April 1, 2011 – Landowners who withdraw land from the managed forest land (MFL) program must pay a withdrawal tax that goes to the municipality in which the land is located. Recently, a state appeals court decided what happens when MFL program land changes hands.
The MFL program encourages property owners to preserve forest land for production of future forest crops by using sound forestry practices. Landowners who commit land to the program must do so for either 25 or 50 years and pay reduced property taxes.
A landowner who withdraws land from the program must pay a withdrawal tax to the Department of Natural Resources (DNR), which then remits 100 percent of the tax to the municipality in which the withdrawn land is located.
In 1987, a landowner enrolled land into the MFL program. The land was located in the Town of Somerset (town) at the time of enrollment, and for the next 20 years until the Village of Somerset (village) annexed and purchased the enrolled land in 2007.
The next year, the village withdrew the land from the MFL program and paid the DNR a $43,597 withdrawal tax, all of which the DNR then remitted back to the village, the municipality in which the land was located at the time of withdrawal. The town filed suit, arguing it was entitled to some of the remittance.
The town alleged the DNR misinterpreted Wis. Stat. section 77.89(1) and, in the alternative, that the statute is “unconstitutional on its face in that it deprives [the town] of a protected property interest, contrary to [the] Wisconsin Constitution.”
It wanted the tax remittance prorated to reflect the 20 years the MFL program land was situated in the town. Under the town’s interpretation of section 77.89(1), the town would get 91 percent ($39,673) of the tax remittance.
However, in Town of Somerset v. Wisconsin Department of Natural Resources, 2010AP1501 (March 29, 2011), the District III Wisconsin Court of Appeals ruled against the town.
The appeals court – in an opinion written by Judge Gregory Peterson – determined the village is entitled to the full tax remittance based on the clear language of section 77.89(1), which states that the DNR must remit 100 percent of each withdrawal tax payment “to the treasurer of each municipality in which is located the land to which the payment applies.”
By using the present tense verb form “is located,” Judge Peterson concluded, “the statute clearly specifies that the Department is to remit the payment to the municipality where the property is located at the present time.”
The appeals court rejected the town’s argument the words “each municipality” implies that more than one municipality can receive a share of the remittance upon withdrawal.
Judge Peterson reasoned that even if the phrase “each municipality” rendered the statute ambiguous, the legislative history reveals the phrase was added in 2006 to address situations in which land withdrawn from the MFL program is located in two municipalities at once.
The appeals court also ruled the town did not have standing to challenge the constitutionality of section 77.89(1) because municipalities generally do not have standing to challenge the constitutionality of statutes and the “great public concern exception” does not apply where a private litigant is not party to the suit.