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In 2008, the Wisconsin Tax Appeals Commission ruled that the
following categories of computerized medical equipment are exempt
from property tax:
- Ultrasound equipment
- Magnetic resonance imaging (MRI) equipment
- Radiation oncology and linear accelerator equipment
- Laser equipment
- Cardiology equipment
- Nuclear medicine equipment
- Digital imaging equipment
- Diagnostic equipment
City of LaCrosse v. Wisconsin Dep't of Revenue and
Gundersen Clinic, Ltd. (Gundersen Clinic).1 The
Dane County Circuit Court recently affirmed the commission's
ruling, and the city is not appealing. Therefore, the
commission's ruling is now final.
The Gundersen Clinic case has important implications
not only for owners and lessees of computerized medical equipment
located in Wisconsin, but also for owners and lessees of other
devices that are connected to and operated by computers. Wisconsin
taxpayers should take immediate steps to evaluate whether to
correct their personal property tax reporting for such
equipment.
Statutory Exemption of Computer Equipment
The ruling in Gundersen Clinic is based on Wis. Stat.
§ 70.11(39), which exempts from property tax "mainframe
computers, minicomputers, personal computers, networked personal
computers, ... electronic peripheral equipment, tape drives, [and]
printers." The exemption does not apply to "equipment
with embedded computerized components." The Computer Exemption
Guidelines (Guidelines) published by the Wisconsin Department of
Revenue state with respect to medical devices that "certain
electronic imaging and monitoring devices" are exempt if they
are "computers or electronic peripheral equipment" and
cite as examples of exempt medical devices "ultrasound imaging
device, magnetic resonance imaging device (MRI), and computerized
axial tomography." The Guidelines state that x-ray imaging
equipment, on the other hand, is taxable because it is "not a
computer or connected to and operated by a computer."
The Gundersen Clinic Ruling
In the Gundersen Clinic case, the taxpayer reported the
above categories of medical equipment as exempt in its personal
property statements for the years at issue. The city assessor
reclassified all but ultrasound and MRI equipment as taxable. The
taxpayer objected to the reclassifications, and the State Board of
Assessors ruled for the taxpayer. The city appealed to the Tax
Appeals Commission.
Both the city and the taxpayer moved for summary judgment based
on their respective experts' opinions as to the meaning of
"electronic peripheral equipment" versus "embedded
computerized components." The commission ultimately did not
rest its decision on expert testimony, but rather on statutory
construction and the burden of proof.
In deciding for the taxpayer, the commission made several
rulings that have broad application beyond medical devices: (1)
When a municipality seeks review of a State Board of Assessors
determination that is favorable to the taxpayer, the municipality
has the burden of overcoming the presumption of correctness of the
board's determination by presenting competent, credible, and
unambiguous evidence demonstrating that the determination is
incorrect. (2) Wis. Stat. § 70.11(39) delineates mutually
exclusive categories of exempt and taxable computer equipment. (3)
The DOR's Computer Exemption Guidelines are authoritative
because they do not conflict with § 70.11(39), but rather give
effect to the statute by further defining the distinctions between
the exempt and taxable categories it establishes. (4) The
commission accepted the Guidelines' and taxpayer's
expert's definition of electronic peripheral devices as devices
"connected to and operated by a computer" and concluded
that the city's expert evidence was insufficient to meet the
city's burden of proof.
Implications for Exemption of Other Computer-Controlled
Equipment
Although the Gundersen Clinic case specifically
addresses computerized medical equipment, it has much broader
implications. The DOR's Guidelines apply Wis. Stat. §
70.11(39) to more than 40 different categories of electronic
equipment. By recognizing the Guidelines as authoritative, the
decision in Gundersen Clinic fortifies the position that
other types of devices that are connected to and controlled by
computers similarly qualify as electronic peripheral devices and
are entitled to the exemption.
The scope of the computer exemption is tempered by the
commission's prior ruling that multifunction document
processing equipment that combines a computer server, scanner,
printer, and fax capabilities (MFD) is not exempt. Xerox Corp.
v. Wis. Dep't of Revenue.2 The commission's
reasoning in Xerox was that for devices to qualify as
electronic peripherals, the computers to which they are connected
and by which they are controlled must be "external."
Claiming the Exemption
Disputes regarding the scope of the computer exemption arise
when taxpayers report equipment as exempt in their personal
property statements, and the assessor reclassifies the equipment as
taxable. Regardless of whether computerized equipment is state
assessed (i.e., owned or leased by manufacturers) or locally
assessed, objections to the assessment of such equipment are filed
with the State Board of Assessors, not with the local board of
review. The deadline for filing a computer objection is 60 days
from the date of the assessment notice (or notice of
reclassification), which is longer than the typical time to file a
local board of review objection.
Wisconsin taxpayers who own or lease computers and
computer-controlled devices and who have reported such equipment as
taxable in the past should carefully consider whether to instead
report such equipment as exempt based on Gundersen Clinic.
If the assessor reclassifies such equipment as taxable, taxpayers
should consult their legal advisors about filing a timely objection
to preserve their rights.
Footnotes
1. [2 Wis.] St. Tax Rep. (CCH) ¶ 401-589 (Wis. Tax
App. Comm'n June 8, 2012, incorporating June 9, 2008 ruling),
aff'd id.¶ 401-658 (Wis. Cir. Ct. Dane County
Dec. 7, 2012).
2. [2 Wis.] St. Tax Rep. (CCH) ¶400-814 (Wis. Tax
App. Comm'n Feb. 17, 2005), aff'd, id. ¶
401-042 (Wis. Cir. Ct. Dane County Sept. 21, 2007),
aff'd, 2009 WI App 113, 321 Wis. 3d 181, 772 N.W.2d
677 (Ct. App. 2009).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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