Wisconsin Closes Manufacturers' Tax Loophole

Lawmakers close loophole used by paper and manufacturing companies to exempt multi-million dollar facilities from property taxes.

MADISON, Wis. (AP) - Wisconsin lawmakers moved Tuesday to close a loophole that paper and manufacturing companies were trying to use to exempt facilities worth millions of dollars from property taxes.

The Assembly voted 94-0 to pass a bill that essentially overturns a 2004 court decision that expanded a property tax break for companies that reduce pollution by using recycled materials.

The ruling said the property tax exemption could apply to all land, buildings and equipment at manufacturing sites where waste treatment is performed.

After the ruling, three companies were granted $34 million worth of annual property tax exemptions. Scores of other companies that recycle paper, plastics and metal applied for tax breaks worth an additional $135 million per year, according to the Department of Revenue.

Municipalities warned they would have to raise taxes on homeowners and other companies to make up for the lost revenue.

The bill tries to return to the policy followed before the court decision, limiting the break to waste treatment facilities that recycle industrial waste or abate pollution.

Rep. Dean Kaufert, R-Neenah, said the bill stops millions of dollars of industrial properties from going off the property tax rolls and ''a massive tax shift in a lot of our districts.''

''This benefits all of us and protects the taxpayers of this state,'' he told the Assembly before the vote.

The Assembly's action sends the bill to Gov. Jim Doyle, who is expected to sign it into law. The Senate passed the bill 33-0 two weeks ago.

Among the companies expected to lose tax exemptions is The Newark Group, Inc., of Cranford, N.J., whose lawsuit led to the 2004 Tax Appeals Court ruling granting a tax break on its $11 million paperboard recycling facility in Milwaukee.

Fox River Fiber Co. in De Pere and Green Bay Packaging are expected to lose exemptions totaling $23 million, and the break would not be available to about a dozen other companies who applied for it.

Edward Wilusz, a lobbyist for the Wisconsin Paper Council, said the pulp and paper industry opposed the bill but decided not to fight it. Many companies' equipment should continue to receive the break, but it will not extend to their land and buildings, he said.

Wilusz and other industry representatives said companies were merely trying legally reduce their costs.

''The court basically changed the law and you can't criticize companies for following the law,'' said James Buchen, a vice president of Wisconsin Manufacturers and Commerce. ''Now the Legislature is choosing to change it again and that's certainly their prerogative and companies will comply with that law.''

Buchen said his group also opposed the bill because it could potentially eliminate the tax break for companies that have historically qualified.

''There's going to be some disagreements over which properties will be exempt and there will be additional litigation as a result,'' he said.

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