LRB-0372/6
JK:jld&amn
2017 - 2018 LEGISLATURE
June 14, 2017 - Introduced by Representatives R. Brooks, Steffen, Hintz,
Berceau, Bernier, Billings, Considine, Doyle, Duchow, Gannon, Hebl,
Horlacher, Katsma, Kessler, Knodl, Kolste, Kooyenga, Kremer, Krug,
Kuglitsch, Macco, Mason, Murphy, Mursau, Ohnstad, Petersen, Quinn,
Rodriguez, Rohrkaste, Sanfelippo, Sargent, Schraa, Spiros, Spreitzer,
Stuck, Subeck, Tauchen, Tittl, Wichgers, Zepnick and Zimmerman,
cosponsored by Senators Stroebel, Roth, Bewley, Carpenter, Erpenbach,
Hansen, Larson, LeMahieu, Marklein, Miller, Olsen, Petrowski, Ringhand
and Wirch. Referred to Committee on Ways and Means.
AB387,1,2 1An Act to amend 70.03 (1) and 70.32 (1); and to create 70.32 (1b) of the statutes;
2relating to: property tax assessments regarding leased property.
Analysis by the Legislative Reference Bureau
This bill provides that, for property tax purposes, real property includes any
leases, rights, and privileges pertaining to the property, including assets that cannot
be taxed separately as real property, but are inextricably intertwined with the real
property. The bill also requires real property to be assessed at its highest and best
use. Current law requires that real property be assessed at its full value and upon
actual view or from the best information that the assessor can obtain from
“arm's-length sales" of comparable property. This bill defines an “arm's-length sale"
as a sale between a willing buyer and willing seller, neither being under compulsion
to buy or sell and each being familiar with the attributes of the property sold.
The bill also provides that an assessor shall determine the value of leased
property by considering the lease provisions and actual rent pertaining to property,
if the lease provisions and rent are the result of an “arm's-length transaction.” The
bill defines an “arm's-length transaction” as an agreement between willing parties,
neither being under compulsion to act and each being familiar with the attributes
of the property.
The Wisconsin Supreme Court decided in 2008 that a property tax assessment
of leased retail property using the income approach must be based on “market rents,"
which is what a person would pay to rent the property, based on rentals of similar
property, as opposed to “contract rents," which is the amount that the lessee actually
paid to rent the property. See, Walgreen Company v. City of Madison, 2008 WI 80,
752 N.W.2d 689 (2008). This bill reverses that decision.

For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB387,1 1Section 1. 70.03 (1) of the statutes is amended to read:
AB387,2,142 70.03 (1) In chs. 70 to 76, 78, and 79, “real property," “real estate," and “land"
3include not only the land itself but all buildings and , fixtures, improvements thereon,
4and all fixtures and, leases, rights, and privileges appertaining thereto, including
5assets that cannot be taxed separately as real property, but are inextricably
6intertwined with the real property, enable the real property to achieve its highest and
7best use, and are transferable to future owners,
except as provided in sub. (2) and
8except that for the purpose of time-share property, as defined in s. 707.02 (32), real
9property does not include recurrent exclusive use and occupancy on a periodic basis
10or other rights, including, but not limited to, membership rights, vacation services,
11and club memberships. In this subsection, “lease” means a right in real estate that
12is related primarily to the property and not to the labor, skill, or business acumen of
13the property owner or tenant. In this subsection, “highest and best use” has the
14meaning given in s. 70.32 (1).
AB387,2 15Section 2. 70.32 (1) of the statutes is amended to read:
AB387,3,1216 70.32 (1) Real property shall be valued by the assessor in the manner specified
17in the Wisconsin property assessment manual provided under s. 73.03 (2a) at its
18highest and best use
from actual view or from the best information that the assessor
19can practicably obtain, at the full value which could ordinarily be obtained therefor
20at private sale. In determining the value, the assessor shall consider recent
21arm's-length sales of the property to be assessed if according to professionally

1acceptable appraisal practices those sales conform to recent arm's-length sales of
2reasonably comparable property; recent arm's-length sales of reasonably
3comparable property; and all factors that, according to professionally acceptable
4appraisal practices, affect the value of the property to be assessed. In this subsection,
5“arm's-length sale" means a sale between a willing buyer and willing seller, neither
6being under compulsion to buy or sell and each being familiar with the attributes of
7the property sold. In this subsection, “highest and best use" means the specific
8current use of the property or a higher use to which the property can be expected to
9be put in the immediate future, if the use is legally permissible, physically possible,
10and financially feasible and provides the highest net return. When the current use
11of a property is the highest and best use of that property, value in the current use
12equals full market value.
AB387,3 13Section 3. 70.32 (1b) of the statutes is created to read:
AB387,3,2214 70.32 (1b) In determining the value of leased real property under sub. (1), the
15assessor shall consider the lease provisions and actual rent pertaining to a property
16and affecting its value, including the lease provisions and rent associated with a sale
17and leaseback of the property, if all such lease provisions and rent are the result of
18an arm's-length transaction involving persons who are not related, as provided
19under section 267 of the Internal Revenue Code for the year of the transaction. In
20this subsection, an “arm's-length transaction" means an agreement between willing
21parties, neither being under compulsion to act and each being familiar with the
22attributes of the property.
AB387,4 23Section 4. Initial applicability.
AB387,3,2424 (1) This act first applies to the property tax assessments as of January 1, 2018.
AB387,3,2525 (End)
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