Standards of tax uniformity required by The language of the constitution relevant to this question is simple: The rule of taxation shall be uniform.... Taxes shall be levied upon such property... as the legislature shall prescribe. Nonetheless, this provision of the constitution has been the subject of litigation for well over one hundred years. The Wisconsin Reports show that more than 40 cases have been concerned with the interpretation of this portion of Art. VIII. In 1906 Mr. Justice Marshall in Chicago & N.W. R. Co. v. State, 128 Wis. 553, 587, 108 N.W. 557, 561, sought to dispel for all time any doubts as to its meaning. He stated: It seems quite unaccountable that, after the lapse of nearly 60 years since the constitution was framed, and half a century since that feature of the article in question was first considered by this court, notwithstanding the seemingly clear decision then made on the point at that time primarily involved, followed soon thereafter by a second decision covering the precise matter now in hand, that we should find ourselves at this late day face to face with a controversy as to the precise meaning of the words of our organic law: "The rule of taxation shall be uniform, and taxes shall be levied on such property as the legislature shall prescribe." That language seems plain, this court, as we shall see, early said it was very plain, and yet it has been treated time and again as ambiguous, and still seems to be so regarded, notwithstanding all that this court has in fifty years said on the subject. And so it must be regarded, especially since men of the highest attainments, lawyers, jurists, and learned laymen, have read different meanings out of it, having regard, as it has been thought, to the object of state constitutions and the broad powers possessed by the people, unrestrained by a charter on the subject. No better object lesson, perhaps, could well be presented to illustrate the rule that ambiguity requiring judicial construction may as well arise through the apparent consequences of applying words in their literal sense to the subject with which they deal as from uncertainty of sense in the words themselves, than by the matter in In view of the approximately 20 cases on the same subject that have come before the court since Mr. Justice Marshall wrote, it is apparent that his hopes have not been realized. In view of past experience, this court does not have the temerity to assume that this case will lay to rest all future uncertainties concerning the meaning of Art. VIII, Sec. 1, of the constitution. We do hope, however, to restate what we deem to be the uniform holding of this court almost from its very inception, and in so doing determine the question presently before us. We adhere to the rule of Knowlton v. Board of Supervisors of Rock County (1859),9 Wis. 378 (*410). This case is over one hundred years old and is, for all practical purposes, the seminal case interpreting that portion of the constitution. Its current viability is shown by the fact that we have found it applicable and quoted it with approval in cases decided within the last two terms of court.... The Knowlton case involved a statute which provided that rural property within the limits of the city of Janesville was not to be subject to an annual city tax exceeding one-half that levied upon other property in the city. The court held that this tax differential violated the uniformity clause of the Constitution and held that the 50 percent exemption was invalid. The supreme court therein rejected the theory that partial exemptions were permissible, and dismissed as untenable the contention that the legislature could classify property to be taxed at different rates so long as there was uniformity within the class. In Knowlton the court held that once property is selected for taxation it must be taxed in its entirety and the same rate must be applied to it as to all property in the tax district. The court stated therein, 9 Wis. at page 388 (*420): ... when property is the object of taxation, it embrace within it clearly and concisely the In Knowlton the court was confronted with the argument that the uniformity requirement would be satisfied if there were uniformity within a proper class and that, since all rural property was taxed at one-half and all other property (in a proper and different class) at the full rate, there was uniformity. The court said, supra, 9 Wis. page 390 (*421): The answer to this argument is, that it creates different rules of taxation to the number of which there is no limit, except that fixed by legislative discretion, whilst the constitution established but one fixed, unbending, uniform rule upon the subject. It was conceded in Knowlton, and the proposition has never been seriously challenged, that the phrase, "as the legislature shall prescribe," confers upon the legislature the right to select some property for taxation and to totally omit or exempt others. From this it was argued, Knowlton, supra, 9 Wis. page 391 (*423), that: expense of government, from that very mo- The pronouncements of this court in Knowlton have been followed undeviatingly by this court since 1859 in all cases involving the general property tax. Mr. Justice Marshall in Chicago & N. W. R. Co. v. State (1906), 128 Wis. 553, 108 N.W. 557, discussed the cases that had been decided under Art. VIII, Sec. 1, of the constitution. From his exposition of the subject, the following principles, to which we subscribe, may be derived: 1. For direct taxation of property, under the uniformity rule there can be but one constitutional class. 2. All within that class must be taxed on a basis of equality so far as practicable and all property taxed must bear its burden equally on an ad valorem basis. 3. All property not included in that class must be absolutely exempt from property taxation. 4. Privilege taxes are not direct taxes on property and are not subject to the uniformity rule. 5. While there can be no classification of property for different rules or rates of property taxation, the legislature can classify as between property that is to be taxed and that which is to be wholly exempt, and the test of such classification is reasonableness. 6. There can be variations in the mechanics of property assessment or tax imposition so long as the resulting taxation shall be borne with as nearly as practicable equality on an ad valorem basis with other taxable property. We conclude that these principles, distilled from the opinion of Mr. Justice Marshall, correctly state the present law. They have without equivocation governed the decisions of this court since the date of that opinion. In 1966, in State ex rel. Harvey v. Morgan, 30 Wis.2d 1, 139 N.W.2d 585, we pointed out that a rebate of income taxes, or a payment from the general fund as a relief measure for the assistance of the needy aged, did not violate the uniformity rule, since the scheme was in no way hinged upon the ownership or taxation of property. The clear implication of the case is that a payment that would constitute a rebate of property taxes would be a partial exemption and therefore void. The viability of the uniformity clause is attested to by the series of constitutional amendments that have been necessary to avoid its proscriptions. In 1908, Art. VIII, Sec. 1, was amended to permit income, privilege, and occupational taxes without regard to the uniformity clause. In 1927, it was amended to make possible the separate taxation of forests and minerals. In 1941, came an amendment that permitted municipalities to collect and return taxes on real estate by optional methods, and, in 1961, the inequality of taxing merchants' stock in trade and certain other personal property uniformly with general property was recognized, and the requirements of the section were lifted in respect to the types of property specified. Without question these amendments resulted from the recognition by the legislature and the people of the onerous strictures of the constitutional requirement of uniformity. The rigors of the uniformity clause have on occasion prevented the passage of socially desirable legislation; and to accomplish the ends sought, constitutional amendments permitting limited and defined exceptions to the rule have been enacted and ratified. Its purpose, however, is as worthy as it is necessary. It is "to protect the citizen against unequal, and consequently unjust taxation." Weeks v. City of Milwaukee (1860), 10 Wis. 186, 201 (*242, *247). Do the tax freeze provisions of the Urban Redevelopment Law violate the constitutional requirement of uniformity. It was argued in the trial court that all that is required by the constitutional uniformity clause is that there be a proper classification based upon substantial distinctions and that there only need be equality or uniformity within the class. This is an assumption that cannot be supported in light of this court's consistent interpretation of the uniformity provision. As we have recently said in State ex rel. Baker Mfg. Co. v. City of Evansville (1952), 261 Wis. 599, 609, 53 N.W.2d 795, 800: . . it contends... that the requirement of uniformity is satisfied so long as there is uniformity within the class. We do not consider this to be the law. We have also said that there can be but one class of property subject to tax, and that all others must be completely exempt. However, were this not a property tax, the classification approved by the trial court on the basis of reasonableness would be sufficient.... It is apparent from the face of the statute that in Sec. 66.409, Stats., we are dealing with a direct property tax and not some other kind of exaction, license, or imposition. Sec. 66.409(1) by its very terms: exempt[s] real property... from any increase in any local tax over the maximum local tax. A perusal of the statutes reveals that during the period of the freeze, which cannot exceed thirty years, the tax on the property will be computed on a valuation that is determined by the assessed value just prior to its acquisition by the redevelopment corporation. For that length of time the owners are relieved of any tax based on an increment in value that might be attributable to the real estate itself and they are relieved of any tax that would result by virtue of an increase in value as the result of improvements or building on the property. Taxes are determined by valuation at the start of, or just prior to, the freeze period instead of by the application of the current assessed value each year as is required in respect to all other property. It is apparent that the property of the redevelopment corporation is subject to a portion of the property tax, but by a statutory concession it is not subject to all of the tax that would fall on other property of equal current value. It is partially exempt. For reasons that the legislature considered sufficient, the property of the redevelopment corporation is given preferential treatment and bears less of its tax burden on the true ad valorem basis than does other property. This law accomplishes its intended, but constitutionally prohibited, purpose-the unequal taxation of property. Property taxes where such a freeze is in force are not uniform in their impact on property owners. Such lack of uniformity is accomplished by a prohibited partial exemption from taxation. While it may be conceded, as contended by respondent, that, if the law accomplishes its purpose, new building may be stimulated and the tax base broadened to the extent that at some time in the future other taxpayers not covered by the freeze might be benefited, nevertheless, the fact remains undisputed and undisputable that, if redevelopment corporations are assessed at a figure less than that which would be assigned to other taxpayers holding equally valuable property, other taxpayers will be paying a disproportionately higher share of local property taxes. This is not uniformity. Under the terms of Art. VIII, Sec. 1, of our constitution as it now exists and as it has been interpreted with consistency by this court, partial exemptions from taxation cannot be granted to urban redevelopment corporations. Discussion Notes 1. The Gottlieb case, as well as the whole question of differential property taxation to encourage certain activities, is ably discussed in David A. Myers, "Open Space Taxation and State Constitutions," Vanderbilt Law Review 33 (May 1980): 837. 2. What would be the obvious solution for those supporting the Urban Redevelopment plan in Wisconsin? The rigid uniformity provisions were originally designed to prevent legislative abuses of the taxing power.... The open space amendments carve out certain exceptions to these rules. At the same time, however, the amendments confirm the continuing viability of the concept of uniformity by allowing specific deviations from operation of the rules. Myers, "Open Space Taxation," 838. 3. See generally Wade J. Newhouse, Constitutional Uniformity and Equality in State Taxation (Buffalo: William S. Hein and Co., 2d Ed. 1984), 2 vols.; Michael M. Bernard, Constitutions, Taxation and Land Policy (Lexington, Mass.: D.C. Heath, Lexington Books, 1979, 1980) 2 vols; William L. Matthews, Jr.," The Function of Constitutional Provisions Requiring Uniformity in Taxation," Kentucky Law Review 38 (1949-1950): 31, 187, 377. 4. State constitutions may hinder attempts to remedy taxation schemes that violate other provisions of the constitution. In Buse v. Smith, 74 Wis.2d 550, 247 N.W.2d 141 (1976), the Wisconsin Supreme Court held that reforms in the system of funding public schools from property tax revenues violated a constitutional requirement that local taxes be spent in the locality where they are collected. See generally Comment, "State Constitutional Restrictions on School Finance Reform: Buse v. Smith," Harvard Law Review 90 (May 1977): 1528. 5. For treatment of specific areas of concern, see Jacqueline P. Hand, "Right-To-Farm Laws: Breaking New Ground in the Preservation of Farmland," University of Pittsburgh Law Review 45 (Winter 1984): 289; Dean T. Massey and Margaret T. Silver, "Property Tax Incentives for Implementing Soil Conservation Programs Under Constitutional Taxing Limitations," Denver Law Journal 59 (No. 3, 1982): 485. 2. Property Tax Exemptions Lutheran Home, Inc. v. Board of County Commissioners of Dickinson County 211 Kan. 270, 505 P.2d 1118 (1973) PRAGER, Justice: This is an action brought by Lutheran Home, Inc. pursuant to K.S.A. 79-2005 to recover ad valorem real property taxes paid under protest. The basis of the claim is that plaintiff's property is used exclusively for charitable and benevolent purposes and therefore is exempt from taxation. Plaintiff's property consists of a tract of land on which is situated a nursing home owned and operated by the plaintiff corporation. . . . The facts in this case are not in dispute. Lutheran Home is a nonprofit corporation, organized and chartered under the laws of Kansas. Although its name may indicate otherwise, Lutheran Home is not affili ated with nor supported nor regulated by any religious body.... In 1964 when the nursing home opened it was owned and operated by another corporation, Lutheran United Home for the Aged, Inc.... The stated purpose of the new corporation Lutheran Home, Inc. was principally to own, lease, operate, maintain and administer nursing homes on a nonsectarian basis and to provide elderly persons on a nonprofit basis with housing facilities and services specially designed to meet the physical, social and psychological needs of the aged, and contribute to their health, security, happiness and usefulness in longer living. . . . The articles of incorporation of Lutheran Home, Inc. provide that on dissolution of the corporation after the payment of all bills and accounts the remainder of the property shall be converted to cash which shall be paid over to such charitable and educational organizations as shall be designated by a vote of the trustees. The articles provide that they may be amended by a 2/3 vote of the trustees at any annual or special meeting. The articles further provide for the adoption of bylaws by the trustees who may change them at their pleasure so long as they do not conflict with the articles. Article XII declares that no part of the net earnings of this corporation shall inure to the benefit of any private individual. Article XII of the corporation bylaws provides as follows: It is the intent and purpose of this corporation and its Trustees that all services rendered and functions performed by the corporation except those rendered and performed for the United States or for any of its agencies, shall, at all times be handled on a cost of doing basis and without income or profit to the corporation or to its members as such, in order that any and all amounts received by the corporation from or in connection with, such services or functions, over and above the cost thereof to the corporation, shall at all times, belong to and be the exclusive property of the corporation. During 1969 and 1970 the corporation charged a monthly rate of $230 for each ambulatory resident; non-ambulatory residents were assessed an additional $30 per month. At the time of the trial in March 1971 there had been an increase in the monthly rate to $260 per month for ambulatory residents and $290 per month for non-ambulatory residents. Residents who are on welfare are charged $300 per month which is paid by welfare funds. All residents of the facility are required to pay the monthly charge for services which is paid either from their own or family funds or by welfare. About half of the residents pay their own way and the other half receive welfare assistance. At the trial Mrs. Kandt testified that no patient had been evicted or asked to leave because he could not pay the monthly charge. She testified that there had been instances in the past where certain patients had not been able to pay and that debit is still on the books. There is nothing in the record to show that any resident has been admitted to the nursing home under an agreement to pay less than the going rate. There is nothing in the evidence to show that the lesser monthly charge is made by the Lutheran Home, Inc. than is made by other nursing facilities in the county. Residents are not required to pay an entrance fee to enter the home. Since the facts are undisputed, the case presents a pure question of law as to whether or not Lutheran Home is entitled to an exemption on the nursing home property under Article 11, Section 1, of the Kansas Constitution and K.S.A. 79-201. Under both the constitutional provision and the statutory provision in order to be entitled to an exemption, Lutheran Home, Inc. has the burden to prove that the nursing home is used exclusively for benevolent or charitable purposes. The parties in this case rely on many decisions of this court pertaining to tax exemption for charitable and benevolent purposes.... We have considered all of those cases along with the many Kansas cases cited therein and the more recent case of Sigma Alpha Epsilon Fraternal Ass'n v. Board of County Comm'rs, 207 Kan. 514, 485, P.2d 1297. All of these decisions recognize certain basic principles of law which are applied in cases of claimed exemption from taxation because of charitable use. These principles may be summarized as follows: (1) Constitutional and statutory provisions exempting property from taxation are to be strictly construed. (2) The burden of establishing exemption from taxation is on the one claiming it. (3) The exemption from taxation depends solely upon the exclusive use made of the property and not upon the ownership or the character, charitable or otherwise, of the owner. (4) The test of whether an enterprise is charitable for ad valorem tax purposes is whether its property is used exclusively to carry out a purpose recognized in law as charitable. (5) The question is not whether the property is used partly or even largely for the purposes stated in the exemption provisions, but whether it is used exclusively for those purposes. (Clements v. Ljungdahl, 161 Kan. 274, 278, 167 P.2d 603; State, ex rel., v. Security Benefit Ass'n, 149 Kan. 384, 87 P.2d 560.) (6) The phrase "used exclusively" as contained in Section 1, Article 11, of the Kansas Constitution, was intended by the framers in the sense that the use made of property sought to be exempt from taxation, must be only, solely, and purely for the purposes stated in the Constitution, and without admission to participation in any other use. (Sigma Alpha Epsilon Fraternal Ass'n v. Board of County Comm'rs, supra.) The principles of law set forth above have generally been accepted and followed in all of our decisions. The major problem presented in this case and in other cases of claimed exemption is whether or not a particular use of property falls within the definition of a use for charitable or benevolent purposes. In Mason v. Zimmerman, supra, we held that the term "benevolent" as used in the constitutional and statutory provisions, is entirely synonymous with "charitable." The trouble is that there has been and is a wide disagreement as to what constitutes a "charitable" use. The strict constructionist construes the word "charity" from the concept of the taxpayer citizen. |