SB 291

This bill provides that, for property tax purposes, real property includes any

leases, rights, and privileges pertaining to the property, including assets that cannot

be taxed separately as real property, but are inextricably intertwined with the real

property. The bill also requires real property to be assessed at its highest and best

use. Current law requires that real property be assessed at its full value and upon

actual view or from the best information that the assessor can obtain from

“arm's-length sales" of comparable property. This bill defines an “arm's-length sale"

as a sale between a willing buyer and willing seller, neither being under compulsion

to buy or sell and each being familiar with the attributes of the property sold.

The bill also provides that an assessor shall determine the value of leased

property by considering the lease provisions and actual rent pertaining to property,

if the lease provisions and rent are the result of an “arm's-length transaction.” The

bill defines an “arm's-length transaction” as an agreement between willing parties,

neither being under compulsion to act and each being familiar with the attributes

of the property.

The Wisconsin Supreme Court decided in 2008 that a property tax assessment

of leased retail property using the income approach must be based on “market rents,"

which is what a person would pay to rent the property, based on rentals of similar

property, as opposed to “contract rents," which is the amount that the lessee actually

paid to rent the property. See,

Walgreen Company v. City of Madison

, 2008 WI 80,

752 N.W.2d 689 (2008). This bill reverses that decision.