April 28, 2009
Nonprofit Low-Income Housing Losing Exemptions in Wisconsin
This story in the Wisconsin State Journal details how low-income housing organizations are facing the loss of property tax exemption in Wisconsin due to an interpretation of state law by the Wisonsin Supreme Court. The issues involved apparently started in 2003, when the Wisconsin Supreme Court decided Columbus Park Housing Corporation v. City of Kenosha. At the time, Wisconsin state law provided that rental property would be exempt only if two requirements were met: (1) the property would be exempt in the hands of the lessee if the lessee owned it and (2) all rental income had to be reinvested in the property or used for debt reduction. Obviously, low-income housing did not meet requirement (1), since the renters were individuals, not tax-exemption charities. And the case in question affirmed that these requirements applied to low-income housing units, which accordingly failed the exemption test. The Wisconsin legislature then passed a law clarifying that requirement (1) did not apply to low income housing. But the law did not address requirement (2), and in fact many low income housing organizations use rental funds for other purposes, such as to subsidize care provided to others served by those organizations, to refinance debt, to offset Medicaid losses and to purchase new properties for low-income housing development (see this article for an excellent discussion of the background to this issue).
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