Children's Hospital of Wisconsin, Inc. v. City of Wauwatosa

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
June 10, 2025
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2023AP1432 Cir. Ct. No. 2021CV4286

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT I

CHILDREN’S HOSPITAL OF WISCONSIN, INC.,

PLAINTIFF-APPELLANT,

V.

CITY OF WAUWATOSA,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Milwaukee County:
GWENDOLYN G. CONNOLLY, Judge. Affirmed.

Before White, C.J., Donald, P.J., and Colón, J.

¶1 COLÓN, J. Children’s Hospital of Wisconsin, Inc. (CHW) appeals
from an order of the circuit court granting the City of Wauwatosa’s motion for
No. 2023AP1432

summary judgment on the grounds that CHW’s North Tower1 could not have been
used exclusively as a tax exempt nonprofit hospital under WIS. STAT. § 70.11(4m)
(2023-24)2 before it was constructed and operational. CHW argues that the North
Tower qualifies for a tax exemption as a nonprofit hospital for the 2020 tax year
regardless of its construction status because CHW was “readying” the North
Tower for use as a nonprofit hospital at the time of assessment. See Family Hosp.
Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 323, 254 N.W.2d 268
(1977) (creating the “readying” rule).

¶2 WISCONSIN STAT. § 70.11(4m) requires property to be “used
exclusively” as a nonprofit hospital to qualify for this tax exemption; thus,
property that has not been used for this purpose cannot be considered tax exempt
under § 70.11(4m). We conclude that the North Tower does not qualify for the
nonprofit hospital tax exemption via the readying rule created by our supreme
court in Family Hospital because this narrowly tailored exception is only
applicable when the property is fully constructed and in the final stages of being
readied to be used for an exempt purpose. Accordingly, we affirm.

BACKGROUND

¶3 In 2019, CHW began construction of the North Tower as an addition
to the CHW facilities on the Milwaukee Regional Medical Complex in the City of

1
The North Tower refers to the now-completed Craig Yabuki Tower located on the
Milwaukee Regional Medical Complex in the City of Wauwatosa. We adopt the parties’
references to this property as the North Tower. At the time of these proceedings, the North
Tower was under construction.
2
All references to the Wisconsin Statutes are to the 2023-24 version. We note that all
relevant portions of the statutes that were in effect on the January 1, 2020 assessment date remain
unchanged in the 2023-24 version.

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No. 2023AP1432

Wauwatosa. CHW had formally leased the parcel of land on which the North
Tower is situated and acquired the parcel from Milwaukee County.3 Based on the
North Tower’s location in the medical complex, CHW intended to connect the
North Tower to the existing hospital building and other surrounding clinic
buildings.

¶4 On January 1, 2020, the City assessed the North Tower for the 2020
tax year. During the onsite inspection, the statutory assessor observed that the
North Tower consisted of only “some of the excavation, footings, foundation
walls, joists set and subfloor or concrete poured, and some of the exterior walls,”
and estimated that the construction “was approximately 14% completed[.]”

¶5 CHW requested a tax exemption. In CHW’s tax exemption request,
it claimed that the North Tower would be “used exclusively to provide outpatient
services” such as “hospital-based specialty clinics and surgical services.” CHW
explained that it had not yet used the North Tower for its intended purpose
because it was still under construction, but argued that the North Tower was tax
exempt under WIS. STAT. § 70.11(4m) because it would be used exclusively as a

3
The City argues that, for the purposes of this case, it is undisputed that CHW owned
both the land and the improvements as of the 2020 assessment date due to CHW’s concession in
its complaint that “[a]t all relevant times, CHW owned the property located in the City of
Wauwatosa at 8915 W. Connell Court[.]” However, we note that the record supports, and CHW
states in its briefing, that CHW owned the North Tower and leased the underlying land from
Milwaukee County on the 2020 assessment date. Neither party argues that whether CHW leased
the land is relevant to the issue on appeal, which is whether the readying rule can apply to
partially constructed buildings; therefore, we do not discuss it further. See WIS. STAT.
§ 70.11(4m).

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No. 2023AP1432

nonprofit hospital once construction was completed.4 The City disagreed and
determined that the North Tower was not tax exempt under § 70.11. The City then
assessed the property. Based on that assessment, in December of 2020, a tax bill
was issued by the City to CHW for a total net property tax of $122,870.15, which
CHW timely paid.

¶6 On July 21, 2021, CHW filed a summons and complaint with the
circuit court alleging that the City’s 2020 tax assessment was unlawful because of
its inclusion of the North Tower, which CHW argues was exempt from property
taxes under WIS. STAT. § 70.11(4) and (4m). The City answered and moved for
summary judgment. The City argued that, as a matter of law, a partially
constructed property cannot be tax exempt under § 70.11(4) and (4m) because
both subsections require the property to be used exclusively for an exempt purpose
and do not contemplate an exemption for alleged future use. CHW responded that
Family Hospital’s readying rule allows property to be tax exempt, even if it is not
presently being used for an exempt purpose, so long as the property is being
“readied” to eventually be used for an exempt purpose.

¶7 At the motion hearing, the circuit court found that there were no
genuine issues of material fact surrounding the dispositive question of whether
partially constructed buildings that are not being used for an exempt purpose can
nonetheless be exempt from taxation under the readying rule. The court analyzed

4
CHW’s tax exemption request provided multiple claims for tax exemption for the
North Tower, including: (1) under the preamble to WIS. STAT. § 70.11; (2) as county owned land
leased to CHW under § 70.11(2); (3) as property used exclusively for educational purposes under
§ 70.11(4); (4) as property used exclusively for benevolent purposes under § 70.11(4); and (5) as
property used exclusively as a nonprofit hospital under § 70.11(4m). On appeal, CHW only
argues that the North Tower is tax exempt as a nonprofit hospital via the readying rule.

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No. 2023AP1432

a number of cases that discussed the readying rule and found that these cases all
relied on whether the building at issue was fully constructed and equipped, like the
building in Family Hospital was, when deciding whether the rule applied. See id.,
78 Wis. 2d at 323; FH Healthcare Dev., Inc. v. City of Wauwatosa, 2004 WI App
182, ¶36, 276 Wis. 2d 243, 687 N.W.2d 532; Group Health Co-op. of Eau Claire
v. DOR, 229 Wis. 2d 846, 859, 601 N.W.2d 1 (Ct. App. 1999); The Dominican
Nuns v. City of La Crosse, 142 Wis. 2d 577, 580, 419 N.W.2d 270 (Ct. App.
1987); Asbury United Methodist Church v. City of La Crosse, No. 09-CV-617-
WMC, 2010 WL 3363378, at *9 (W.D. Wis. Aug. 23, 2010).

¶8 The circuit court then discussed CHW’s reliance on a section of the
Wisconsin Property Assessment Manual (the WPAM)5 that recommends that a
new construction, attached to a hospital, that remains unfinished on the assessment
date, should be tax exempt when certain conditions are met. See WPAM 13-59.
The court found that CHW could not rely solely on the WPAM to support its
interpretation of the readying rule because the WPAM is designed to give
guidance that conforms to the law, and in this instance, it conflicts with it.
Ultimately, the circuit court granted the City summary judgment finding that the
readying rule could not apply to partially constructed buildings; thus, the North
Tower could not qualify as a tax exempt nonprofit hospital because it was only
about 14% constructed on the assessment date.

¶9 CHW appeals.

5
The WPAM is published annually by the Wisconsin Department of Revenue pursuant
to WIS. STAT. § 73.03(2a). All references to the WPAM are to the 2020 version—available at
https://www.revenue.wi.gov/documents/wpam20.pdf—which is the version the parties and circuit
court relied on.

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No. 2023AP1432

DISCUSSION

¶10 The circuit court granted summary judgment in the City’s favor on
the basis that a partially constructed building could not, as a matter of law, be tax
exempt under WIS. STAT. § 70.11(4m). The question before us is whether a
partially constructed building can qualify as a tax exempt nonprofit hospital under
§ 70.11(4m) if it will eventually be used for such an exempt purpose.

¶11 We review the circuit court’s grant of a summary judgment
independently, “applying the same standard as the circuit court.” Saint Joseph’s
Hosp. of Marshfield, Inc. v. City of Marshfield, 2004 WI App 187, ¶9, 276
Wis. 2d 574, 688 N.W.2d 658. “A party is entitled to summary judgment if there
is no genuine issue as to any material fact and that party is entitled to judgment as
a matter of law.” Id.; WIS. STAT. § 802.08(2). Our consideration of this issue
involves a question of statutory interpretation which we also review
independently. Wauwatosa Ave. United Methodist Church v. City of
Wauwatosa, 2009 WI App 171, ¶6, 321 Wis. 2d 796, 776 N.W.2d 280.

¶12 “In Wisconsin, the taxation of property is the rule and exemption is
the exception.” Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 80,
591 N.W.2d 583 (1999). There is a presumption that property is taxable and “the
party seeking the exemption bears the burden of proving that it falls within a
statutory exemption.” Id. at 80-81; WIS. STAT. § 70.109. This presumption
furthers the public interest by “stem[ming] the erosion of municipal tax bases” to
ensure that the taxpayer is not overloaded with an inequitable portion of the tax
burden. International Found. of Emp. Ben. Plans, Inc. v. City of Brookfield, 95
Wis. 2d 444, 454, 290 N.W.2d 720 (Ct. App. 1980), aff’d, 100 Wis. 2d 66, 301
N.W.2d 175 (1981).

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No. 2023AP1432

¶13 “[W]e apply a ‘strict but reasonable construction’ to tax exemption
statutes” where any ambiguity “must be resolved against the party seeking the
exemption.” Deutsches Land, 225 Wis. 2d at 80-81 (citation omitted); Columbus
Park Hous. Corp. v. City of Kenosha, 2003 WI 143, ¶11, 267 Wis. 2d 59, 671
N.W.2d 633. The “[s]tatutory language is given its common, ordinary, and
accepted meaning … interpreted in the context in which it is used … and
reasonably, to avoid absurd or unreasonable results.” State ex rel. Kalal v. Circuit
Ct. for Dane Cnty., 2004 WI 58, ¶¶45-46, 271 Wis. 2d 633, 681 N.W.2d 110.

¶14 Under WIS. STAT. § 70.11(4m), property used as a nonprofit
hospital, as specifically defined by the statute, can be tax exempt. “In order to
qualify for the not-for-profit hospital exemption, a property must be ‘used
exclusively for the purpose[] of [a] hospital.”6 Covenant Healthcare Sys., Inc. v.
City of Wauwatosa, 2011 WI 80, ¶24, 336 Wis. 2d 522, 800 N.W.2d 906 (quoting
WIS. STAT. § 70.11(4m)(a)) (alterations in original).

¶15 CHW argues that the readying rule applies here and stands for the
proposition that property can be tax exempt regardless of whether the building is
fully constructed and in use so long as, under the totality of the circumstances, it
appears that the property will eventually be used for an exempt purpose, and some

6
WISCONSIN STAT. § 70.11(4m)(a) provides in relevant part, that property exempted
from general property taxes is:

Real property owned and used and personal property used
exclusively for the purposes of any hospital of [ten] beds or more
devoted primarily to the diagnosis, treatment or care of the sick,
injured, or disabled, which hospital is owned and operated by a
corporation, voluntary association, foundation or trust…. This
exemption does not apply to property used for commercial
purposes, as a health and fitness center or as a doctor’s office.

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No. 2023AP1432

action has been taken to ready the property for the future exempt use. Thus, CHW
maintains that the North Tower was exempt even though it was only 14%
constructed. In response, the City contends that CHW’s interpretation of the
readying rule is too broad and argues that the rule only allows property that is fully
constructed and in the final stages of being operational on the assessment date to
qualify as an exempt nonprofit hospital under WIS. STAT. § 70.11(4m).

¶16 We start by discussing how our supreme court created the readying
rule in Family Hospital before analyzing subsequent case law. In Family
Hospital, our supreme court considered whether a nursing home that was fully
constructed but not yet occupied by patients was used exclusively for benevolent
purposes, pursuant to WIS. STAT. § 70.11(4), on the assessment date. Family
Hospital, 78 Wis. 2d at 323. The court noted the circuit court’s findings that “the
nursing home was equipped and in the process of readying itself for the receipt of
its first patient,” that the nursing home was not used for any other purpose, and
that the delay in receiving patients was only “due to the necessity of acquiring a
full complement of operating personnel.” Id. It then held that “the nursing home
should not be taxable during the period in which it was readying itself for its
benevolent purpose.” Id.

¶17 The breadth of the readying rule was later raised in Group Health
when this court was tasked with deciding whether property was tax exempt when
the taxpayer had purchased the property and submitted plans and a permit
application in preparation to start construction on a health center. Id., 229 Wis. 2d
at 856-58. The court emphasized that the taxpayer’s “situation was very different
from the situation in Family Hospital” because the nursing home in Family
Hospital “was fully constructed and equipped on the assessment date” and only
“not operational because it was not yet fully staffed.” Group Health, 229 Wis. 2d

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No. 2023AP1432

at 859. The court held that the readying rule could not be “stretched” to apply to
property where the property had merely been purchased in the hopes of developing
a health clinic and construction had not even commenced yet. Id. Indeed, the
court noted that the property was vacant and unused at the date of assessment. Id.
at 858.

¶18 In FH Healthcare the court addressed whether the readying rule
applied to a partially constructed building connected to an existing hospital that
the taxpayer intended to use for an exempt purpose once completed. Id., 276
Wis. 2d 243, ¶¶2, 9, 33. The court stated that “there is no indication that, as in
Family Hospital, the FHHD building was fully constructed and equipped, and in
the final stages of readying itself for an exempt purpose.” Id., ¶36. The court also
discussed how the taxpayer failed to provide anything more than a conclusory
statement that the building would eventually be used for an exempt purpose, but
noted that “the relevant case law appears to be concerned with the use of the
property at the time of assessment[.]” Id. The court finally concluded that the
readying rule did not apply to the building at issue. Id., ¶¶36-37.

¶19 Because in both cases this court discussed the circumstances specific
to each case instead of holding that the readying rule only applies to fully
constructed buildings, CHW argues that Group Health and FH Healthcare
support that the readying rule applies to partially constructed buildings. CHW
contends that the assessor must look at the totality of the circumstances to
determine whether the property is being readied for future exempt use. CHW’s
argument misconstrues the holdings regarding the readying rule in these cases.
The court determined that the readying rule did not apply by concluding that the
properties at issue were unlike the property in Family Hospital because the

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No. 2023AP1432

properties were not “fully constructed and equipped[.]” See Group Health, 229
Wis. 2d at 859; FH Healthcare, 276 Wis. 2d 243, ¶36.

¶20 Furthermore, if our supreme court had intended to make the readying
rule apply as expansively as CHW suggests, then it would have clearly stated so in
Family Hospital; instead, the court confined its holding to a fully constructed and
equipped building in the final stages of readying itself for tax exempt use. See id.,
78 Wis. 2d at 323; see also The Dominican Nuns, 142 Wis. 2d at 579 (“Tax
exemptions are matters of legislative grace and there must be clear evidence that
such grace was intended before we will so find in a given case.”) Therefore we
conclude that the case law supports that the inquiry into whether the readying rule
applies depends on whether a fully constructed building is in the final stages of
readying itself for exempt use on the assessment date.7

¶21 CHW also argues that the readying rule must apply to partially
constructed buildings because a contrary interpretation would lead to “absurd
results.” CHW reasons that because the land was previously tax exempt when it
was vacant, it would be absurd for the North Tower to be taxable during

7
Additionally, CHW argues that the WPAM supports its interpretation of the readying
rule case law. See WPAM 13-59, 20-7. However, CHW cannot rely solely on the WPAM to
support an interpretation contrary to the statutes and case law. See Doneff v. City of Two Rivers
Bd. of Rev., 184 Wis. 2d 203, 217, 516 N.W.2d 383 (1994) (“[T]he legislature intended that the
[WPAM] conform to, rather than establish, Wisconsin law.”) In light of our conclusion that
Family Hospital Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 254 N.W.2d 268
(1977), Group Health Co-op. of Eau Claire v. DOR, 229 Wis. 2d 846, 601 N.W.2d 1 (Ct. App.
1999), and FH Healthcare Development, Inc. v. City of Wauwatosa, 2004 WI App 182, 276
Wis. 2d 243, 687 N.W.2d 532, support that the readying rule only applies to fully constructed
buildings, we do not discuss CHW’s argument that the WPAM reinforces its interpretation of the
case law and the application of its interpretation to the North Tower further. See Maryland Arms
Ltd. P’ship v. Connell, 2010 WI 64, ¶48, 326 Wis. 2d 300, 786 N.W.2d 15.

10
No. 2023AP1432

construction only to then become tax exempt after construction has been
completed.

¶22 CHW’s argument conflates the individual tax exemptions to propose
an interpretation of the readying rule that would prioritize maintaining the overall
tax exempt status of a property, even if the property fails to fall within the plain
meaning of any of the exemptions listed in WIS. STAT. § 70.11. This
interpretation would run contrary to the established law that determines how
property qualifies for tax exemptions. See Wauwatosa Ave., 321 Wis. 2d 796, ¶7
(“To be entitled to tax exemption the taxpayer must bring himself [or herself]
within the exact terms of the exemption statute.” (Citation omitted)); see also
Wisconsin Evangelical Lutheran Synod v. City of Prairie du Chien, 125 Wis. 2d
541, 545 n.3, 373 N.W.2d 78 (Ct. App. 1985) (stating that vacant property is not
tax exempt by default).

¶23 “[A]ll presumptions are against tax exemption, and an exemption
should not be extended by implication.” Southwest Airlines Co. v. DOR, 2021
WI 54, ¶26, 397 Wis. 2d 431, 960 N.W.2d 384. This presumption originates from
“the public interest to stem the erosion of municipal tax bases. The more
exceptions allowed, the more inequitable becomes the apportionment of the tax
burden. The continuous removal of real property from taxation thus imposes a
particular hardship upon local government and the citizen taxpayer.”
International Found., 95 Wis. 2d at 454.

¶24 Thus, property is only tax exempt if it meets the requirements listed
in the statute. This is true even if the property at issue is owned by a taxpayer that
tends to use its properties for exempt activities. See Deutsches Land, 225 Wis. 2d
at 87 (“We have repeatedly stressed that a benevolent association must do more

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No. 2023AP1432

than own or control property to claim an exemption; it must also use that property
for benevolent purposes.”); The Dominican Nuns, 142 Wis. 2d at 581 (concluding
that “property … not being ‘used’ for any of the [taxpayer’s] regular activities or
benevolent purposes” did not qualify for an exemption).

¶25 For the North Tower to be tax exempt as a nonprofit hospital it must
fit within the exact terms of WIS. STAT. § 70.11(4m). See Wauwatosa Ave., 321
Wis. 2d 796, ¶7. Whether the property without the incomplete North Tower
improvement was tax exempt under a different exemption in prior years is
irrelevant to the question of whether the North Tower qualifies as a tax exempt
nonprofit hospital under §70.11(4m) on the 2020 assessment date. Although
CHW may find it inconvenient for the North Tower to be taxable because its
construction overlapped with the 2020 assessment date, it is not an absurd
outcome.

¶26 It is the legislature’s duty to determine where to draw the line
regarding when property is eligible for tax exemption, and this line must be drawn
somewhere.8 The plain language of WIS. STAT. § 70.11(4m) indicates that
exemption eligibility begins when property is “used” as a nonprofit hospital. The
readying rule provides some flexibility but cannot be stretched as far as CHW
contends because such a broad interpretation of a judicially created rule would
conflict with the plain language of § 70.11, effectively usurping the legislature’s

8
“Under our tripartite system of government, it is the duty of this court to apply the
policy the legislature has codified in the statutes, not impose our own policy choices—to do
otherwise would render this court little more than a super-legislature.” Columbus Park Hous.
Corp. v. City of Kenosha, 2003 WI 143, ¶34, 267 Wis. 2d 59, 671 N.W.2d 633. Therefore, we
interpret WIS. STAT. § 70.11(4m) “as written, not interpret it as we think it should have been
written.” Id.

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No. 2023AP1432

authority as the policymaker by fundamentally changing the point at which
property can qualify for this exemption. While we recognize that tax exemption
for alleged-hospital buildings that are under construction on the assessment date
may serve a beneficial public purpose, such an exemption “must be clearly spelled
out by the legislature.” Columbus Park, 267 Wis. 2d 59, ¶40 (citation omitted).

CONCLUSION

¶27 For the foregoing reasons, we conclude that the readying rule is only
applicable to fully constructed buildings in the final stages of being readied to be
used for an exempt purpose. Any other interpretation would leave tax exemption
to the eye of the beholder and if tax exemption is in the eye of the beholder then
the beholder has to be the legislature. Therefore, we also conclude that the
partially constructed North Tower cannot be tax exempt as a nonprofit hospital
under WIS. STAT. § 70.11(4m) via the readying rule. Accordingly we affirm the
circuit court’s order.

By the Court.—Order affirmed.

Recommended for publication in the official reports.

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No. 2023AP1432 (D)

¶28 WHITE, C.J. (dissenting). This court’s construction of the property
tax exemption statutes should be “strict but reasonable.” Columbia Hosp. Ass’n
v. City of Milwaukee, 35 Wis. 2d 660, 668, 151 N.W.2d 750 (1967). Determining
whether a property qualifies for an exemption is based on examining “the facts of
the particular case regarded as a whole” including the “organizational structure
and the method of operation of an institution” claiming the exemption. See
Family Hosp. Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 319,
254 N.W.2d 268 (1977). Because I believe that when an organization constructs a
property that will qualify for an exemption under WIS. STAT. § 70.11(4m), such as
a new hospital, the preparation and construction—the “readying,” as our supreme
court has described it—is indispensable to its use, and therefore such property
should also qualify for the exemption during this prerequisite stage. See Family
Hosp. Nursing Home, Inc., 78 Wis. 2d at 323.

¶29 Here, there is a dispute over whether the North Tower, 1 based on the
plans and permits, will qualify for an exemption. Whether the North Tower
qualifies for an exemption during construction should be based on whether it will
qualify for an exemption once the building is complete and operational. As I
believe that question must be resolved in order to determine the property’s
exemption status during construction, I would reverse the summary judgment and

1
I adopt the Majority’s and the parties’ references to the property in question as North
Tower.
No. 2023AP1432(D)

remand this case to the circuit court for further proceedings. Accordingly, I
respectfully dissent.

¶30 The Majority concludes that a property under construction cannot
satisfy the requirement of the exemption that the property must be “used” as a
non-profit hospital under WIS. STAT. § 70.11(4m). I think this interpretation is
overly narrow. As our supreme court held, “a strict construction is nonetheless a
construction, and an exemption statute need not be given an unreasonable
construction or the narrowest possible construction.” Columbia Hosp. Ass’n, 35
Wis. 2d at 668. A more reasonable interpretation would consider how the
construction of an exempt property is an indispensable part of having non-profit
properties, like hospitals, provide a public good to our residents. I also believe a
property with construction underway complies with the readying rule in Family
Hospital.

¶31 The legislature relieves certain organizations engaged in charitable
undertakings from their tax burden because “they are devoted to the general well-
being of mankind and thus provide a benefit to the taxpaying community.”
International Found. of Emp. Ben. Plans, Inc. v. City of Brookfield, 95 Wis. 2d
444, 454-55, 290 N.W.2d 720 (Ct. App. 1980), aff’d, 100 Wis. 2d 66, 301 N.W.2d
175 (1981). “[S]pecific and limited property tax exemptions are based on a theory
of mutual consideration: the public relieves an organization of its property tax
burden when it provides a public benefit.” University of Wis. Med. Found., Inc.
v. City of Madison, 2003 WI App 204, ¶11, 267 Wis. 2d 504, 671 N.W.2d 292.
Most construction, but especially that of modern healthcare facilities, cannot
spring up from vacant land to a fully functioning hospital in less than a tax year.
The Majority creates a rule barring a property tax exemption during construction.
This will lead to confusion (and litigation) over the question of what period is

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No. 2023AP1432(D)

sufficient to constitute “readying.” Overall, this decision will have a chilling
effect on the development of non-profit organizations that provide a public benefit.

¶32 There are three Wisconsin cases that I believe are instructive:
Columbia Hosp. Ass’n, where the hospital exemption was considered in terms of
practical and reasonable needs to the functioning of the hospital; Family Hosp.
Nursing Home, Inc., where the readying rule appears; and FH Healthcare Dev.,
Inc. v. City of Wauwatosa, 2004 WI App 182, 276 Wis. 2d 243, 687 N.W.2d 532,
where a property owner failed to provide facts about an under construction
property sufficient to establish an exemption. I discuss each in turn.

¶33 In Columbia Hospital, our supreme court addressed a requested
exemption for off-site housing for hospital interns and resident doctors employed
by a hospital that qualified for the exemption under WIS. STAT. § 70.11(4m).
Columbia Hosp. Ass’n, 35 Wis. 2d at 671. The court considered that “conducting
an internship and residency program is a valuable and reasonably necessary
function of a large modern hospital and to attain such purposes it is reasonably
necessary for [the hospital] to offer housing accommodations to secure interns and
residents.” Id. at 674. It concluded that these separate parcels containing housing
also qualified as exempt properties because they were of “reasonable necessity” to
the functioning of the hospital. Id. at 671.

¶34 The guidance in Columbia Hospital for this case is that a reasonable
construction of the exemption statutes must consider the practical and necessary
use of the property—the substance of its mission and not only the form of the
building. The Columbia Hospital court concluded it must not limit the meaning
of the word “hospital” in WIS. STAT. § 70.11(4m) to “the primary purpose of a
hospital or to a typical small hospital offering limited facilities.” Columbia Hosp.

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No. 2023AP1432(D)

Ass’n, 35 Wis. 2d at 668. Instead, the court concluded that “[t]he section has
carefully expressed the exemption in terms of a hospital whose primary purpose is
diagnosis, treatment and care and this contemplates that a hospital may have other
functions and objects, whether they be directly or indirectly associated with the
care of the sick.” Id. Therefore, the court concluded that housing for interns and
residents were necessary for the hospital to attract quality candidates and fulfill its
mission. Similarly, I believe constructing a structure is necessary for a hospital
property to exist and provide “diagnosis, treatment and care.” See WIS. STAT.
§ 70.11(4m)(a).

¶35 In Family Hospital, our supreme court considered how to determine
whether a nursing home was “a benevolent nursing home under sec. 70.11(4),
Stats.,” which would then make it “exempt from certain real and personal property
taxes[.]” Family Hosp. Nursing Home, Inc., 78 Wis. 2d at 314. In that case, the
nursing home was not in actual use as a nursing home at the time of the tax
assessment. The court held this non-use was not dispositive, concluding that “the
nursing home should not be taxable during the period in which it was readying
itself for its benevolent purpose.” Id. at 323. The court’s inquiry focused on the
facts and circumstances of the property as a whole, not looking only at operational
use.

¶36 In the Family Hospital court’s thorough analysis, it rejected a bright
line test for the language of the articles of incorporation, which did not include the
word “benevolent;” the separate incorporation of the facility due to the Federal
Housing Administration’s requirements for the mortgage; or the location of the
facility. Id. at 314-15, 321. It rejected the City’s argument that if the nursing
home was located in a hospital wing—contiguously attached—it would qualify,
but that a separate facility would not. Id. at 321. It considered that the nursing

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No. 2023AP1432(D)

home had the same board of trustees as the hospital, it was licensed by the State
Board of Health, it was certified for federal medical assistance programs; and it
was exempt from state sales tax and state and federal income tax. Id. at 316.
Further, it considered that there was no claim the facility was operated for
pecuniary profit. Id. at 321. It also rejected a challenge that the property was not
in actual use, but held that the property was “readying” for operation meant that an
exemption was possible. Id. at 323. Ultimately, considering the facts of the
property as a whole, our supreme court concluded that the nursing home qualified
for the property tax exemption for a benevolent institution.

¶37 As guidance for this case, the holdings of Family Hospital show that
(1) a determination of exemption status depends on the facts and circumstances of
the property as a whole and (2) that having the building in preparation to be used,
but not in use, was not fatal to the exemption. Building a non-profit hospital is a
huge enterprise with years of planning and funding in addition to the physical
construction of the building, employment of staff, and admission of patients. The
Family Hospital court discussed issues that could be determined before the
facility was in use for patients, reviewing the nursing home’s corporate structure,
government qualifications, licensure, and non-profit management. Here, the
Majority focuses on a narrow interpretation of “use” and does not consider the
property as a whole and whether its organizational structure and methods of
operation will qualify for an exemption when complete. Id. at 319.

¶38 The third instructive case is FH Healthcare Dev., Inc. v. City of
Wauwatosa, 2004 WI App 182, 276 Wis. 2d 243, 687 N.W.2d 532. There, a not-
for-profit holding company affiliated with Froedtert Hospital sought an exemption
for a new building it developed in which space was leased to a medical laboratory
services company, which had originated from Froedtert, but became independent.

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Id., ¶¶7-9. The laboratory services company provided laboratory testing for
Froedtert at cost, but with a market-rate pricing structure, designed to cover
overhead and generate income, with other clients. Id., ¶7. The FH Healthcare
court rejected an exemption for the property while it was under construction
because the holding company “failed to provide us with enough [facts] to establish
that it was being readied for an exempt purpose.” Id., ¶36. However, the question
of a property tax exemption came down to “whether the property is used for
commercial purposes; if so, the exemption does not apply, regardless of whether
the property is ‘reasonably necessary’ to the hospital’s primary and secondary
purposes or who uses the equipment.” Id., ¶19. This court concluded that the
commercial purposes of the laboratory barred the exemption.

¶39 As guidance for this case, I believe FH Healthcare’s holding shows
that the court’s considerations focused on whether the property would be exempt
when complete—in that case, an exemption was precluded by its commercial use.
However, I note that the use of the property during construction was not
dispositive to the issues. My takeaway is that this court should consider the
property’s contemplated future use in the exemption inquiry, not limit our analysis
to use during construction.

¶40 In reviewing this issue, I looked at other states that have analyzed
the question of property tax exemptions during construction more frequently than
Wisconsin has. While it is difficult to find exact parallels, the theoretical
underpinnings are informative. There is undoubtedly a split in the treatment of
property under construction. Many states regularly offer exemptions during
construction; common reasoning included that the future exemption for the
completed property was not in dispute, that construction was considered part of
the use of the property, and that courts exempted property during construction as

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part of the organization’s efforts to serve the public good. However, other states,
like the Majority, focus on actual use of the property during the time of
construction and decline to allow an exemption.

¶41 Many states allow a property tax exemption during construction of a
property that will be exempt upon completion. Generally, the property’s future
qualification for an exemption is undisputed. See e.g., Utah Cnty. By & Through
Cnty. Bd. of Equalization of Utah Cnty. v. Intermountain Health Care, Inc., 725
P.2d 1357, 1359 (Utah 1986) (holding that in Utah a hospital under construction
qualifies for an exemption “when its use is irrevocably committed to purposes that
will qualify for a charitable exemption at its completion”); Carney v. Cleveland
City Sch. Dist. Pub. Libr. of Cuyahoga Cnty., 169 Ohio St. 65, 69, 157 N.E.2d
311 (1959) (holding that in Ohio the prospective use doctrine applied to properties
during construction because “it is not necessary that actual physical use of
property for an exempt purpose be commenced before it is entitled to be exempted
from taxation”); State v. Second Church of Christ, Scientist, 185 Minn. 242, 244,
240 N.W. 532 (1932) (holding that in Minnesota the exemption for a church under
construction is determined by “the use to which the property is devoted, or about
to be devoted. It is not necessarily the use or nonuse of the property at the exact
time when the tax is levied”); City of Fayetteville v. Phillips, 306 Ark. 87, 94-95,
811 S.W.2d 308 (1991) (holding that in Arkansas, a “public entity seeking an
exemption should be permitted appropriate opportunity to establish by proof its
claim of exemption … otherwise all public property under construction might be
subject to taxation based on some perceived chance of a non-public benefit or
use”).

¶42 Further, many states allow an exemption during construction under
the reasoning that construction of a property can itself be an exempt use of the

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property because it is necessary preparation. See e.g., Hedgecroft v. City of
Houston, 150 Tex. 654, 661-62, 244 S.W.2d 632 (1951) (holding that in Texas, an
exemption during construction of a polio clinic was allowed because
“[p]reparation for and operation of the clinic are both indispensable” and “[b]oth
constituted a use by [the polio clinic operator] of the premises”); Overmont Corp.
v. Board of Tax Revision of City of Philadelphia, 479 Pa. 249, 251, 388 A.2d 311
(1978) (holding that in Pennsylvania, “when a charity is constructing facilities,
that charity is ‘using’ its property for charitable purposes so as to come within the
scope of the General County Assessment Law”); Abbott Ambulance, Inc. v.
Leggett, 926 S.W.2d 92, 96 (Mo. Ct. App. 1996) (holding that in Missouri, a
charity’s construction of a new headquarters would qualify for an exemption
because the charity’s “use of the property in constructing the facility as a
prerequisite to [an exempt] use should likewise be considered a charitable use”);
City of Richmond v. Richmond Mem’l Hosp., 202 Va. 86, 95, 116 S.E.2d 79
(1960) (holding that in Virginia, an exemption during construction of a hospital
was allowed because it “existed as a corporate entity before it was a hospital in
brick and mortar, and as a corporate entity it was occupying and using its real
estate during the two years in question to develop the hospital in the physical
sense”).

¶43 Another recurring idea in states that allow for an exemption during
construction is that it is for the public good that non-profit organizations can
devote resources to their works for the benefit of society. See e.g., Utah Cnty. By
& Through Cnty. Bd. of Equalization of Utah Cnty., 725 P.2d at 1359 (holding
that in Utah, it was “consistent with the constitutional policy of encouraging
private charities” to allow certain exemptions and that the public benefit of
charities could only be diminished “if monies committed to the charity must be

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No. 2023AP1432(D)

used to pay ad valorem property taxes”); Overmont Corp., 479 Pa. at 251 (holding
that in Pennsylvania, to deny an exemption during construction “would tend to
impede the purposes for which the tax exemption was created”); South Iowa
Methodist Homes, Inc. v. Board of Rev. of Cass Cnty., 257 Iowa 1302, 1305,
1309, 136 N.W.2d 488 (1965) (holding that in Iowa, subjecting a “property to
taxation during the construction period would tend to defeat the object of the
exemption statutes”).

¶44 Nonetheless, there are certainly states that bar an exemption during
construction, usually premised on the idea that the intended use of a building does
not qualify for an exemption. See e.g., Grace & Peace Fellowship Church, Inc.
v. Cranford Twp., 4 N.J. Tax 391, 400 (N.J. Tax Ct. 1982) (holding that New
Jersey does not provide exemptions for intended use); Smith v. American Lung
Ass’n of Gulfcoast Fla., Inc., 870 So. 2d 241, 242 (Fla. Dist. Ct. App. 2004)
(holding that in Florida “the ongoing construction of a building[] does not qualify
for an exemption even though the intended future use of the building will
qualify”); In re Vienna Baptist Church, 241 N.C. App. 268, 272, 773 S.E.2d 97
(N.C. Ct. App. 2015) (holding that in North Carolina, a half-constructed church

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No. 2023AP1432(D)

did not qualify for an exemption because the building was not exclusively used for
religious purposes).2

¶45 I believe that the current statutory language allows for a construction
phase to satisfy the exclusive use requirement for the property tax exemption for
hospitals when the facts support that there is no dispute over the exemption when
the property is completed.3 In my opinion, that is the true issue and dispute in this
case—whether the North Tower qualifies for an exemption as a completed and
operational entity. Taxation during the construction process should flow from the
use of the property, in a reasonable interpretation of WIS. STAT. § 70.11(4m).
Therefore, I would remand this case for further proceedings.4 I respectfully
dissent.

2
I note that some states have expressly included construction as a use for exemption of
certain types of property. It appears the North Carolina legislature amended the relevant statutes
effective for taxes imposed after the 2012 tax year analyzed in In re Vienna Baptist Church, 241
N.C. App. 268, 773 S.E.2d 97 (2015). The statutes were amended to exempt such property
“under construction and intended to be wholly and exclusively used by its owner for religious
purposes upon completion.” N.C. GEN. STAT. § 105-278.3(g)(3) (2023-24); 2015 N.C. Sess.
Laws,185, § 1. An Idaho law provides that “[a]ll improvements to and construction on the real
property, while it is being prepared for use as a hospital, shall be exempt from taxation.” IDAHO
CODE § 63-602D(3) (2023-24). After a California court rejected an exemption during
construction because there was no actual use in Cedars of Lebanon Hosp. v. Los Angeles Cnty.,
35 Cal. 2d 729, 743, 221 P.2d 31 (1950), the California legislature then amended its property tax
exemption statutes to provide that “‘property used exclusively for religious, hospital or charitable
purposes’ [in this section] shall include facilities in the course of construction on or after the first
Monday of March, 1954…. CAL. REV. & TAX. CODE § 214.1 (1951-52). California property tax
law was amended since then and the construction exemption appears narrowed. Nevertheless,
Cedars of Lebanon and its aftermath represent the legislature’s control over the topic.
3
As the Majority’s holding is premised on the “used exclusively” language in WIS.
STAT. § 70.11(4m), I would presume that at least a dozen other subsections that use similar
language would be covered the same prohibition. See § 70.11(4), (5), (6), (13), (14), (16), (17),
(25), (28), (32), (33), (46).
4
Reviewing the record in this case, CHW moved to join this case, challenging the 2020
tax year, with a later challenge of the 2021 tax year for being denied the exemption or paying
excessive taxation. The circuit court denied that motion.

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No. 2023AP1432(D)

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