When can Publicly-Owned Land be Taxed by a Municipality?

Municipal Law Alert, February 2008

The Wisconsin Supreme Court, in the case of Milwaukee Regional Medical Center, Inc. v. City of Wauwatosa, 2007 WI 101, has once again considered when publicly owned land can be taxed. Generally, real estate owned by a municipality or other public entity is exempt from property taxation under Wis. Stat. § 70.11(2). However, as examined in Milwaukee Regional Medical Center, whether real estate is “owned” by a municipality is not determined simply by the name on the deed. Instead, an assessor can look past the record title holder to the “beneficial owner” of the property and tax land owned in the name of a public entity.

Determining the beneficial owner of property is done on a case-by-case basis. “Ownership” is described by courts as a bundle of rights or bundle of sticks. Record title is one of many rights in the bundle. Courts weigh the rights held by one party against the rights held by the other party to determine who is the beneficial owner and, therefore “owner” under the tax exemption statute. A governmental entity can be both record title owner and beneficial owner. If so, the land is tax exempt. It is when the beneficial owner is other than the governmental entity and record title owner that the property can become taxable.

In Milwaukee Regional Medical Center, the Supreme Court held that the government entity was not the beneficial owner and therefore the property in question was taxable. The case involved a day care located on land with record title held by Milwaukee County but operated by Milwaukee Regional Medical Center, Inc. (MRMC). The City of Milwaukee sought to tax the property.

The County leased land located at the Milwaukee Medical Complex to MRMC. The lease terms required MRMC to build and operate a childcare facility on the site. The lease term was 50 years. MRMC paid $1.00 per year for rent for the first 30 years and then market rent for the last 20 years. At the end of the lease, the building would be owned by the County.

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