March 14, 2011 – The $16.4 million question is whether freezing cranberries is considered “storage” or “manufacturing” for purposes of property tax assessment. Recently, the Wisconsin Tax Appeals Commission concluded that litigation must continue to determine the answer.
In WR Cold Storage LLC v. Wisconsin Department of Revenue, No. 08-M-79 (Feb. 28, 2011), the Tax Appeals Commission (commission) refused to grant partial summary judgment, finding genuine issues of material fact still exist.
The Wisconsin Department of Revenue (DOR) assessed the personal and real property of WR Cold Storage LLC (Cold Storage) at $16.4 million for tax years 2007-09, which Cold Storage challenged on appeal.
Under Wis. Stat. section 70.11, certain real and personal property used in the manufacturing process is exempt from property tax, but manufacturing does not include storing raw materials or finished units of tangible personal property.
Despite its name, Cold Storage argues the personal and real property it uses to keep harvested cranberries at -20 degrees Fahrenheit is part of a manufacturing process, not a storage process, because the freezing component enhances certain commercially desirable qualities, like sweetness. However, the DOR argues the hyper-freezing process is part of a cranberry “storage” process.
Among its evidence, Cold Storage obtained an affidavit from a certified professional soil scientist and agronomist concerning research indicating that freezing cranberries at colder temperatures enhances certain desirable qualities.
Thus, the freezing process – and the real and personal property used in this process – is part of the cranberry manufacturing process, Cold Storage argues.
But the DOR filed its own affidavit from a U.W. professor of horticulture, in which the professor asserts that “there is no scientific basis upon which [the soil scientist’s] hypothesis can be predicated and no scientific facts that would form a basis for such a conclusion.”
The commission examined several relevant cases, including one case in which it upheld the DOR’s conclusion that commercial greenhouses were not manufacturing property.
But the commission concluded the statutes, regulations, and case law do not answer the specific question at issue, and genuine issues of material fact still exist.
“Summary judgment procedure does not allow us to decide this case based on which party has the better affidavits,” Commissioner Thomas J. McAdams wrote. “There are genuine issues of material fact that are yet to be resolved here.”
Namely, litigation will continue to determine the reliability of the soil scientist’s research.