Court ruling offers property tax exemption for computerized equipment

As technology has evolved at an astounding pace over the past years, businesses have been quick to adapt and incorporate advanced technology into operations. Business owners and operators in Wisconsin who utilize computerized equipment should be aware of a recent Wisconsin court decision that could significantly impact their annual property tax assessments.

In 2008, the Wisconsin Tax Appeals Commission ruled that certain categories of computerized medical devices are exempt from property tax. That decision recently was affirmed by the Dane County Circuit Court in the case of City of LaCrosse v. Wisconsin Department of Revenue and Gundersen Clinic.

The Wisconsin Statutes exempt from property tax computers and other equipment connected to or operated by a computer, referred to as “electronic peripheral equipment.” In the City of LaCrosse case, the court affirmed that the exemption extends to sophisticated medical devices such as MRI, ultrasound and nuclear medicine equipment. The court gave weight to the DOR’s computer exemption guidelines, which recognize as exempt many other types of computerized equipment such as ATMs, credit card readers and grocery store scanners.

Owners and operators of businesses that rely heavily on computerized equipment should take immediate steps to evaluate whether their personal property tax reporting for such equipment needs to be adjusted in future tax filings. The following steps are recommended:

1. Consider what equipment may be tax exempt. Take inventory of how computers are used in your business. If the computerized equipment is used in manufacturing, it most likely already is exempt under a separate exemption for manufacturing machinery and equipment. If the computerized equipment is not used in manufacturing, it may be entitled to the computer exemption.

2. Consult with a legal advisor. Work with a legal advisor to evaluate whether the computerized equipment is exempt and quantify the potential tax savings from claiming the exemption.

3. Prepare for reclassifications. Disputes regarding the scope of exemptions arise when equipment reported as exempt in personal property statements is reclassified by the assessor as taxable. If the assessor reclassifies such equipment as taxable, taxpayers should consult a legal advisor about filing a timely objection to preserve their rights.

Understanding that such advanced equipment can often represent a significant portion of tax filings for businesses, it is essential for companies to evaluate whether any money is being left on the table. The ruling could mean significant changes to tax filings for businesses across the state of Wisconsin.

Maureen McGinnity is a partner in Foley & Lardner LLP’s Milwaukee office. She is member of the firm’s Business Litigation practice and focuses on federal, state and local tax litigation and resolution of complex contract and tax disputes.

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