BIDS as a Superior Innovation Tool

Cities, which were previously facing population decreases due to urban sprawl, are now facing an urban resurgence or revitalization. Millennials and retirees have found a home in many of the urban centers of America. In 2010, 83.7% of people in the United States and Puerto Rico lived in metropolitan area and a 10.8% growth in metropolitan areas from 2000-2010.[1] However, with a large number of people living in the suburbs in previous decades, cities have not updated their neighborhoods to fit the needs and desires of its new residents. One of the tools to meet this need is a Business Improvement District (BID)

Business Improvement Districts are areas inside a municipality created for the purpose of developing, redeveloping, or maintaining a business area.[2] New Orleans was the first city in the United States to implement a BID, and it saw great success. [3] There are now more than 1,200 BIDs nationally. In 1984, Wisconsin created its BID statute. [4] There currently 34 active BIDs within the city of Milwaukee. [5]

One of the unique aspects of a BID is that it requires that one business owner in this area to come forward with a petition for the BID.[6] The planning commission designs its special assessment method and the implementation of the collected funds. If the owners of at least 40% of land value inside the BID raise an objection, it is vetoed. If the landowners do not veto the plan, then it then goes through the city legislative process and the mayor can approve it. The BID members have to renew the BID on an annual basis, unless there is an outstanding debt.

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US Treasury and IRS Recognize Same-Sex Marriages for Federal Tax Purposes

accounting-calculatorYesterday the U.S. Department of the Treasury and the Internal Revenue Service (IRS) announced that legally married same-sex couples will be recognized and treated as married for all federal tax purposes. As long as the couple is legally married it does not matter if they live in a jurisdiction that does not recognize same-sex marriages. The announcement comes just months after the Supreme Court’s decision in United States v. Windsor, which held that a key provision of the Defense of Marriage Act (DOMA) violated principles of equal protection under the Due Process Clause of the Fifth Amendment. The ruling gives married same-sex couples the freedom to move throughout the United States without having to worry about federal tax implications. However, the ruling does not apply to couples in domestic partnerships or civil unions.

Yesterday’s “ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.” IR-2013-72. The ruling is to be applied retroactively so married same-sex couples have the opportunity to file or amend federal tax returns for the 2010, 2011, and 2012 tax years. Before amending returns, couples will want to determine if their combined income will subject them to the “marriage penalty” which could place them in a higher tax rate bracket.

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Ending Agricultural Use Assessment Abuse

Agriculture is one of Wisconsin’s most important industries, and various state laws are intended to protect existing farms from urban encroachment. For example, Wisconsin, like many other states, assesses agricultural property for property tax purposes based on its use value rather than its market value. Assessing farmland by its use value protects existing farmers from forced sale of their land when urban encroachment raises the market value of the farmland.

Existing farmers are not the only ones benefiting, however, from agricultural use assessments. Both local and national media outlets identified a growing problem: agricultural use assessment abuse. [See here ; here ; and here.] Wealthy developers and property owners put their property to agricultural uses so that the property benefits from a use value assessment instead of a market value assessment. The use assessment often results in considerable tax savings. Most coverage of the issue criticizes the practice, but either describes the practice as a loophole or implies that local government units are powerless to do anything about it.

Most coverage fails to recognize, however, that local communities can put a stop to much of the abuse. Many new agricultural uses implemented simply for the tax benefit violate existing local zoning ordinances. The Wisconsin Department of Revenue says that tax assessors must assess agricultural land by its use value even if the agricultural use violates local zoning ordinances.

The Wisconsin Department of Revenue also says that local communities can stop the abuse by enforcing zoning ordinances. There are various reasons why communities choose not to pursue enforcement. Communities may fear that an enforcement action could bankrupt a developer which would then prevent the completion of a stalled project. Local leaders may not want the political risk involved in taking on wealthy developers or residents. Regardless of the reason for avoiding enforcement, communities are not powerless to reduce agricultural use assessment abuse.

Agricultural use assessment abuse is not a victimless transgression. Illegal agricultural use assessments harm other property owners by either shifting the tax burden to other property owners or forcing local governments to reduce services. During these difficult economic times, local governments must make many difficult choices. Local governments should not, however, allow illegally obtained tax breaks.

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