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Village, not town, will get full benefit of tax penalty

For 20 years a parcel in the Town of Somerset was in the Managed Forest Land Program and the owner paid reduced property taxes. But the town won't get the $43,597 penalty assessed for pulling the land from the program early.

In a decision filed March 29, the District III Court of Appeals ruled that the Village of Somerset, which annexed and bought the land three years ago, should get the withdrawal tax -- which it paid.

According to background in the decision, in 1987 the owner of the property, land that was then in the Town of Somerset, enrolled it in the MFL program that encourages the management of private forests to produce trees for commercial use. The landowner got a tax break for agreeing to keep the land in the program for 25-50 years.

If property is withdrawn early, the owner must pay a tax to the Department of Natural Resources and, under state law, the DNR must pay "100 percent of each withdrawal tax payment -- to the treasurer of each municipality in which is located the land to which the payment applies."

In November 2007, this parcel was annexed and bought by the Village of Somerset, which withdrew the land from MFL in August 2008 and paid a withdrawal tax of $43,597 to the DNR. Because the land was in the village when it was removed from the program, a year later the DNR returned the full amount to the village.

The town asked the county court to review that action, arguing that the DNR should have prorated the withdrawal tax payment between the two municipalities, with the town receiving 91 percent and the village 9 percent.

Judge Howard Cameron dismissed the town's lawsuit, finding the DNR's interpretation of the statute was reasonable and consistent with the clear meaning of the law. He also found that the town, as an entity created by the Legislature, can't challenge the constitutionality of a state law.

The three-judge appeals panel agreed and affirmed Cameron's decision.

Wisconsin law requires the DNR to pay the full amount "to the treasurer of each municipality in which is located the land to which the payment applies," wrote the appeals court. "By using a present tense verb form, the statute clearly specified that the department is to remit the payment to the municipality where the property is located at the present time.

"The statute does not require the department to pay the withdrawal tax to each municipality where the land was located during its enrollment in the MFL program."