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  • WisBar News
    November 22, 2016

    Statute of Limitations May Bar Special Tax Refund Claims Against Milwaukee

    Joe Forward

    Taxes

    Nov. 22, 2016 – The City of Milwaukee conceded that it wrongfully charged special tax assessments against a residential apartment complex. But a state appeals court has ruled that a six-year statute of limitations may bar refund claims for certain years.

    Starting in 2005, the city started imposing special tax assessments against DJK 59 LLC (DJK), which owned a residential apartment complex in the downtown area.

    The property fell within a Downtown Business Improvement District that used special assessments to fund improvement initiatives. The special assessments are allowed by statute, but may not be assessed against properties that are purely residential.

    During a seven-year period, the city imposed the special assessment against the residential DJK properties. The total assessed during that period was more than $470,000. But DJK did not file a complaint for a refund until 2014.

    The city filed a motion to dismiss, arguing that DJK’s claim was precluded by the voluntary payment doctrine and the claim was barred by a statute of limitations. But the circuit court ruled for DJK, entering judgment for $614,336 plus statutory costs.

    In DJK 59 LLC v. City of Milwaukee, 2015AP2046 (Nov. 22, 2016), a three-judge panel for the District I Appeals Court confirmed the voluntary payment doctrine did not preclude DJK’s refund claim but ruled that claims for some years may be time-barred.

    Voluntary Payment Doctrine

    The common law voluntary payment doctrine applied because DJK paid the special assessments without disputing them, the city argued.

    But the panel explained that the doctrine does not apply if it would “undermine the manifest purposes of a statutory cause of action.” The statute at issue, Wis. Stat. section 66.1109, is a mechanism to fund business improvement districts.

    But it also includes taxpayer protections. The statute provides an “implied private right of action for a party charged [business improvement district] special assessments” when the assessment is charged against property that is purely residential.

    “[T]o apply the voluntary payment doctrine under these circumstances would both eviscerate this implied right of action and would conflict with the overarching purpose of Wis. Stat. § 66.1109 as a whole,” wrote Judge Patricia Curley.

    Statute of Limitations

    DJK prevailed on the voluntary payment doctrine issue, but the panel concluded that a six-year statute of limitations applies to tax refunds on special assessments.

    The circuit court had ruled that a one-year statute of limitations, section 893.72, is applicable to recovery of special tax assessments, but only if a municipality has authority to impose the assessment. In this case, Milwaukee had no authority, so the one-year limitations statute did not apply, the circuit court had ruled.

    But the appeals court panel ruled that if Milwaukee did not have authority to impose the special tax assessment, a six-year statute of limitations still applies.

    “To read § 893.72 otherwise would mean that § 893.72 prescribes an indefinite statute of limitations in special assessment contests not governed by the one-year statute of limitations, with the practical effect being that in this case, DJK could bring its claims for years to come,” wrote Judge Curley for the three-judge panel. “Such a result is not reasonable, and we must avoid interpreting a statute in such a manner.”

    The panel remanded the case to determine which of DJK’s refund claims are subject to the six-year statute of limitations under Wis. Stat. section 893.93(1)(a).



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