Politics & Government

Supreme Court Ready to Hear Wheaton vs. Tosa Tax Case

City could owe up to $7 million if healthcare company is deemed tax-exempt; high court will hear arguments Friday.

Wauwatosa City Attorney Alan Kesner will travel to Madison on Friday to sit in on a Supreme Court argument that will, when the justices hand down their ruling later this spring, settle a longstanding claim that many in the health care industry will be watching.

At issue is whether Wheaton Franciscan Healthcare's outpatient clinic at 210 N. Mayfair Rd. should or should not pay property taxes.

"They've argued for years that they're tax exempt, and we've argued they're not," Kesner said. "We've gotten mixed findings in the the courts."

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In 2003, Wheaton Franciscan moved operations from an existing and tax-exempt outpatient facility to a new five-story outpatient center in Wauwatosa.Β  Approximately two-thirds of the building is operated as a hospital outpatient and urgent care center.

A Milwaukee Circuit Court trial ended in Wheaton's favor, but Wauwatosa won a reversal of that finding in the Court of Appeals. Wheaton then appealed to the Supreme Court, and if it wins outright, would be owed an estimated $7 million in refunds from 2003 to date.

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"Wheaton Franciscan, or Covenant as it was called when this started, has said it should have been tax-exempt because it is used as part of the main St. Joseph's Hospital campus over on Chambers Street (at 55th Street in Milwaukee) – seven miles away."

Wisconsin tax law allows tax-exemptions for hospitals of 10 or more overnight beds; the Wheaton clinics on Mayfair Road do not have beds, providing only outpatient and urgent care.

"They have cited integrated services and referrals," Kesner said. "Their argument is whether it's a necessary part of their operations.

"The original court finding split up those services and said that something like 40 percent was not tax-exempt and the rest was. But the Court of Appeals ruled that none of it was.

"They've also used the argument that they're a charitable organization, but that hasn't gotten them far in the courts," Kesner said.

"State law was changed some years ago to say that doctors' offices are not tax-exempt. Doctors themselves are not charities; those are usually partnerships."

Anne Ballentine, a spokeswoman for Wheaton Franciscan, said that the health care organization has agreed that it must pay taxes on its doctors' offices and has paid them, but that the clinics are a different matter.

"We do pay taxes on the doctors' offices, that's not in dispute," Ballentine said. "What's in dispute is the hospital outpatient services, such as radiology, MRI, cardiopulmonary and wound care, as examples. We're saying that those facilities are just like the outpatient clinics at any hospital; these are just in a different place.

"With our urgent care facility, we're a 24/7 operation. Every hospital in the area has opeations like these associated with it, and we don't see ours as any different.

"In all respects, the outpatient center functions in the same manner as if its services were provided within the four walls of a hospital."

Wheaton has continued to pay property taxes while the case has moved through the courts, but it has also continued to file claims that the assessment of its properties is too high.

Wheaton's refund claims for 2010 amount to more than $1 million and are among a slew of such claims from some of Wauwatosa's biggest taxpayers. Similar overassessment claims were filed by Mayfair Property Inc. for a refund of about $250,000; by Macy's Retail Holdings Inc. for about $650,000 dating since 2008; by Walgreen Co. for nearly $150,000; Target for just over $100,000; plus other smaller claims.

Regular taxpayers needn't be alarmed, though, that the city is actually liable to pay back all that money.

"It's pretty routine," Kesner said. "These come every year. They can file claims by the end of January, and we have 90 days to respond. We always deny them, and then they can sue us if they want.

"It's just what everybody says – 'My taxes are too high.'"

The Common Council's Budget and Finance Committe will review those claims Tuesday night. Kesner said that because litigation is involved, the committee will almost undoubtedly go into closed session.


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