Appealing Real Estate Assessments In Wisconsin

"In this world, nothing can be said to be certain, except death and taxes." - Benjamin Franklin

In January, property owners in Wisconsin paid all or a significant portion of their real estate taxes for 2012. Although determinations of the 2012 taxes are now complete, the 2013 property tax cycle is just beginning. For property owners interested in appealing their 2013 real estate assessments, this article provides an overview of the real estate taxation process in Wisconsin and opportunities owners have to reduce their property tax obligations.

Distinguishing "Taxes" and "Assessments"

As a preliminary matter, when discussing "tax appeals" we are really talking about an appeal of one's real property assessment. Real estate taxes are the product of two components, the assessed value of a parcel multiplied by the millage (or mill) rate. Both components are determined by the municipality in which the parcel is located. The millage rate -- in essence, a fraction derived by dividing the municipality's budget by the total assessed value of all property in the municipality as of January 1 of that year -- is applied uniformly to all parcels in the municipality and may not be appealed. Assessments of individual properties, on the other hand, are appealable.

How the Assessment Is Determined

In establishing a parcel's assessed value, municipalities will first determine a parcel's fair market value as of January 1 of each year. In the next step, the municipality may vary the fair market value determination up to 10% (either up or down), to be applied uniformly across all parcels in the jurisdiction.1 Assessed values, therefore, are the fair market values, as adjusted by this uniform multiplier.

For the most part, a municipality's assessor determines the fair market value for each parcel.2 The assessor uses what has come to be called in Wisconsin as the "Markarian hierarchy," a progressive series of three analytical approaches to valuation.3 Under that hierarchy, the assessor first determines whether there has been a recent arms'-length sale of the parcel at issue; if so, then the assessor must use this sales information to determine fair market value. If there have been no recent sales of the subject parcel, then the assessor must review recent sales of comparable parcels to extrapolate a fair market value determination for the subject parcel. If there are neither recent sales of the subject parcel nor comparable sales available to review, then the assessor may utilize alternative appraisal methods to determine fair market value, including, but not limited to, the income approach, replacement value, or even construction costs. In the recent case of Allright Properties, Inc. v. City of Milwaukee, 767 N.W.2d 570 (Wisc. App. 2009), the court held that, in the third tier of analysis, assessors may use the following factors to determine fair market value: "cost, depreciation, replacement value, income, industrial conditions, location and occupancy, sales of like property, book value, amount of insurance carried, value asserted in a prospectus and appraisals produced by the owner." Id. at 577 (citing a passage from the Wisconsin Property Assessment Manual for Wisconsin...