Applegate-Bader Farm, LLC v. Wis. Dep't of Revenue

• Decision Date: 16 March 2021
• Docket Number: No. 2018AP1239,2018AP1239
• Citation: 2021 WI 26,955 N.W.2d 793,396 Wis.2d 69
• Parties: APPLEGATE-BADER FARM, LLC, Plaintiff-Respondent-Cross-Appellant-Petitioner, v. WISCONSIN DEPARTMENT OF REVENUE and Richard Chandler in his capacity as Secretary of the Department of Revenue, Defendants-Appellants-Cross-Respondents.
• Court: Wisconsin Supreme Court

396 Wis.2d 69

955 N.W.2d 793

2021 WI 26

APPLEGATE-BADER FARM, LLC, Plaintiff-Respondent-Cross-Appellant-Petitioner,

v.WISCONSIN DEPARTMENT OF REVENUE and Richard Chandler in his capacity as Secretary of the Department of Revenue, Defendants-Appellants-Cross-Respondents.

No. 2018AP1239

Supreme Court of Wisconsin.

Oral Argument: November 9, 2020

Opinion Filed: March 16, 2021

Motion For Reconsideration Filed March 31, 2021

For the plaintiff-respondent-cross-appellant-petitioner, there were briefs filed by Ryan L. Woody, Catherine Dowie, and Matthiesen, Wickert & Lehrer, S.C., Hartford. There was an oral argument by Ryan L. Woody.

For the defendants-appellants-cross-respondents, there was a brief filed by Anthony D. Russomanno, assistant attorney general; with whom on the brief was Joshua L. Kaul, attorney general. There was an oral argument by Anthony D. Russomanno.

An amicus curiae brief was filed on behalf of Midwest Environmental Advocates, Madison, by Adam Voskuil, and Clean Wisconsin, Madison, by Evan Feinauer.

ROGGENSACK, C.J., delivered the majority opinion of the Court, in which ANN WALSH BRADLEY, REBECCA GRASSL BRADLEY, DALLET, and KAROFSKY, JJ., joined. HAGEDORN, J., filed a dissenting opinion.

PATIENCE DRAKE ROGGENSACK, C.J.

¶1 We review a decision of the court appeals¹ that affirmed the circuit court's² grant of summary judgment to the Department of Revenue (the Department) against Applegate-Bader Farm, LLC (Applegate). As it relates to this appeal, the circuit court and the court of appeals determined that Applegate did not raise a claim that triggered judicial review of the Department's decision not to prepare an Environmental Impact Statement (EIS) under the Wisconsin Environmental Policy Act (WEPA) when it promulgated the administrative rule set out in Wis. Admin. Code § Tax 18.05(1)(d) (2015-16) ("the rule").³

¶2 The circuit court held that Applegate had not made a threshold showing that there was an environmental injury. The court of appeals affirmed and held that Applegate had not raised a bona fide claim because it alleged only indirect environmental effects.

¶3 We conclude that administrative agencies must consider indirect, as well as direct, environmental effects of their proposed rules when deciding whether to prepare an EIS. Therefore, Applegate met its threshold burden even though it alleged only indirect environmental effects of the rule. On review of the Department's decision not to prepare an EIS, we conclude that the Department failed to develop a reviewable record that demonstrates that it made a preliminary investigation and reached a reasonable conclusion about the environmental consequences of its action. Therefore, the Department failed to comply with WEPA. Accordingly, we reverse the court of appeals’ decision that concludes to the contrary. We remand the WEPA claim to the circuit court with instructions to remand the WEPA matter to the Department for further actions consistent with this decision. Additionally, we stay the enforcement of Wis. Admin. Code § Tax 18.05(1)(d).

I. BACKGROUND

¶4 Applegate operates a farm in southern Wisconsin on approximately 11,000 acres of land. Roughly 2,000 of those acres are enrolled in a federal Wetland Reserve Easement ("easement") through the Agricultural Conservation Easement Program. Applegate's easement is permanent, and therefore it is unable to use the land subject to the easement for agricultural purposes. This action arises out of a 2015 revision of Wis. Admin. Code § Tax 18.05(1)(d) and the effect that that revision had on landowners with certain conservation easements.

A. Wisconsin Admin. Code § Tax 18.05(1)(d)

¶5 The Wisconsin Constitution provides that land must be taxed uniformly. Wis. Const. art VIII, § 1. Generally, this requires that real property is taxed according to its fair market value. Wis. Stat. § 70.32(1) (2019-20).⁴ However, "[t]axation of agricultural land and undeveloped land, both as defined by law, need not be uniform with the taxation of each other nor with the taxation of other real property." Wis. Const. art. VIII, § 1. Accordingly, agricultural land is assessed "according to the income that could be generated from its rental for agricultural use." Wis. Stat. § 70.32(2r). This is generally referred to as the land's "use value." Non-agricultural, undeveloped land is assessed at "50 percent of its full value, as determined under [ § 70.32 ](1)." § 70.32(4).

¶6 Pursuant to Wis. Stat. § 70.32(2)(c)1i., "agricultural use" is "defined by the department of revenue by rule and includes the growing of short rotation woody crops, including poplars and willows, using agronomic practices." The Department defines agricultural use in Wis. Admin. Code § Tax 18.05(1). As it relates to this appeal, paragraph (d) states as follows:

(d) Land without improvements subject to a federal or state easement or enrolled in a federal or state program if all of the following apply:

1. The land was in agricultural use under par. (a), (b), or (c) when it was entered into the qualifying easement or program, and

2. Qualifying easements and programs shall adhere to standards and practices provided under the January 31, 2014 No. 697 version of s. ATCP 50.04, 50.06, 50.71, 50.72, 50.83, 50.88, 50.91, 50.96, or 50.98. The Wisconsin Property Assessment Manual, authorized under [ Wis. Stat. §] 73.03(2a), shall list the qualifying easements and programs according to the ATCP provisions, and

3. a. The terms of the temporary easement or program do not restrict the return of the land to agricultural use under par. (a), (b), or (c) after the easement or program is satisfactorily completed, or

b. The terms of the easement, contract, compatible use agreement, or conservation plan for that specific parcel authorized an agricultural use, as defined in par. (a), (b), or (c), for that parcel in the prior year.

Wis. Admin. Code § Tax 18.05(1)(d). The Department adopted this version of the rule in 2015.

¶7 Prior to the above quoted definition, the Department listed easements by name that qualified for agricultural use taxation. See Wis. Admin. Code § Tax 18.05(e) (1997). Several of the previously named state and federal easement programs are no longer in existence. Accordingly, the Department first revised the agricultural use rule in 2000. See Wis. Admin. Code § Tax 18.05(1)(d) and (e) (2000). And, in 2013, the Department undertook revising the rule again. According to the Department's 2013 statement of scope:

The proposed rule will address changes in the listed programs that have occurred since the rule was enacted and will also identify general criteria for determining what land that is in federal and state pollution control and soil erosion programs qualifies for agricultural use under the subchapter. This will provide consistency and clear standards for property owners and assessors.

691B Wis. Admin. Reg. SS 084-13 (July 31, 2013).

¶8 A draft of the 2013 rule included temporary and permanent easements at both the state and federal level. 696B Wis. Admin. Reg. CR 13-102 (Paragraph (e) explained agricultural use as follows: "Commencing with the January 1, 2015 assessment, land without improvements subject to a permanent federal or state easement or enrolled in a permanent federal or state program if that land was in agricultural use under par. (a), (b), or (c) when it was entered into the easement or program."). During the comment period, the Department received feedback from several entities, Applegate included. Some entities, including Applegate, supported the broader definition that the proposed rule provided. However, some entities opposed that broad definition; they argued that those who permanently removed their lands from agricultural use should not be permitted to take advantage of that agricultural use definition.

¶9 The final rule appears to permit permanent state or federal easement holders to claim agricultural use for taxation only when the terms of an easement "authorized an agricultural use, as defined in par. (a), (b), or (c), for that parcel in the prior year." Wis. Admin. Code § Tax 18.05(1)(d)3.b.

B. This Litigation

¶10 In 2016, and after the Department issued the final version of the rule, Applegate initiated this lawsuit. Applegate's amended complaint raised nine claims for relief, two of which were subject to appeal and one of which, the WEPA claim, is now before us in this case.⁵

¶11 As it relates to Applegate's WEPA claim, Applegate alleged the following:

206. The final rule order excluded wetlands covered by the ACEP and WRE and completely removed agricultural use value assessment from wetlands enrolled in the Stream Bank Protection program under [ Wis. Stat. § 23.094 ]; the Conservation Reserve Enhancement program under [ Wis. Stat. § 93.70 ], and the Non-point Source Water Pollution Abatement program under [ Wis. Stat. § 281.65 ].

207. The Department ignored and/or failed to consider evidence in its possession from the Department of Natural Resources that the exclusion and removal of wetlands in agricultural conservation easements from Tax 18.05(1)’s definition of "agricultural use" causes farmers to destroy sensitive wetlands by placing cows within the wetlands to achieve use value assessment.

208. The Department further ignored and/or failed to consider evidence in its possession from the [Department of] Natural Resources that the exclusion of WRP/WRE easements from Tax 18.05(1) is causing property owners to not enroll their wetlands into the federal program.

209. The removal and exclusion of wetlands conserved in agricultural easements from agricultural use value will result in the further destruction, degradation and loss of wetlands in this State.

210. The exclusion and removal of wetlands conserved in agricultural easements from agricultural use value has and will continue to have a significant effect upon the environment, thus, necessitating compliance with WEPA, Wis. Stat. [§] 1.11.

....

212. WEPA is procedural in nature and does not control

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