COLUMBUS PARK HOUSING CORPORATION, Plаintiff-Respondent, v. CITY OF KENOSHA, Defendant-Appellant.†
No. 02-0699
Court of Appeals of Wisconsin
Submitted on briefs September 12, 2002.—Decided November 20, 2002.
2002 WI App 310 | 655 N.W.2d 495
† Petition to review granted 4-22-03.
On behalf of the plaintiff-respondent, the cause was submitted on the brief of David L. Kinnamon, Anthony A. Tomaselli and David C. Swanson of Quarles & Brady, LLP, of Madison.
Before Brown, Anderson and Snyder, JJ.
¶ 1. BROWN, J. Columbus Park Housing Corporation, a nonstock, nonprofit organization that rehabilitates and provides housing for qualified low-income residents of the City of Kenosha, seeks an exemption from real property taxes pursuant to
¶ 2. We hold that
¶ 3. The following facts are relevant to this appeal. The parties do not contest that Columbus Park is a benevolent association within the meaning of
¶ 4. In 1998, Columbus Park claimed exemptions from property tax pursuant to
¶ 5. The City determined that Columbus Park was actively rehabilitating four of the sixteen properties and thus only those four qualified for exemptions. The City issued real estate property tax bills for the remaining twelve properties, which were leased to quаlified low-income families or were substantially rehabilitated and ready for occupancy. Columbus Park did not pay the tax bills and the City treats them as delinquent.
¶ 6. In 1999, Columbus Park again claimed tax exemptions pursuant to
¶ 8. We review summary judgment determinations de novo, applying the sаme standards as the circuit court. Ahrens v. Town of Fulton, 2000 WI App 268, ¶ 7, 240 Wis. 2d 124, 621 N.W.2d 643, aff‘d, 2002 WI 29, 251 Wis. 2d 135, 641 N.W.2d 423. Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.
¶ 9. Because the parties do not dispute the facts, the only issues before us require construction of
¶ 11. Columbus Park seeks an exemption from real property taxes for the years 1998 and 1999, claiming that it is entitled to such under
70.11 Property exempted from taxation. The property described in this section is exempted from general property taxes .... 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....
(4) EDUCATIONAL, RELIGIOUS AND BENEVOLENT INSTITUTIONS; WOMEN‘S CLUBS; HISTORICAL SOCIETIES; FRATERNITIES; LIBRARIES. Propеrty owned and used exclusively by ... benevolent associations ... but not exceeding 10 acres of land necessary for location and convenience of buildings while such property is not used for profit....
¶ 12. The City stipulates that Columbus Park is a benevolent association within the meaning of
¶ 13. Whether property for which a benevolent organization seeks a tax exemрtion is “used exclusively” by the benevolent organization is a fact-specific question, which can be answered only on a case-by-case basis. See Deutsches Land, 225 Wis. 2d at 84. The City argues that Columbus Park has not satisfied the “used exclusively” requirement of
¶ 14. The City‘s reliance on Dominican Nuns is misplaced. First, the facts are distinguishable. There, the religious order had vacated the property, listed it for
¶ 15. Second, in Deutsches Land, our supreme court clarified the apposite inquiry for determining whether a nonprofit organization qualifies for an exemption. Deutsches Land teaches that in order to satisfy the dictates of
¶ 16. Columbus Park‘s rental of its properties bears a direct relationship to its benevolent purposes. Its mission is to improve the living conditions of the poor and underprivileged in the city by providing and maintaining safe, decent and affordable housing. By
¶ 17. The City next argues that Columbus Park failed to satisfy the eligibility requirements for tax exemption under the preamble to
¶ 20. However, statutory language unambiguous on its face can sometimes be rendered ambiguous by the context in which it is sought to be applied. State v. Ramirez, 2001 WI App 158, ¶ 12, 240 Wis. 2d 802, 633 N.W.2d 656, review denied, 2001 WI 114, 246 Wis. 2d 176, 634 N.W.2d 321 (Wis. Aug. 27, 2001) (No. 00-2605-CR). If the statutory language is unclear or ambiguous, the court may look to the scope, history, context, subject matter and object of the statute to determine the legislative intent. State v. Head, 2002 WI 99, ¶ 82, 255 Wis. 2d 194, 648 N.W.2d 413. It is not altogether clear from the four corners of the statute whether the legislature intended for the rent use condition to be applied to each individual leased property as the City appears to argue or to a tax-exempt organization‘s leasehold property in the aggregate. We therefore look beyond the plain language of the statute to determine the legislature‘s intent.
¶ 21. Wisconsin has long exempted from taxation the real property of a benevolent association used exclusively for benevolent purposes and not for profit. Milwaukee Protestant Home for the Aged v. City of Milwaukee, 41 Wis. 2d 284, 292, 164 N.W.2d 289 (1969). However, the court has not required that tax-exempt organizations operate at a loss. The court has recognized the gain or profit that destroys the benevolent
The respondent‘s claim is to the effect that the River Pines Sanatorium should be taxed on the ground that it aims to operate at a profit .... [A]ll benevolent institutions endeavor so to operate. But as the profit made by these institutions, if any, is payable to nobody, but is only turned back into improving facilities or extending the benevolence in which the institutions are primarily engaged, the profit element becomes immaterial.
Thus, it is the organization‘s use of the properties and their profits and not whether an individual property earns a profit that has been the focus of the court‘s inquiries.
¶ 22. In construing the rent use condition, our supreme court seems to indicate that the focus should be on the organization‘s use of the leasehold income, “[i]f the exempt organization uses the rental income in ways other than [for maintenance or debt retirement], no exemption can be claimed on the leased part of the рroperty.” Deutsches Land, 225 Wis. 2d at 93 (emphasis added). The court appears to be addressing the concern that the organization would earn a profit and then use the income for purposes unrelated to its benevolent use of the property. Thus, the proper inquiry is not whether an individual property shows a profit, but rather, it is whether the benevolent organization earns a profit from all of its leasehold property and fails to use the income for the specified exempt purposes. We therefore
¶ 23. This conclusion is consistent with the basic purpose and objective of the Wisconsin tax-exemption statute. In Catholic Woman‘s Club v. City of Green Bay, 180 Wis. 102, 104, 192 N.W. 479 (1923), our supreme court set forth the statute‘s objective and purpose:
The statute of exemptions for taxation ... is not difficult of construction. Its intent is plain. It would encourage benevolence, charity, religion, education, and fraternity. It recognizes these qualities of mind and character as essential to a well-ordered state whose principal object is the general welfare or common good. [Catholic Woman‘s Club] is a corporation engaged in promoting charity, benevolence, education, and fraternity—not one but nearly all of the objects of the statute. Its property has been wholly acquired by charitable gifts. It makes no profits for any purpose. Its receipts are all devoted to its general purposes above enumerated. No dividend has ever been declared, nor is аny in contemplation.
To deny that the [Catholic Woman‘s Club] comes within the statute of exemptions [
WIS. STAT. § 70.11(4) ] is to deny the purpose of the statute.
The purpose of the statute, the promotion of charitable activities, is defeated only where a tax-exempt organization is permitted to earn a profit on its properties and use the profit for activities unrelated to its benevolent purposes. Where a tax-exempt organization does not profit from its properties in the aggregate and uses all receipts for exempt purposes, the fact that the organization realizes some margin of income in leasing an
¶ 24. We now turn to the facts of this case. Columbus Park leases all of its properties solely in furtherance of its exempted benevolent activities. Columbus Park endeavors to improve the living conditions of Kenosha‘s poor and underprivileged by directly leasing the rehabilitated homes to its low-income tenants who otherwise could not afford decent housing. Despite the positive net income shown on four of its properties, Columbus Park does not earn a profit by leasing its properties overall and devotes all of its rental income to the maintenance and debt retirement of all the properties it leases. If the City wished to challenge this fact, it should have filed an affidavit refuting Columbus Park‘s assertions.3 We therefore hold that Columbus Park has demonstrated that it satisfied the rent use element of the preamble to
¶ 25. The final issue we address is the City‘s аrgument that Columbus Park failed to satisfy the lessee identity prong of the preamble because its individual tenants would not be entitled to an exemption if they owned the property. Columbus Park acknowledges that its low-income tenants, who are not tax-exempt organizations, sign the leases, but counters that be-
¶ 26. While we agree with the City that the 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. The strong interplay between the Authority and Columbus Park results in the ability of the low-income tenants to rent the homes. Columbus Park charges the tenants an amount of rent based upon their ability to pay, which is currently thirty percent of the occupant‘s income as determined by the United States Department of Housing and Urban Development. The Authority then pays to Columbus Park federal government subsidies, which bring the rents up to “market rates” as defined by the federal government. Columbus Park‘s tenants would not be able to rent the properties but for the Authority‘s subsidies. Even though the name on the lease is that of the low-income tenant, to
¶ 27. To apply the City‘s strict interpretation under the facts of this case would frustrate and defeat the legislative purpose in granting tax exemptions to benevolent associations such as Columbus Park and its intent in creating the lessee identity condition. In construing this portion of the preamble, our supreme court noted, “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. Deutsches Land seems to suggest that the “lessee” the statute is addressing is a for-profit entity, which presumably would not be using the property for benevolent purposes.
¶ 28. This is not а case where a for-profit lessee is occupying the property or the nonprofit entity is entering into the leases for pecuniary gain. Columbus Park rehabilitates homes and leases them to provide shelter to low-income individuals in furtherance of its tax-exempt benevolent purposes. The record demonstrates that Columbus Park derives no economic benefit or profit from its activities. The lessees in this instance do not pay “market rate” rents and could not even lease the properties without thе assistance of the federal government.
¶ 29. Although statutes conferring tax exemptions are to be strictly construed, the construction must be reasonable. Friendship Village v. City of Milwaukee, 181 Wis. 2d 207, 219-20, 511 N.W.2d 345 (Ct. App. 1993). It would be an unreasonable construction of the term “lessee” in the context of this statute to apply it to
By the Court.—Judgment affirmed.
¶ 30. SNYDER, J. (dissenting). The majority decision, in essence, holds the City hostage to the accounting practices of a benevolent association. Because a straightforward reading of the statutes requires a reversal of the trial court‘s decision, I respectfully dissent.
¶ 31. As the majority correctly noted, the taxation of property is the rule and exemption is the exception. Trustees of Ind. Univ. v. Town of Rhine, 170 Wis. 2d 293, 299, 488 N.W.2d 128 (Ct. App. 1992). Tax exemption statutes are mattеrs of legislative grace and must be strictly construed against the granting of an exemption. St. Clare Hosp. of Monroe, Wis., Inc. v. City of Monroe, 209 Wis. 2d 364, 369, 563 N.W.2d 170 (Ct. App. 1997).
¶ 32. The majority inexplicably concludes that, despite the use of “property” in the singular, the statute is ambiguous as to whether the legislature intended its application to each individual property or all the property owned by the benevolent organization in the aggregate. Such a construction renders the application of the statute captive to the accounting methods utilized by the benevolent organization and would create inconsistent rules. A cardinal rule of statutory construction is that statutes must be construed to avoid an absurd or unreasonable result. State v. Mendoza, 96 Wis. 2d 106, 115, 291 N.W.2d 478 (1980). Subjecting a
¶ 33. In addition, in order to qualify for an exemption under
¶ 34. Columbus Park directly leases its rehabilitated homes to low-income tenants. Columbus Park acknowledges that its low-income tenants are not tax-exempt organizations. However, the majority holds that the Kenosha Housing Authority‘s role in administering and subsidizing the tenants elevates it to lessee status sufficient to satisfy the above requirement that the lessee be entitled to a tax exemption if it owned the property. The majority cites no authority for such an assumption. The only names on the leases are those of the low-income tenants, not the Kenosha Housing Authority. The majority opinion acknowledges that the