In a case that represents a significant victory for Wisconsin property taxpayers, the state’s Supreme Court recently held unconstitutional a statutory amendment that allowed municipalities to “opt out” of de novo review for cases challenging property tax assessments within their jurisdictions. (Metropolitan Assoc. v. City of Milwaukee, 2011 WI 20 (Mar. 25, 2011).)

Under Wisconsin law, property owners challenging their property assessments initially file an administrative appeal with the local board of review, which is a quasi-judicial body comprised of lay citizens to hear evidence and adduce whether the assessor's valuation is correct. Prior to 2008, if taxpayers were unsatisfied with a decision of the local board of review, they could choose between two types of review in the circuit court: common law certiorari review or statutory de novo review. In 2008, the Legislature passed a law ("Act 86") that allowed municipalities to pass an ordinance opting out of de novo review. Under the new law, taxpayers in these municipalities were restricted to a new form of "enhanced certiorari review," which was broader in scope than traditional certiorari, but narrower than de novo review.

Shortly after passage of this law, the City of Milwaukee opted out of de novo review by passing an ordinance in conformance with Act 86. Metropolitan Associates then filed a class action suit against Milwaukee, seeking declaratory relief and a ruling that the opt out provisions of Act 86 violated the equal protection provisions of the Wisconsin and United States Constitutions.

In examining the constitutionality of Act 86, the Wisconsin Supreme Court found that the law created a distinct class of citizens – taxpayers living in opt out municipalities – that were treated significantly different from all other taxpayers. Although Act 86 required opt out municipalities to grant their taxpayers additional administrative rights during the board of review proceedings (e.g., added notice requirements, a 60-day extension of the hearing date, and broader administrative discovery), the limitation on both the type and scope of circuit court review was significant. Under the enhanced certiorari review, the circuit court must presume that the board of review’s assessment is correct, absent a “sufficient showing” that the assessment is in error. And, if a taxpayer was able to overcome this presumption, only then could the court consider: 1) evidence that was not available at the time of the board hearing; 2) evidence that the board refused to consider; and, 3) evidence that the court otherwise determines should be considered in order to correctly assess the property.

In contrast, de novo review, which was available in all other municipalities, requires that the court make its determination without regard to the board of review’s record or decision. In other words, with de novo review, the circuit court is required to hear new evidence, and although the assessor’s valuation is presumed correct, the court does not presume that the board of review’s decision is correct.

The court held that even with the additional administrative rights granted under Act 86, the board of review proceedings continued to favor municipalities over taxpayers because, among other things, taxpayers in opt out municipalities do not have an opportunity to fully contest their case in a court trial. Unlike de novo actions, the circuit court on enhanced certiorari review must first review the board’s findings, and decide whether the taxpayer has rebutted the presumption. Only then does the court decide if it will receive any independent evidence. In contrast, a taxpayer on de novo review need not overcome any presumptions to introduce new evidence. Rather, all relevant evidence is admissible.

The court noted that equal protection does not deny a state the power to treat persons within its jurisdiction differently.  Rather, the test is whether there exists a rational basis to justify the disparate treatment.  Here, after examining Act 86 under the Wisconsin case law, the court found there was no rational basis for the distinction.  Therefore, the court held that the provisions of Act 86 which created the enhanced board of review procedures and the enhanced certiorari procedures were unconstitutional.

Obviously, the court’s decision restored significant procedural rights to property taxpayers in opt out municipalities.  As noted by the court, the state had enacted a system that was biased toward municipalities, and against taxpayers.  Now, regardless of where the property is located, all taxpayers in the state will have an opportunity to start anew in the court system if they are unsatisfied with the administrative decision rendered by the local board of review.