What Wisconsin Manufacturers Can Do About Personal Property Tax Assessments

The Wisconsin Department of Revenue (WDOR) is once again issuing personal property tax assessments. The 2017 Act 59 passed by Legislature brought into action a new personal property tax exemption for “machinery, tools and patterns.” Wis. State. §70.111(27) defines machinery as “a structure or assemblage of parts that transmits force, motion or energy from one part to another in a predetermined way by electrical, mechanical or chemical means.”

How This Impacts You

WDOR is taking a very strict approach to applying the new exemption for machinery, tools and patterns.  For example, the WI Property Assessors Manual (pp. 19-25 and 19-27) provides a listing of property as examples that are to be reported as Furniture, Fixtures and Office Equipment; a classification which the WDOR and Assessors will continue to treat as taxable property. The listing covers a broad array of equipment such as bowling alley equipment, dentist chairs and doctor’s equipment, including instruments.

Remember: The statute does not provide any specific limitations to the type of businesses that use the “machinery, tools and patterns” other than the exclusion for property “used in manufacturing.” However, please beware of the likelihood of property being added back to assessment roles if not previously reported on Sch C of the personal property tax returns. In addition, the WDOR is taking the position that businesses that are manufacturers for property tax purposes are not allowed to claim this new exemption on any of its property.

What You Can Do About It

The interpretations taken by the WDOR appear to go beyond what the statute calls for. Therefore, manufacturers currently have the option to appeal the WDOR’s assessment of “machinery, tools and patterns.” Time is running short as manufacturers only have 60 days to file an objection from the date of the assessment notice (the due date is August 10, 2018 according to a release from the Wisconsin Manufacturers & Commerce). There is no guarantee of success on appeal, and it may take a taxpayer to litigate their situation through the courts before we will know for certain if the WDOR’s interpretations are too strict.

Note that “machinery, tools and patterns” owned by contractors, repair shops, warehouses and landscapers should qualify for the exemption (again, if property was not previously reported on Sch C, then the Department and/or Assessor will likely continue to treat such property as taxable).

For more information on Personal Property Tax Assessments, please contact your local Sikich Tax Advisor.

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