Nestlé USA, Inc. v. Wisconsin Department of Revenue
2011 WI 4
| Wis. | 2011Background
- Nestlé built the Gateway Plant in Eau Claire (2001) designed to meet FDA standards for powdered infant formula.
- DOR assessor Stepanek determined the plant’s highest and best use as a powdered infant formula facility and chose the cost approach for valuation.
- Stepanek found no usable market for a similar plant’s sale for continued use as formula production and rejected the comparable sales method.
- Nestlé hired Vitale, who appraised the plant using, among other methods, a comparable sales approach based on general food processing plants and a cost approach with substantial functional obsolescence.
- Tax Appeals Commission upheld the DOR’s determination and rejected Nestlé’s contrary evidence; circuit court and court of appeals affirmed, and the court granted review to Nestlé.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Commission properly determined the plant’s highest and best use. | Nestlé: no market exists for continued use as formula facility; market should drive use. | DOR: market exists in limited form; the facility’s use as formula facility is marketable and legal. | Yes; Commission’s highest and best use finding is supported by substantial evidence. |
| Whether the Commission validly rejected the comparable sales approach. | Nestlé: absence of direct sales shows no market; hence, comparable sales should be used. | DOR: lack of exact matches does not preclude comparable-sales; marketable use exists for formula facility. | Yes; the cost method was appropriate given the highest and best use as a formula facility. |
| Whether the DOR properly applied the cost approach and denied functional obsolescence. | Nestlé: FDA-required features are super adequacies not marketable; deserve deduction. | DOR: features are marketable under the plant’s highest and best use; no deduction warranted. | Yes; functional obsolescence deduction not warranted under the specified market. |
| Whether Nestlé rebutted the presumption of correctness attaching to the DOR’s assessment. | Nestlé: introduced evidence challenging existence of a market; insufficient rebuttal. | DOR: Nestlé failed to show no market exists; substantial evidence supports Board’s finding. | Yes; Nestlé failed to overcome the presumption of correctness. |
Key Cases Cited
- Northwestern Mutual Life Ins. Co. v. Weiher, 177 Wis. 445, 188 N.W. 598 (1922) (Wis. 1922) (no market for a highly unique property; cannot assume a hypothetical purchaser)
- Markarian v. City of Cudahy, 45 Wis. 2d 683, 173 N.W.2d 627 (1970) (Wis. 1970) (assessment based on sale value in open market; not intrinsic value)
- Metropolitan Holding Co. v. Bd. of Review of City of Milwaukee, 173 Wis. 2d 626, 495 N.W.2d 314 (1993) (Wis. 1993) (marketability and highest and best use tied to private sale value)
- Adams, 294 Wis. 2d 441 (Wis. 2001) (third-tier appraisal considerations when arm’s-length sales are unavailable)