ch. 658, Laws of 1911. Despite its age, the exemption has not been substantially amended since its creation. Until today no appellate court has had to determine whether it applies to fixtures. This lack of judicial attention may be the result of the department’s unequivocal and unchallenged interpretation of the exemption.

*739For many years, the department has advised the assessors in this state that the farm machinery exemption applies only to personalty and not to real property or to fixtures. The department has done so in the manual it must distribute to every assessor. It did so even before distribution was required.1

The department’s, 1 Property Assessment Manual for Wisconsin Assessors sec. 21.5-1 (Rev. 12/86) contains a discussion entitled, "REAL PROPERTY V. PERSONAL PROPERTY.” That discussion refers to definitions of real and personal property and continues,

It is important that the assessor understand these definitions in order to properly classify the property to be assessed. There are a number of reasons why the assessor should properly classify property.
1. May Determine Assessability. Proper classification of real and personal property, in some instances, determines whether the property is taxed at all. A good example of this is farm machinery, which when owned and used by any person in farming is exempt from property tax as personal property. In some cases the individual’s farming machinery may be attached to the real estate in a more or less permanent manner so as to *740become regarded by law as part of the real estate and therefore taxable. [Emphasis added.]

In its discussion of sec. 70.111(9), Stats., the manual states:

Applying the earlier discussed three tests of the law of fixtures to the machinery and equipment found on a farm, in farming, would be exempt from taxation because it fails [emphasis added] all three tests of the law of fixtures:
1. the machinery is not attached to the real estate and there is no damage to the machinery or the real estate if the machinery is removed from the farm;
2. the intention of the person in farming is not to have the machinery become part of the real estate;
3. the real estate is not specifically adapted to this specific farm machinery.
There are several gray areas in determining whether farm machinery and equipment is considered a fixture. It must be stressed that each item of machinery must be evaluated individually to determine its exempt status. The four [sic] key phrases that have to be asked of each item to determine whether it is real estate, and therefore taxable, are: attachment, typical intent, and adaptation.

Id. at 21.7-14-25.

The manual quotes from a Revenue Department legal opinion issued October 7, 1960:

Relative to the taxability of the water pumps used to protect cranberry marshes from frost... [i]t has been, and remains our opinion that only machinery that is personal property can be exempt under s. 70.111(9), Stats. Whether a machine is sufficiently attached to or related to real estate so as to *741constitute a part of such real estate is a question of fact_Id. at 21.7-15.

Ladish Malting Co. v. Dept. of Revenue, 98 Wis. 2d 496, 297 N.W.2d 56 (Ct. App. 1980), and Revenue Dept. v. Greiling, 112 Wis. 2d 602, 334 N.W.2d 118 (1983), involved relatively new tax exemption statutes as to which no long-standing administrative interpretation had evolved. The use-function test was first applied in Ladish, where we dealt with the manufacturing machinery exemption in sec. 70.11(27), Stats. That exemption was created by sec. 322m, ch. 90, Laws of 1973, effective with the May 1, 1974 assessment. The taxpayer in Ladish claimed the manufacturing machinery exemption from its inception in 1974. Consequently, we construed an exemption which lacked the years of administrative interpretation the farm machinery exemption in sec. 70.111(9) has received. The Greiling court also dealt with a relatively new tax exemption for farm and horticultural machines. This use tax exemption in sec. 77.54(3), Stats., became law in 1969. Sec. 250, ch. 154, Laws of 1969.

In view of the legislature’s acquiescence in the department’s long-standing interpretation of sec. 70.111(9) Stats., that farm machinery is exempt only if it is not a fixture and because no showing has been made that the department has wrongly interpreted the legislature’s intent, I accept the department’s view of the law. The question then is whether the taxpayer’s layer facility, a farm machine, is a fixture.

Whether an article is a fixture depends on its annexation to the land, its application or adaptation to the use of the land and the intention of the person who annexes it to the land. Dept. of Revenue v. Smith Harvestore Products, 72 Wis. 2d 60, 67-68, 240 N.W.2d *742357, 360 (1976). If the article is firmly attached to the land, it meets the annexation test. The manner in which it is used determines the adaptation test. Id. at 68, 240 N.W.2d at 360. Intention is the most important factor. Id., 240 N.W.2d at 360-61. Intent is not subjectively determined. Rather, it is the intent which a reasonable person would have in view of the nature of the article, the degree of its annexation and the appropriateness of the article to the use of the land. Id. at 69, 240 N.W.2d at 361. If, as here, the facts are undisputed and admit only one reasonable inference as to each of the tests, whether the article is a fixture is a question of law. Id. at 68, 240 N.W.2d at 360.

The trial court found that the facility is located on 5.711 acres of an 82-acre farm owned by Larry Pulsfus and leased to Pulsfus Poultry Farms, Inc. The court concluded that the adjacent building used for egg packing is not exempt under sec. 70.111(9), Stats., and that building is not at issue. The court described the remainder of the facility as "a building specifically designed, equipped, and operated for the mass production of a single product, namely — eggs.” Inside the building are a three-deck layer cage system, an egg collector system, a bulk feed storage and delivery system, a watering system, a system to control incoming air, and a standby generator. The court concluded that the layer house, with its integrated cages, wiring, water piping, conveyors, and support equipment, constitutes farm machinery.

The only reasonable inference is that the facility is a fixture. Its size and weight alone annexes it to the land. It is devoted to agricultural purposes, and is well adapted to the farmland on which it is situated.

Viewed objectively, the intent of a reasonable owner of such a facility would be to annex it perma*743nently to the land. It is there to stay. It took about 90 days to construct the facility, about two-thirds of which was devoted to site work, electrical and mechanical work. The lessor, Larry Pulsfus, will own the entire facility at the end of ten years, upon payment of $200,000.

The subjective intent of the annexor, Pulsfus Poultry Farms, Inc., while not critical, is instructive. That intent is reflected in the testimony of the annexor’s president, who also owned the corporation that constructed the facility. He frequently described the facility as a building and agreed that it is not a "temporary type structure.”

Having concluded that the facility is a fixture, I turn to whether the installations within it are also fixtures. The trial court concluded that the entire facility (except for a part not at issue) is an integrated unit which constitutes a farm machine for purposes of sec. 70.111(9), Stats. The conclusion is unavoidable that all installations within the facility are part of that fixture. The only articles about which doubt can exist are the outside installations, two bulk feed storage bins.

The storage bins are located just, outside the building. Augers deliver feed from the bins to the automatic feeding system and ultimately to the 500-foot cages. Each bin weighs between 1,500 pounds and 2,000 pounds when empty. Each probably contains 42,000 pounds when full. The bins rest on an I-beam and are stabilized by bolts anchoring them to a concrete slab. Two men could probably unbolt, dismantle and remove the bins in about an hour’s time.

The only reasonable inference is that the storage bins are fixtures. They are attached to the land by their weight and bolts. Certainly feed storage bins *744serving a larger facility are adapted to land devoted to the facility. The Harvestore court said, "[W]hen the article in question is clearly adapted to and is in fact put by the owner of the realty to the use to which he has devoted the realty, this is conclusive evidence of an intent to make a permanent accession to the realty.” 72 Wis. 2d at 69, 240 N.W.2d at 361.

I conclude that the layer facility, its interior installations and the storage bins are fixtures. Consequently, I conclude that although the facility, its installations, and the bins constitute a farm machine for purposes of sec. 70.111(9), Stats., it is not exempt from general property taxes. I therefore would reverse the judgment of the trial court, insofar as it is based on a contrary conclusion.

The department has general supervision over the administration of the assessment laws and over assessors, "to the end that all assessments of property be made relatively just and equal at full value_” Sec. 73.03(1), Stats. The department must publish for the use of and distribution to assessors "detailed assessment manuals.” Those manuals must "discuss and illustrate accepted assessment methods, techniques and practices with a view to more nearly uniform and more consistent assessments of property at the local level.” Sec. 73.03(2a). The department has been required to publish assessment manuals since 1963, sec. 4, ch. 279, Laws of 1963.