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 may 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.
The bill also provides that to determine the value of property using generally
accepted appraisal methods, an assessor must consider all of the following as
comparable to the property being assessed:
1. Sales or rentals of properties exhibiting the same or a similar highest and
best use with placement in the same real estate market segment.
2. Sales or rentals of properties that are similar to the property being assessed
with regard to age, condition, use, type of construction, location, design, physical
features, and economic characteristics.
The bill defines “real estate market segment” to mean a pool of potential buyers
and sellers that typically buy or sell properties similar to the property being
assessed, including potential buyers who are investors or owner-occupants.
The bill also provides that a property is not comparable to the property being
assessed if the seller has placed restrictions on the highest and best use of the
property or if the property is dark property and the property being assessed is not
dark property. The bill defines “dark property” as property that is vacant or
unoccupied beyond the normal period for property in the same real estate market
segment.
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:
AB146,1 1Section 1. 70.03 (1) of the statutes is amended to read:
AB146,3,42 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,

1and club memberships. In this subsection, “lease” means a right in real estate that
2is related primarily to the property and not to the labor, skill, or business acumen of
3the property owner or tenant. In this subsection, “highest and best use” has the
4meaning given in s. 70.32 (1).
AB146,2 5Section 2. 70.32 (1) of the statutes is amended to read:
AB146,4,26 70.32 (1) Real property shall be valued by the assessor in the manner specified
7in the Wisconsin property assessment manual provided under s. 73.03 (2a) at its
8highest and best use
from actual view or from the best information that the assessor
9can practicably obtain, at the full value which could ordinarily be obtained therefor
10at private sale. In determining the value, the assessor shall consider recent
11arm's-length sales of the property to be assessed if according to professionally
12acceptable appraisal practices those sales conform to recent arm's-length sales of
13reasonably comparable property; recent arm's-length sales of reasonably
14comparable property; and all factors that, according to professionally acceptable
15appraisal practices, affect the value of the property to be assessed. In this subsection,
16“arm's-length sale" means a sale between a willing buyer and willing seller, neither
17being under compulsion to buy or sell and each being familiar with the attributes of
18the property sold. In this subsection, “highest and best use" means the specific
19current use of the property or a higher use for which the property may be used as of
20the current assessment date, if the property is marketable for that use and the use
21is legally permissible, physically possible, not highly speculative, and financially
22feasible and provides the highest net return. When the current use of a property is
23the highest and best use of that property, value in the current use equals full market
24value. In this subsection, “legally permissible” does not include a conditional use
25that has not been granted as of the assessment date or any use that has not received

1as of the assessment date all federal, state, or local government approvals, permits,
2or licenses that are necessary for the use to occur.
AB146,3 3Section 3. 70.32 (1b) of the statutes is created to read:
AB146,4,164 70.32 (1b) In determining the value of real property under sub. (1), the assessor
5may consider, as part of the valuation under sub. (1), any lease provisions and actual
6rent pertaining to a property and affecting its value, including the lease provisions
7and rent associated with a sale and leaseback of the property, if all such lease
8provisions and rent are the result of an arm's-length transaction involving persons
9who are not related, as provided under section 267 of the Internal Revenue Code for
10the year of the transaction. The assessor shall reconcile the results of such
11consideration with the professionally acceptable appraisal practices regarding
12reasonably comparable sales, the cost approach, and other methods specified in the
13Wisconsin property assessment manual provided under s. 73.03 (2a). In this
14subsection, an “arm's-length transaction" means an agreement between willing
15parties, neither being under compulsion to act and each being familiar with the
16attributes of the property.
AB146,4 17Section 4. 70.32 (1d) of the statutes is created to read:
AB146,4,2018 70.32 (1d) (a) To determine the value of property using generally accepted
19appraisal methods, the assessor shall consider all of the following as comparable to
20the property being assessed:
AB146,4,2221 1. Sales or rentals of properties exhibiting the same or a similar highest and
22best use with placement in the same real estate market segment.
AB146,5,223 2. Sales or rentals of properties that are similar to the property being assessed
24with regard to age, condition, use, type of construction, location, design, physical
25features, and economic characteristics, including similarities in occupancy and the

1the potential to generate rental income. For purposes of this subdivision, such
2properties may be found locally, regionally, or nationally.
AB146,5,43 (b) For purposes of par. (a), a property is not comparable if any of the following
4applies:
AB146,5,85 1. At or before the time of sale, the seller places any deed restriction on the
6property that changes the highest and best use of the property, or prohibits
7competition, so that it no longer qualifies as a comparable property under par. (a) 1.
8or 2. and the property being assessed lacks such a restriction.
AB146,5,139 2. The property is dark property and the property being assessed is not dark
10property. In this subdivision, “dark property” means property that is vacant or
11unoccupied beyond the normal period for property in the same real estate market
12segment. For purposes of this subdivision, what is considered vacant or unoccupied
13beyond the normal period may vary depending on the property location.
AB146,5,1514 (c) For purposes of par. (a), “highest and best use" has the meaning given in s.
1570.32 (1).
AB146,5,2116 (d) For purposes of par. (a), “real estate market segment” means a pool of
17potential buyers and sellers that typically buy or sell properties similar to the
18property being assessed, including potential buyers who are investors or
19owner-occupants. For purposes of this paragraph, and depending on the type of
20property being assessed, the pool of potential buyers and sellers may be found locally,
21regionally, nationally, or internationally.
AB146,5 22Section 5. Initial applicability.
AB146,5,2323 (1) This act first applies to the property tax assessments as of January 1, 2020.
AB146,5,2424 (End)
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