COLUMBUS PARK HOUSING CORPORATION, Plaintiff-Respondent, v. CITY OF KENOSHA, Defendant-Appellant-Petitioner.
No. 02-0699
Supreme Court of Wisconsin
Oral argument September 11, 2003. — Decided November 19, 2003.
2003 WI 143; 259 Wis. 2d 316; 671 N.W.2d 633
For the plaintiff-respondent there were briefs by David L. Kinnamon, Anthony A. Tomaselli, David C. Swanson, and Quarles & Brady LLP, Madison, and oral argument by David L. Kinnamon.
An amicus curiae brief was filed by Gregg C. Hagopian and Genevieve O‘Sullivan-Crowley, assistant city attorneys, and Grant F. Langley, city attorney, on behalf of the City of Milwaukee.
An amicus curiae brief was filed by Claire Silverman, Madison, on behalf of League of Wisconsin Municipalities.
I. FACTUAL BACKGROUND
¶ 2. The parties to this action have stipulated to the essential facts. Columbus Park is a nonstock, nonprofit Wisconsin corporation that acquires blighted property in Kenosha, rehabilitates the property, and makes the property available for rent to qualified low-income families. The parties agree that Columbus Park is a benevolent association, within the meaning of
¶ 3. Columbus Park seeks to fulfill its mission by engaging in two principal activities. First, Columbus Park rehabilitates dilapidated buildings by providing work and training opportunities to several at risk groups, including Kenosha County Jail inmates, who restore the buildings. Once the buildings are refur
¶ 4. Columbus Park participates in the federal rent subsidy program under section 8 of the Federal Fair Housing Act.
¶ 5. The affidavit of Kathy Rippon, Executive Director of Columbus Park, provides that in 1998 and 1999 Columbus Park “used all of the leasehold income received from its tenants and all the lease subsidies received [from the federal government] for maintenance of the leased property, construction debt retirement of the leased property or both.” Further, it states, “[g]ifts, grants and contributions made to [Columbus Park] by individuals, corporations, charitable organiza
II. PROCEDURAL POSTURE
¶ 6. Columbus Park instituted this declaratory judgment action, seeking a determination that taxes assessed and levied on certain real property of Columbus Park by Kenosha in 1998 were illegal and that Columbus Park was entitled to a refund for taxes assessed by Kenosha and paid by Columbus Park on certain pieces of real estate in 1999. The circuit court granted Columbus Park summary judgment, finding it exempt from taxation under
¶ 7. The court of appeals affirmed the circuit court‘s grant of summary judgment, determining that Columbus Park “exclusively used the properties in question for benevolent purposes in both 1998 and 1999.” Columbus Park, 259 Wis. 2d 316, ¶ 16. The court of appeals also determined that Columbus Park met the rent use condition in the preamble of
III. ISSUES
¶ 8. Kenosha raises three issues on appeal to this court: (1) whether a benevolent association satisfies the lessee identity condition in the preamble of
IV. STANDARD OF REVIEW
¶ 9. This case arises from the circuit court‘s grant of summary judgment to Columbus Park. We review the grant of summary judgment de novo, applying the same standards as the circuit court. Voss v. City of Middleton, 162 Wis. 2d 737, 748, 470 N.W.2d 625 (1991). This court reverses a grant of summary judgment if it was based on an incorrect interpretation of a legal issue. St. John‘s Lutheran Church v. City of Bloomer, 118 Wis. 2d 398, 400, 347 N.W.2d 619 (Ct. App. 1984). The resolution of this dispute involves the interpretation of
¶ 10. In construing a statute, our primary purpose is to give effect to the legislative intent embodied in the language of the statute. Id. at 80. However, when the language of a statute is unambiguous, ” ‘[s]tatutory
¶ 11. In addition, in construing tax exemption statutes, “taxation of property is the rule and exemption is the exception.” Deutsches Land, 225 Wis. 2d at 80. See also
V. ANALYSIS
¶ 12. In resolving whether Columbus Park is entitled to a tax exemption under
Leasing a part of the property described in this section does not render it taxable if the lessor uses all of the leasehold income for maintenance of the leased property, construction debt retirement of the leased property or both and if the lessee would be exempt from taxation under this chapter if it owned the property.
¶ 14. In Deutsches Land, this court construed the preamble of
(1) the exempt organization must use the leasehold income for maintenance of the property, construction debt retirement, or both (the “rent use condition“) and (2) the lessee would itself be entitled to an exemption if it owned the property (the “lessee identity condition“). If the exempt organization uses the rental income in ways other than provided for by the statute, no exemption can be claimed on the leased part of the property. Likewise, if the lessee itself is not an exempt organization but rather a for-profit organization, no exemption can be claimed on the leased part of the property.
Deutsches Land, 225 Wis. 2d at 93.
¶ 15. We conclude that Columbus Park is not entitled to a tax exemption under
[i]t would be an unreasonable construction of the word “lessee” in the context of this statute to apply it to the very individuals who are the objects of the tax-exempt activity. Consequently, we conclude that the term “lessee” should not be so technically defined so as to preclude the applicability of the tax exemption to Columbus Park.
¶ 18. The term “lessee” is an unambiguous legal term; under the applicable statutory rules of construction, we must ascribe to it its technical legal meaning. The term “lessee” is defined as “[o]ne who has a possessory interest in real or personal property under a lease; TENANT.” Black‘s Law Dictionary 914 (7th ed. 1999). The court in Deutsches Land, 225 Wis. 2d at 94 n.13, interchangeably referred to this provision of the preamble of
¶ 19. Further, although the record does not contain a properly authenticated copy of an actual lease between Columbus Park and one of its lessees, the record does contain a sample lease with the signature of Executive Director Rippon.5 This sample lease states,
“[l]andlord and [t]enant understand that their rights and obligations under the [c]ontract are subject to...
Wis. Stat. Chapter 704 , Wis. Admin. Code Chapter ATCP 134.... ”6 Wisconsin Admin. Code § ATCP 134.02(12) defines “tenant” as “a person occupying, or entitled to present or future occupancy of a dwelling unit under a rental agreement....” Wis. Admin. Code § ATCP 134.02(12) (June 1999) (emphasis added). Section ATCP 134.02(6) incorporates the definition of “lease” found inWis. Stat. § 704.01(1) .Section 704.01(1), Stats. , defines “lease” as “an agreement, whether oral or written, for transfer of possession of real property, or both real and personal property, for a definite period of time.”Wis. Stat. § 704.01(1) (emphasis added).
¶ 20. Under the established legal definition of “lessee,” there can be no other conclusion except that Columbus Park‘s “lessees” are the low-income individuals to whom Columbus Park rents. It is undisputed that the Authority does not sign the leases, occupy the property, or retain any possessory interest in any of the
¶ 21. More important, however, is the undisputed fact that Columbus Park receives rent subsidies from the Authority under section 8 of the Federal Fair Housing Act. In order to participate in the assisted housing program, the federal government requires the Authority to approve of the lease entered into “between tenant and owner.”
¶ 22. Further review of the regulations governing section 8 housing programs supports the obvious conclusion that the low-income individuals, not the Authority, are Columbus Park‘s lessees. For instance, in order to receive rent subsidies, “[t]he tenant must have legal capacity to enter a lease ....”
¶ 23. Moreover, the regulations provide:
The PHA [Public Housing Authority] failure to pay the housing assistance payment to the owner is not a violation of the lease between the tenant and the owner. During the term of the lease the owner may not terminate the tenancy of the family for nonpayment of the PHA housing assistance payment.
¶ 24. In addition, we find it significant that the Authority is involved in both sides of the landlord-tenant, lessor-lessee relationship. If Columbus Park‘s tenants cannot be considered independent lessees because of the Authority‘s involvement in administering the section 8 program, Columbus Park, 259 Wis. 2d 316, ¶ 26, then under the same rationale, Columbus Park itself can hardly be considered an independent lessor. Utilizing the court of appeals’ methodology, we note that the Authority: (1) approves of a family‘s unit and tenancy,
¶ 25. Therefore, we conclude that the Authority‘s involvement in administering the section 8 leasing program does not render it a de jure lessee for the purposes of
¶ 26. Columbus Park further argues that under Town of Menominee v. Skubitz, 53 Wis. 2d 430, 192 N.W.2d 887 (1972), this court may “enlarge” the meaning of the word lessee to encompass the Authority. In Skubitz, the appellant, a member of the Menominee Indian Tribe, owned several buildings on land owned by Menominee Enterprises, Inc. Id. at 433. Appellant repeatedly refused to enter into a lease or purchase the property upon which her buildings were located; however, she did pay a “land-use” fee to Menominee Enterprises. Id. The issue on appeal was whether
It is evident that the legislature intended to define the treatment to be given to certain property situated on the land of another and did not mean to limit the relationship of the occupier of the land and the owner of the real estate to that of lessor-lessee.... [T]he term “leased lands” contained in
sec. 70.17, Stats. , should be construed broadly enough to encompass a multitude of situations in which the occupier of lands not owned by him places improvements on those lands.
Id. at 438-39. The court applied the rule that “the meaning of some words in a statute may be enlarged or restricted in order to harmonize them with the legislative intent of the entire statute.” Id. at 437.
¶ 27. However, Skubitz is readily distinguishable from the case at hand. First, the court in Skubitz enlarged the term “leased lands” to include the situation where an individual owned buildings on land owned by another and paid a land use fee but had no formal lease. The appellant in Skubitz actually occupied the lands and possessed the buildings thereon. As discussed supra, a lessee necessarily is someone who pays consideration for the temporary possession and occupancy of property. In contrast, as previously noted, the Authority has absolutely no possessory rights in Columbus Park‘s property, nor does it occupy the property. Under no judicial contortion of the word “lessee” can the term be expanded to include someone who partially pays for the possessory rights of another in a piece of property.
¶ 29. Thus, it is clear that under the standard legal definition of the word “lessee” and the facts and circumstances present, the “lessees” for purposes of
¶ 31. In Deutsches Land, this court analyzed whether a benevolent association devoted to the preservation of Germanic culture and heritage was entitled to a property tax exemption under
¶ 32. Moreover, Columbus Park‘s proposed reading of
¶ 33. Next, Columbus Park argues that it is entitled to a tax exemption as a matter of public policy. A good portion of its briefs and oral argument was concerned with the extent to which Columbus Park is engaged in eleemosynary activities, the fact that its lessees are the object of its benevolent activities, and the possibility that but for its benevolence, the low-income individuals to whom it rents would be homeless. In essence, Columbus Park asks this court to carve out an exception to the lessee identity condition and hold that this condition does not apply if the lessees are the objects of the organization‘s benevolence.9
¶ 34. Whether this court is of the opinion that Columbus Park should receive a tax exemption is irrelevant. Certainly Columbus Park‘s efforts to serve the poor are indeed laudable. However, whether an organization should benefit from a tax exemption is a
¶ 35. As noted by Columbus Park at oral argument,
¶ 36. Having determined the statute is unambiguous, our interpretation is confined to its plain language. Weichert, 254 Wis. 2d 36, ¶ 16. Nevertheless, analysis of the legislative history validates our conclusion that the exemption does not apply to Columbus Park. The lessee identity requirement in the preamble of
¶ 37. As the previous version allowed an exemption to leased property only if the property was leased to another charitable organization, and
¶ 38. The most persuasive indication that the exemption Columbus Park seeks was not intended is that the legislature added the exact exception that Columbus Park asks this court to impose to the lessee identity requirement to
¶ 39. Analysis of the proposed bill also confirms our conclusion that the lessee identity condition applies with equal force to Columbus Park as does the rent use condition contained in the preamble. The Report of the Joint Survey Committee on Tax Exemption analyzed the bill as follows:
This bill would allow a person who owns property which is exempt under s. 70.11 to lease a part of that property without changing the tax-exempt status of the property if:
The lessor used all of the rental income for “maintenance, construction debt retirement or both” and - If the lessee would be exempt from taxation under ch. 70, Stats., if it owned the property.
Report of the Joint Survey Committee on Tax Exemption (Sept. 1983) (emphasis in original). The analysis by the Legislative Reference Bureau is substantially similar. See Legislative Reference Bureau Drafting File for 1983 Wis. Act 327, Analysis by the Legislative Reference Bureau of 1983 A.B. 89. Thus, the legislative history of
¶ 40. Because our duty is to apply a “strict but reasonable” interpretation to tax-exemption statutes, and the language of
¶ 42. Finally, Columbus Park argues that if we are to give
¶ 43. The issue in M&I First National Bank was which party had a priority security interest in a fund in excess of $1,000,000 that contained entrance fees paid by the residents of Lake Oaks at DeKoven, an assisted living center for the elderly, when said facility defaulted on its mortgage obligation. Id. at 488. In affirming the circuit court‘s imposition of a constructive trust on the fund in favor of the residents, the court of appeals concluded that the “residency agreement” entered into between the tenants and the owner constituted a leasing arrangement under Wis. Adm. Code § ATCP 134.02, despite language in the contract stating it was not a lease. Id. at 500-502.
¶ 44. In reaching this conclusion, the court of appeals noted that the dominant and primary purpose of the residency agreement was to pay rent for the use and occupation of property and not the provision of services to the elderly. Id. at 501. The court noted that the facility was marketed as an assisted living center, not as a nursing home or life-care facility, and that the owner reserved the right to terminate the resident agreement if the resident could no longer indepen-
¶ 45. We are not persuaded by Columbus Park‘s slippery slope argument, as we see nothing in the language of M&I First National Bank that would lead to the cataclysmic results Columbus Park predicts. Both nursing homes and continuing care facilities charge fees for the primary and dominant purpose of the provision of services. Residents in these facilities would not constitute “lessees” for purposes of
VI. SUMMARY
¶ 46. In conclusion, we hold that under the plain language of
By the Court.—The decision of the court of appeals is reversed.
¶ 47. SHIRLEY S. ABRAHAMSON, C.J. (dissenting). Applying a strict but reasonable interpretation to tax exemption statutes,1 I would affirm the decision of the court of appeals and the judgment of the circuit court. I dissent because the majority opinion‘s approach is more strict than reasonable.
¶ 48. The issue in this case is whether Columbus Park Housing Corp., a not-for-profit benevolent housing association, is entitled to a tax exemption under
¶ 49. The court of appeals in this case concluded that the City‘s interpretation of
¶ 50. The legislative history of
¶ 51. The majority opinion makes much of the fact that the word “lessee” is an unambiguous legal term and resorts to the legal dictionary for its meaning.3 Yet case law has recognized that the word “leased” in a statute does not always mean leased4 and that the word “owned” in a statute does not always mean absolute ownership.5 These words depend on their context and legislative intent.
¶ 52. The majority opinion focuses on the fact that an individual signs the “lease,” and the individual, not the Kenosha Housing Authority, is evicted on a breach of that lease.6 While these are legitimate points that explain why, as conceded by the court of appeals, the Housing Authority is not a true lessee, the majority opinion does not account for the fact that the low-
¶ 53. The court of appeals wisely acknowledged that although the Housing Authority “is not the true lessee of the properties within the technical definition of the term, the Authority‘s control is a relevant consideration in making a determination as to the ability of [Columbus Park] to qualify for an exemption.”8 The court of appeals determined that even though the Housing Authority‘s name is not on the lease, “to pretend that [Columbus Park‘s] tenants are independent lessees ignores the role of the Authority in administering and subsidizing the tenants.”9 I agree with the court of appeals that the Kenosha Housing Authority‘s pervasive control over the housing rentals coupled with its substantial financial contribution to the rent of the
¶ 54. A strict but reasonable construction of
¶ 55. For the foregoing reasons, I dissent.
Notes
Columbus Park, 259 Wis. 2d 316, ¶ 25 n.4.The Authority: (1) requires new tenants of publicly-subsidized housing in the City to attend an orientation session that the Authority holds, (2) issues vouchers to income-qualified tenants that allows them to participate in the Section 8 housing program, (3) conducts an initial inspection of any Columbus Park rental unit selected by an income-qualified tenant to ensure compliance with applicable minimum housing standards, (4) conducts an annual inspection of Columbus Park‘s Section 8 rental units to ensure compliance with applicable minimum housing standards, (5) requires reports to be made by Section 8 tenants directly to the Authority showing any changes in monthly income, and (6) makes monthly adjustments to Section 8 tenants’ rent subsidies based on changes in their income.