author: SHIRLEY S. ABRAHAMSON, C.J.

text:
    Kelly Brown, Plaintiff-Appellant, v. Labor and Industry Review Commission, Defendant-Respondent, Schultz Sav-o-Racine and Reliance Insurance Company, Defendants-Respondents-Petitioners.
    Supreme Court

      No. 02-1429.

      Oral argument October 7, 2003.—

      Decided November 18, 2003.

    2003 WI 142
    (Also reported in 671 N.W.2d 279.)

      For the defendants-respondents-petitioners there were briefs by Michael C. Frohman and Kasdorfi Lewis & Swietlik, S.C., Milwaukee, and oral argument by Michael C. Frohman.

    For the plaintiff-appellant there was a brief by John A. Becker and Becker, French & DeMatthew, Racine, and oral argument by John A. Becker.

    For the defendant-respondent there was a brief (in the court of appeals) by Lowell E. Nass, assistant attorney general, and James E. Doyle, attorney general.

       Motion for Reconsideration denied 2-26-04.

   SHIRLEY S. ABRAHAMSON, C.J.

¶ 1. This is a review of a published decision of the court of appeals. The circuit court affirmed the order of the Labor and Industry Review Commission (LIRC), which held that Reliance Insurance Company, the insurer, did not act in bad faith when it suspended temporary total disability benefit payments to Kelly Brown, the employee, prior to the termination of his healing period. See Wis. Stat. § 102.18(l)(bp) (2001-2002) (establishing penalty in an award for bad faith); Wis. Admin. Code § DWD 80.70(2) (Nov. 2002) (defining bad faith).

¶ 2. The court of appeals reversed the order of the circuit court, concluding that LIRC misapplied the law of bad faith to the facts of the case. The court of appeals concluded that the insurer failed to properly investigate and develop the facts necessary to evaluate the employee's claim and, as a result, the insurer acted in bad faith when it terminated the employee's benefits. The court of appeals remanded the cause to the circuit court for remand to LIRC for a determination of the amount of the penalty award.

¶ 3. The issue before us is whether LIRC's conclusions of law — that the employee's claim for benefits was fairly debatable and that the insurer's suspension of benefits did not constitute bad faith under Wis. Stat. § 102.18(l)(bp) and Wis. Admin. Code § DWD 80.70(2) —should be affirmed.

¶ 4. We conclude that this court must give great weight deference to LIRC's conclusions of law and that LIRC's conclusions of law are reasonable. Accordingly, we affirm LIRC's order dismissing the employee's application for bad faith and reverse the decision of the court of appéals.

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¶ 5. For the purposes of this review, we provide an abbreviated version of the undisputed facts that are relevant to deciding the issues presented. Additional facts appear later in the opinion relating specifically to the issue of bad faith.

¶ 6. The employee worked as a meat cutter at a grocery store and suffered a compensable hack injury in March 1993. The employee re-injured his back in April 1995. After the second injury, the employee could not return to work. The insurer initially paid the employee temporary total disability from April 6, 1995 through January 26, 1996, but it suspended payment after investigating allegations that the employee was working and not reporting offset income earned from an external source.

¶ 7. The employee challenged the termination of his benefits and requested a worker's compensation hearing on the issue. In November 1996, a hearing was held before an administrative law judge and benefits were reinstated for the remainder of the employee's healing period because the insurer failed to prove that the employee received any income that would have offset disability payments received during the stipulated disability period. Thus the employee won his case for continuation of benefits, and the insurer lost. The issue of whether the employee should receive benefits is not before us. The issue before us is whether the employee is entitled to additional penalty payments on the ground that the insurer acted in bad faith.

¶ 8. After winning his claim for continuation of benefits, the employee filed a claim for a penalty award pursuant to Wis. Stat. § 102.18(l)(bp), alleging that the insurer acted in bad faith when it terminated his temporary total disability benefits. After a hearing in March 2001, the administrative law judge concluded that although there may have been better ways to go about suspending the employee's benefits in January 1996, the insurer's actions did not constitute bad faith. The employee appealed the administrative law judge's findings and order to LIRC. LIRC affirmed and adopted as its own, with one modification, the findings and order of the administrative law judge.

¶ 9. The employee then appealed to the circuit court. The circuit court concluded that the insurer had a reasonable basis to suspend the employee's benefits because the merits of the suspension were debatable.

¶ 10. Our analysis in this case centers around the standard of review. The court of appeals correctly explained that a determination of bad faith under Wis. Stat. § 102.18(1)(bp) and Wis. Admin. Code § DWD 80.70(2) presents a mixed question of fact and law. The parties' conduct presents a question of fact. Courts will sustain LIRC's factual determinations so long as they are supported by credible and substantial evidence.

¶ 11. The interpretation of a statute presents a question of law. The application of a statutory standard to a fact situation is ordinarily a question of law for the courts. The conclusion that an insurer's conduct constitutes bad faith is drawn from the underlying findings of fact, and we label it a legal conclusion.

¶ 12. Nevertheless, labeling an issue as a question of law does not mean that a court may disregard an agency's determination. As the court of appeals correctly stated, an important principle of administrative law is that, in recognition of the expertise and experience of an agency, a court will in certain circumstances defer to the agency's interpretation and application of a statute. Whether a court independently interprets a statute or independently applies the law to the facts or defers in some way to an agency's conclusions of law depends on the particular agency action being reviewed.

¶ 13. Over time, we have developed a three-level approach to an agency's conclusions of law: a court gives an agency's conclusion of law no deference (the court makes a de novo determination of the question of law); a court gives an agency's conclusion of law due weight deference; or a court gives an agency's conclusion of law great weight deference. The appropriate level of scrutiny a court should use in reviewing an agency's decision on questions of law depends on the comparative institutional capabilities and qualifications of the court and the agency to make a legal determination on a particular issue.

¶ 14. No deference is due an agency's conclusion of law when an issue before the agency is one of first impression or when an agency's position on an issue provides no real guidance. When no deference is given to an administrative agency, a court engages in its own independent determination of the questions of law presented, benefiting from the analyses of the agency and the courts that have reviewed the agency action.

¶ 15. Due weight deference is appropriate when an agency has some experience in the area but has not developed the expertise that necessarily places it in a better position than a court to interpret and apply a statute. Under the due weight deference standard "a court need not defer to an agency's interpretation which, while reasonable, is not the interpretation which the court considers best and most reasonable."

¶ 16. Great weight deference is appropriate when: (1) an agency is charged with administration of the particular statute at issue; (2) its interpretation is one of long standing; (3) it employed its expertise or specialized knowledge in arriving at its interpretation; and (4) its interpretation will provide uniformity and consistency in the application of the statute. In other words, when a legal question calls for value and policy judgments that require the expertise and experience of an agency, the agency's decision, although not controlling, is given great weight deference.

¶ 17. We agree with the court of appeals that LIRC's conclusions of law in the present case, although not controlling, are entitled to great weight deference. The legislature delegated the responsibility to administer the Wisconsin's Worker's Compensation Act to the Department of Workforce Development (DWD) and to LIRC. The legislature's rationale was that LIRC would develop the specialized knowledge, expertise, and experience to make consistent policy judgments about bad faith claims when it heard disability compensation claims.

¶ 18. LIRC has developed extensive experience interpreting penalty provisions contained in the Worker's Compensation Act. The legislature enacted Wis. Stat. § 102.18(l)(bp) in 1981 and authorized DWD to adopt a rule governing bad faith. LIRC adopted such a rule through the rulemaking process. Moreover, LIRC has many years of experience applying the law of bad faith and determining appropriate penalties for bad faith consistent with the statutes, administrative code, and case law. In sum, through the. DWD's rulemaking process and through LIRC's cases, LIRC has developed specialized experience, expertise, and knowledge concerning bad faith and employed its expertise in the present case, and deferring to LIRC's interpretation and application of the statute provides uniformity and consistency. We therefore conclude, as did the court of appeals, that LIRC applied that experience, expertise, and knowledge in the present case, and that LIRC's legal conclusions are entitled to great weight deference.

¶ 19. When an agency's conclusions of law are entitled to great weight deference, a court will refrain from substituting its view of the law for that of an agency charged with administration of the law and will sustain the agency's conclusions of law if they are reasonable. Thus a court should sustain an agency's conclusion of law even if an alternative view of the law is just as reasonable or even more reasonable. An agency's conclusion of law is unreasonable and may be reversed by a reviewing court if it directly contravenes the words of the statute or the federal or state constitution, if it is clearly contrary to the legislative intent, history, or purpose of the statute, or if it is without rational basis.

¶ 20. We turn now to examining LIRC's interpretation of the bad faith statute and its application of bad faith law to the facts of the present case.

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¶ 21. Wisconsin Stat. § 102.18(l)(bp) provides, in relevant part, that the Department of Workforce Development (DWD) may include a penalty in an award to an employee if the department determines that an employer's or insurance carrier's suspension or termination of payments resulted from bad faith. The statute authorizes the department to award an amount that it considers just, not to exceed the lesser of 200% of the total compensation due or $15,000. The statute further authorizes the DWD to define, by rule, actions which demonstrate bad faith.

¶ 22. The DWD adopted such a rule. Wisconsin Admin. Code § DWD 80.70(2) defines actions constituting bad faith. An insurance company that, after having commenced payments under § DWD 80.70(2), unreasonably suspends or terminates the payments without credible evidence demonstrating that the claim for the payments is fairly debatable shall be deemed to have acted in bad faith.

¶ 23. The court of appeals concluded in Kimberly-Clark that Anderson v. Continental Insurance Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978), recognizing the tort of bad faith, applies to bad faith claims under Wis. Stat. § 102.18(1)(bp) and the accompanying administrative code provision, Wis. Admin. Code § DWD 80.70(2). The Anderson case adopted a two-part test for bad faith. To demonstrate bad faith, .a claimant must show that the insurer had no reasonable basis for denying benefits and knew or recklessly disregarded that there was no reasonable basis for denying benefits.

¶ 24. The claimant, here the employee, must first show that the insurance company did not have a reasonable basis to suspend payment on the claim. In other words, the insurer did not possess information that would lead a reasonable insurer to conclude that an employee's claim is fairly debatable and that therefore payment need not be made on the claim. The "fairly debatable" test is an objective test. It asks whether a reasonable insurer under similar circumstances would have denied, suspended, or delayed payment on the claim.

¶ 25. The test for determining that an insurer has a reasonable basis to suspend payment on the claim is whether the insurer properly investigated the claim and whether the results of the investigation were subject to a reasonable evaluation and review. The reasonable or unreasonable character of the insurer's conduct is gauged by examining the circumstances existing when the insurer made its decision to deny benefits.

¶ 26. The second element the claimant must show to demonstrate bad faith is that the insurer knew or recklessly disregarded that there was no reasonable basis for denying benefits. The Anderson court explained that the nature of the tort of bad faith is intentional and that implicit in the two-part test is "our conclusion that the knowledge of the lack of a reasonable basis may be inferred and imputed to an insurance company where there is a reckless disregard of a lack of a reasonable basis for denial or a reckless indifference to facts or to proofs, submitted by the insured." The focus for determining whether an insurer is liable for bad faith is the sufficiency or strength of its reasoning.

¶ 27. The state of mind required for a bad faith penalty may be better understood upon examination of Wis. Stat. § 102.22(1), which imposes a penalty for inexcusable neglect. As the court of appeals explained in North American Mechanical v. LIRC, 157 Wis. 2d 801, 808-809, 460 N.W.2d 835 (Ct. App. 1990), chapter 102 contemplates three types of conduct resulting in a delay in payments: (1) excusable neglect; (2) inexcusable neglect; and (3) bad faith delay. The legislature apparently contemplated that some delay could be excusable. When the delay is inexcusable, the delayed payments shall be increased by 10% under § 102.22(1).

¶ 28. The potential 200% penalty provided in Wis. Stat. § 102.18(1)(bp) is reserved for cases of bad faith. Not all inexcusable delays rise to the level of bad faith. "[A] finding of the 'knowledge' element of the Anderson test is a prerequisite to imposition of 'bad faith' penalties under sec. 102.18(1)(bp), Stats."

¶ 29. If an insurance company exercises ordinary care in investigating the facts and law and reasonably concludes that the claim is fairly debatable, the company's actions will not constitute bad faith.

¶ 30. We now turn to whether LIRC's conclusions of law that the employee's claim for benefits was fairly debatable and that the insurer's suspension of benefits did not constitute bad faith within Wis. Stat. § 102.18(l)(bp) and Wis. Admin. Code § DWD 80.70(2) were reasonable and should be affirmed.

IV

¶ 31. The sole question before us is whether LIRC's conclusion of law that the insurer did not act in bad faith is a reasonable interpretation and application of Wis. Stat. § 102.18(l)(bp), the administrative code, and the case law. We reiterate that the issue we address is not whether the employee was entitled to temporary total disability benefits. That issue has already been decided in the employee's favor; the employee's benefits were reinstated.

¶ 32. LIRC reviewed the evidence submitted to the administrative law judge and adopted the findings of fact (with one exception), the conclusions of law, and the order of the administrative law judge as its own. LIRC concluded that the employer had a reasonable basis for believing the employee was engaged in wage-earning services.

¶ 33. The administrative law judge addressed the various pieces of information received at the hearing and concluded that the employer had not suspended benefits in bad faith. The administrative law judge considered important the fact that the insurer received information from three independent sources indicating that the employee was working in insurance sales.

¶ 34. The insurer's first source of information was the state. The Wisconsin Worker's Compensation Division received an anonymous tip on its fraud hotline that the employee was defrauding the insurer by failing to report external income. The insurer initiated an investigation to verify the veracity of the anonymous tip.

¶ 35. The insurer's second source of information was the employee's supervisor. The insurer communicated with the employee's supervisor, who reported that the employee was selling insurance and was not planning to return to his former occupation.

¶ 36. The third source of information was an investigation firm. The insurer hired the firm to watch the employee. The firm provided surveillance on the employee on four separate occasions. The surveillance showed the employee wearing a business suit while entering a building during working hours. The administrative law judge concluded that this information "could be interpreted as selling insurance." The evidence disclosed that the employee had been licensed to sell insurance in Wisconsin since 1994. The evidence also disclosed that the employee did not have a business telephone number.

¶ 37. Apparently the administrative law judge allowed the insurer to infer that when someone was working he was probably earning money. The assumption that the employee was earning money was reinforced by the fact that the employee was in his third year of insurance sales.

¶ 38. The insurer waited until after it had acquired this information — three months after the initial contact with the fraud investigation unit — before suspending benefit payments. The insurer did not, however, seek wage or earnings information from the employee until after it suspended benefits. The court of appeals criticized the insurer and LIRC for this failure, remarking that an insurer cannot shoot first and ask questions later.

¶ 39. The administrative law judge noted that the legislature placed a fraud provision in the worker's compensation act to prevent fraud on the system and stated that "if fraud is involved, and the temporary disability money is paid under mistake of fact, there is no way of getting it back from the person who committed the fraud." Thus, reasoned the administrative law judge, employers, insurers, and LIRC have an important interest in suspending benefits before the costs of the fraud become too great. The administrative law judge thus considered the purposes of the law in reaching his decision. The employee contends that the administrative law judge did not adequately consider another purpose of the worker's compensation law, namely to assure payments to an injured employee. Here the employee had no other source of income and suffered undue hardship to the point of foreclosure and bankruptcy.

¶ 40. From the totality of this information, the administrative law judge concluded that "although there may have been better ways to go about suspending benefits in January 1996," the evidence was sufficient to conclude that the actions of the insurer did not constitute bad faith.

¶ 41. The employee objects to the validity of the individual pieces of pre-suspension evidence on the grounds that each is either weak, based on third-hand hearsay, or, in the case of his insurance license, a perfectly legitimate second job pursuant to Wis. Stat. § 102.43(c)(b).

¶ 42. The insurer cannot seriously debate the employee's criticisms. The claims adjuster admitted at the hearing that there was not much in the video tape surveillance or in the surveillance report.

¶ 43. Weak evidence notwithstanding, both parties make strong arguments. The employee argues that the insurer did not exercise sufficient diligence in its investigation, while the insurer queries what more it could reasonably have done under the circumstances of this case. The insurer contends that the court of appeals unreasonably placed a requirement on the insurer to obtain actual evidence of business profits before suspending benefits in the face of evidence of income-producing work activity. According to the insurer, this requirement is particularly onerous because insurers do not have authority to require production of documents disclosing such information prior to an eviden-tiary hearing. The employee recognizes that an insurer does not have the right to compel production of documents before a hearing, but argues that an insurer does have the right (and obligation) to request information. Because an employee might not tell the truth does not, asserts the employee, excuse an insurer from asking for earnings information.

¶ 44. This case presented a close call for the administrative law judge and LIRC. Were this court reviewing the order of LIRC de novo, the result might very well be different.

¶ 45. But we are not reviewing the order of LIRC de novo. Ultimately, we must reverse the decision of the court of appeals because, after enunciating the great weight deference standard as the appropriate standard of review applicable in this case, the court of appeals failed, we conclude, to pay credence to it.

¶ 46. The court of appeals concluded that the insurer's limited investigation did not provide it with any information that could have possibly led it to conclude that it need not make payment on the employee's claim. The court of appeals' decision can be read to create a new requirement of insurers that does not exist in the statute or administrative code, namely that an insurer must either communicate with an employee directly to obtain wage and earnings information or must obtain such information elsewhere before it can suspend benefits.

¶ 47. LIRC has not adopted, as far as we can discover, the court of appeals' criterion for gauging whether an investigation or development of the facts is reasonable. In the present case LIRC explicitly concluded that the insurer "does not have to have exact income information in order to make an exact offset before it can withhold payment of TTD [temporary total disability]. The question is whether the [insurer] had a reasonable basis for believing the [employee] was engaged in wage earnings services. The commission finds after reviewing the record that the [insurer] did have a reasonable basis for such a belief." LIRC apparently interprets the statute and administrative code on a case-by-case basis in order to determine whether a claim is fairly debatable under the statute, administrative code, and case law.

¶ 48. The court of appeals acknowledges in its decision that an agency's interpretation and application of a statute and administrative code are reasonable if they accord with the language of the statute, the legislative intent, the legislative history, the federal or state constitution, and the purpose of the statute, and "are consistent with the judicial analysis of the statute." The court of appeals did not assert that LIRC's case-by-case interpretation and application of the statute and administrative code, or its order in the present case, violated the language of the statute, the legislative intent, the legislative history, or the federal or state constitution.

¶ 49. The court of appeals concluded that LIRC's interpretation and application of the statute and administrative code "are inconsistent with [the court of appeals'] own interpretation and application of the term 'fairly debatable' as set forth in Kimberly-Clark and directly contravene the basic purpose behind the Worker's Compensation Act [which is to give prompt relief to injured employees entitled to compensation]."

¶ 50. We disagree with the court of appeals. LIRC did apply the term "fairly debatable" as set forth in Kimberly-Clark and Anderson and did consider the purposes behind the Worker's Compensation Act. The court of appeals and LIRC just disagree about the weight to be given to the evidence presented and to the purposes of the Act.

¶ 51. We cannot say that, had we been in its position, we would have reached the same conclusions as LIRC. We can say, however, that LIRC's conclusions are reasonable, although different conclusions might be more reasonable. We acknowledge that the investigation came up with some — but not a great deal of— evidence, and it is arguable that the insurer may have been premature in suspending benefits when it did. Inherent in the great weight deference standard is the concept that LIRC is well positioned to make judgments about bad faith so it may develop and apply consistent policies and standards. Courts are bound to give LIRC flexibility to do so. We therefore conclude that LIRC's conclusions of law and order were reasonable and that the court of appeals did not show proper deference to LIRC.

¶ 52. That said, insurers, employers, and LIRC should not infer from this opinion that suspending an employee's benefits after a brief, inconclusive investigation is an acceptable means of avoiding a bad faith penalty. The court recognizes that employees are often financially dependent upon worker's compensation benefits and a reasonable investigation under the circumstances is needed before suspension of benefits occurs.. The insurer's actions in the present case may have been reasonable in LIRC's opinion, but the insurer's actions press very near the limit of what the great weight deference level of review will bear.

¶ 53. For the reasons set forth, we reverse the decision of the court of appeals.

By the Court. — The decision of the court of appeals is reversed.

        Brown v. LIRC, 2003 WI App 56, 260 Wis. 2d 788, 659 N.W.2d 918.

       All references to the Wisconsin statutes are to the 2001-02 version unless otherwise indicated.

         Brown, 260 Wis. 2d 788, ¶ 1.

        Nottelson v. DILHR, 94 Wis. 2d 106, 115, 287 N.W.2d 763 (1980).

         Nottelson, 94 Wis. 2d at 114-15; Applied Plastics, Inc. v. LIRC, 121 Wis. 2d 271, 276, 359 N.W.2d 168 (Ct. App. 1984).

       Wisconsin Stat. § 102.23(6) provides as follows:
      If the commission's order or award depends on any fact found by the commission, the court shall not substitute its judgment for that of the commission as to the weight or credibility of the evidence on any finding of fact. The court may, however, set aside the commission's order or award and remand the case to the commission if the commission's order or award depends on any material and controverted finding of fact that is not supported by credible and substantial evidence.
      This court set forth the standard of review for LIRC's orders as follows:
      Factual findings of LIRC are conclusive as long as they are supported by credible and substantial evidence and LIRC did not act fraudulently or in a manner which exceeds its powers. A court may overturn a decision made by LIRC if it was fraudulently obtained or made while LIRC was acting outside the scope of its powers. A LIRC order or award may also be set aside if it is unsupported by LIRC's findings of fact, or depends upon "any material and controverted finding of fact that is not supported by credible and substantial evidence." However, "the court shall not substitute its judgment for that of the commission as to the weight or credibility of the evidence on any finding of fact."

        Wis. Elec. Power Co. v. LIRC, 226 Wis. 2d 778, 786, 595 N.W.2d 23 (1999) (citations omitted).

        Nottelson, 94 Wis. 2d at 114-15; Applied Plastics, 121 Wis. 2d at 276.

        Nottelson, 94 Wis. 2d at 115; Applied Plastics, 121 Wis. 2d at 276.

        Nottelson, 94 Wis. 2d at 114-15.

        UFE Inc. v. LIRC, 201 Wis. 2d 274, 284, 548 N.W.2d 57 (1996); see also Jicha v. DILHR, 169 Wis. 2d 284, 290, 485 N.W.2d 256 (1992).

        State ex rel. Parker v. Sullivan, 184 Wis. 2d 668, 699, 517 N.W.2d 449 (1994) (quoted with approval in UFE Inc., 201 Wis. 2d at 284).

        UFE Inc., 201 Wis. 2d at 285.

       Id. at 286.

        Harnischfeger Corp. v. LIRC, 196 Wis. 2d 650, 660 n.4, 539 N.W.2d 98 (1995).

       Id. at 660; Lisney v. LIRC, 171 Wis. 2d 499, 505, 493 N.W.2d 14 (1992).

        Harnischfeger Corp., 196 Wis. 2d at 659; Nottelson, 94 Wis. 2d at 117; Kimberly-Clark Corp. v. LIRC, 138 Wis. 2d 58, 64, 405 N.W.2d 684 (Ct. App. 1987).

       See Wis. Stat. §§ 102.14(1) (delegating enforcement of Chapter 102 to the DWD), 102.18(3) (providing that a party in interest may petition LIRC to review the decision of an examiner). See also Hagen v. LIRC, 210 Wis. 2d 12, 19, 563 N.W.2d 454 (1997) ("[T]he Department of Workforce Development (DWD) is charged under Wis. Stat. § 102.14(1) with administering Chapter 102, and both the DWD and LIRC are charged with interpreting the statute and making factual findings when determining a claimant's entitlement to worker's compensation benefits."). Courts have frequently held that LIRC's decisions about chapter 102 are entitled to great deference. See, e.g., Hagen, 210 Wis. 2d at 24-25 (LIRC's interpretation of § 102.52(1) is entitled to great weight deference); United Wis. Ins. Co. v. LIRC, 229 Wis. 2d 416, 600 N.W.2d 186 (Ct. App. 1999) (the court will defer to LIRC's interpretation if it is intertwined with value and policy determinations inherent in the agency's decision-making function); Doering v. LIRC, 187 Wis. 2d 472, 523 N.W.2d 142 (Ct. App. 1994) (the court gives great deference to LIRC's application and interpretation of a labor statute).

        Beverly Enters., Inc. v. LIRC, 2002 WI App 23, ¶ 20, 250 Wis. 2d 246, 640 N.W.2d 518 (LIRC's determination of bad faith is entitled to great weight deference; LIRC has had a substantial number of cases to develop considerable experience).

       The court of appeals in Kimberly Clark, 138 Wis. 2d at 64, concluded that LIRC did not have the expertise or body of precedent necessary to address the interplay of Wis. Stat. § 102.18(l)(bp) and Wis. Admin. Code § DWD 80.70(2) at the time that case was decided. See also N. Am. Mech. v. LIRC, 157 Wis. 2d 801, 806, 460 N.W.2d 835 (Ct. App. 1990).
      Nevertheless, we conclude, as did the court of appeals in the present case, that since these cases, LIRC has had ample time to develop the requisite expertise and precedent necessary to address this question. See, e.g., Greenwood v. Woodbridge Corp., No. 1999046119 (September 10, 2002) (available at http://www .dwd.state.wi.us/lirc/wcdecsns/686.htm) (finding no bad faith on part of insurer suspending benefits); Baysinger v. Ludwig Siding, No. 1996031413 (June 30, 1998) (available at http: //www.dwd.state.wi.us/lirc/wcdecsns/231.htm) (finding bad faith on part of insurer suspending benefits); Smith v. Longview Fibre Co., No. 1990024253 (October 29, 1998) (available at http: //www.dwd.state.wi.us/lirc/wcdecsns/259.htm) (same); Starkl v. JC Penney Milwaukee Catalog, No. 90065879 (June 13, 1996) (same) (available at http://www.dwd.state.wi.us/lirc/wcdecsns /7%2D20%5Fsta.htm); Meyer v. Milliken Millwork Inc., No. 93023332 (February 27,1998) (available at http://www.dwd.state .wi.us/lirc/wcdecsns/195.htm) (same). See also LIRC cases cited in Beverly Enters., 250 Wis. 2d 246, ¶ 20 n.9. A search on LIRC's Web page for worker's compensation decisions indicates that there are a total of 43 catalogued decisions by the LIRC interpreting the phrase "bad faith."

        West Bend Educ. Ass'n v. WERC, 121 Wis. 2d 1, 13-14, 357 N.W.2d 534 (1984).

        Harnischfeger Corp., 196 Wis. 2d at 661; Lisney, 171 Wis. 2d at 506; see also Honthaners Rests., Inc. v. LIRC, 2000 WI App 271, ¶ 13, 240 Wis. 2d 234, 621 N.W.2d 660; Eaton Corp. v. LIRC, 122 Wis. 2d 704, 708, 364 N.W.2d 172, 174 (Ct. App. 1985).

        UFE Inc., 201 Wis. 2d at 287; Harnischfeger Corp., 196 Wis. 2d at 660.

        Harnischfeger Corp., 196 Wis. 2d at 662; Barron Elec. Coop. v. Pub. Serv. Comm'n, 212 Wis. 2d 752, 766, 569 N.W.2d 726 (Ct. App. 1997).

       Wisconsin Stat. § 102.18(1) (bp) provides as follows:
      FINDINGS, ORDERS AND AWARDS. The department may include a penalty in an award to an employee if it determines that the employer's or insurance carrier's suspension of, termination of or failure to make payments or failure to report injury resulted from malice or bad faith. This penalty is the exclusive remedy against an employer or insurance carrier for malice or bad faith. The department may award an amount which it considers just, not to exceed the lesser of 200% of total compensation due or $15,000. The department may assess the penalty against the employer, the insurance carrier or both. Neither the employer nor the insurance carrier is liable to reimburse the other for the penalty amount. The department may, by rule, define actions which demonstrate malice or bad faith.

       Wisconsin Admin. Code § DWD 80.70(2) provides as follows:
      MALICE OR BAD FAITH: An insurance company or self-insured employer who, without credible evidence which demonstrates that the claim for the payments is fairly debatable, unreasonably fails to make payment of compensation or reasonable and necessary medical expenses, or after having commenced those payments, unreasonably suspends or terminates them, shall be deemed to have acted with malice or in bad faith.
      This chapter of the administrative code was renumbered from § IND to § DWD 80 as of July 1996.

        Kimberly-Clark, 138 Wis. 2d at 65.

        Coleman v. American Universal Insurance Co., 86 Wis. 2d 615, 273 N.W.2d 220 (1979), held that the exclusive remedy provision within the worker's compensation law does not bar a tort action for bad faith claims. The legislature enacted Wis. Stat. § 102.18(l)(bp) in response to Coleman. See § 14, ch. 92, Laws of 1981; Kimberly-Clark, 138 Wis. 2d at 62-63.

        Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 692, 271 N.W.2d 368 (1978); Kimberly-Clark, 138 Wis. 2d at 64. See also Trinity Evangelical Lutheran Church v. Tower Ins. Co., 2003 WI 46, ¶ 33, 261 Wis. 2d 333, 661 N.W.2d 789.

        Anderson, 85 Wis. 2d at 692; Kimberly-Clark, 138 Wis. 2d at 65.

        Kimberly-Clark, 138 Wis. 2d at 65. See also Trinity, 261 Wis. 2d 333, ¶ 33.

        Kimberly-Clark, 138 Wis. 2d at 65-66.

         Anderson, 85 Wis. 2d at 693. See also Trinity, 261 Wis. 2d 333, ¶ 38.

        N. Am. Mech., 157 Wis. 2d at 808-09.

        Anderson, 85 Wis. 2d at 693. See John W Thornton & Milton S. Blaut, Bad Faith and Insurers: Compensatory and Punitive Damages, 12 Forum 699, 719 (1977) ("An insurer should have the right to litigate a claim when it feels there is a question of law or fact which needs to be decided before it in good faith is required to pay the claimant.").

       LIRC removed an incorrect finding of fact of the administrative law judge. The administrative law judge found that "[t]hey determined the applicant had a business phone number and appeared to be selling insurance while he was supposed to be temporarily totally disabled." LIRC replaced this finding with the following: "The report noted that the applicant had been an independent insurance agent since October 1994 selling products for a number of companies. The applicant had an agent license number with the state."

        Brown v. LIRC, 260 Wis. 2d 788, ¶ 17.

        Id., ¶ 19.

         Id., ¶¶ 18-19.
      The court of appeals also held that the insurer knew it had no information upon which to suspend payment of benefits, the second prong of the bad faith test laid out in Anderson, 85 Wis. 2d at 691. See Brown, 260 Wis. 2d 788, ¶ 17.


source: Caselaw Access Project

author: JON E WILCOX, J. SHIRLEYS. ÁBRAHAMSON, C.J.

license: Public Domain

text:
    Columbus Park Housing Corporation, Plaintiff-Respondent, v. City of Kenosha, Defendant-Appellant-Petitioner.
    Supreme Court

      No. 02-0699.

      Oral argument September 11, 2003.—

      Decided November 19, 2003.

    2003 WI 143
    (Also reported in 671 N.W.2d 633.)

      For the defendant-appellant-petitioner there were briefs by Robert I. DuMez and O'Connor, Willems, DuMez, Alia & McTernan, S.C., Kenosha, and oral argument by Robert I. DuMez.

    For the plaintiff-respondent there were briefs by David L. Kinnamon, Anthony A. Tomaselli, David C. Swanson, and Quarles & Brady LLP, Madison, and oral argument by David L. Kinnamon.

    An amicus curiae brief was filed by Gregg C. Hago-pian and Genevieve O'Sullivan-Crowley, assistant city attorneys, and Grant F. Langley, city attorney, on behalf of the City of Milwaukee.
    An amicus curiae brief was filed by Claire Silver-man, Madison, on behalf of League of Wisconsin Municipalities.
   JON E WILCOX, J.

¶ 1. City of Kenosha (Kenosha) seeks review of a published court of appeals decision, Columbus Park Housing Corporation v. City of Kenosha, 2002 WI App 310, 259 Wis. 2d 316, 655 N.W.2d 495, that affirmed an order of the Kenosha County Circuit Court, David M. Bastianelli, Judge, granting summary judgment in favor of Columbus Park Housing Corporation (Columbus Park), finding that Columbus Park was exempt from certain real property taxes under Wis. Stat. § 70.11(4) (1999-2000). Because we determine that Columbus Park has failed to satisfy the lessee identity condition in the preamble of § 70.11, we reverse the court of appeals' decision.

I. FACTUAL BACKGROUND

¶ 2. The parties to this action have stipulated to the essential facts. Columbus Park is a nonstock, nonprofit Wisconsin corporation that acquires blighted property in Kenosha, rehabilitates the property, and makes the property available for rent to qualified low-income families. The parties agree that Columbus Park is a benevolent association, within the meaning of Wis. Stat. § 70.11(4), whose mission is to improve the living conditions of the. poor and underprivileged in Kenosha by providing safe, affordable housing.

¶ 3. Columbus Park seeks to fulfill its mission by engaging in two principal activities. First, Columbus Park rehabilitates dilapidated buildings by providing work and training opportunities to several at risk groups, including Kenosha County Jail inmates, who restore the buildings. Once the buildings are refurbished, Columbus Park rents units to qualifying low-income families who might otherwise be homeless. All of Columbus Park's rental units, with the exception of one unit occupied by its executive director and resident manager, are occupied by individuals with annualized income below the federal poverty level. Columbus Park then uses the rental income from its leased properties, in part, for maintenance and construction debt reduction of its leased properties.

¶ 4. Columbus Park participates in the federal rent subsidy program under section 8 of the Federal Fair Housing Act. 42 U.S.C. § 1437f (1999). Columbus Park charges its tenants 30% of their income and receives subsidies from the federal government through the Kenosha Housing Authority (the Authority), which bring the rents to reasonable market rates. The disputed taxes were levied on properties that had been rehabilitated and were rented to low-income individuals or awaiting occupancy.

¶ 5. The affidavit of Kathy Rippon, Executive Director of Columbus Park, provides that in 1998 and 1999 Columbus Park "used all of the leasehold income received from its tenants and all the lease subsidies received [from the federal government] for maintenance of the leased property, construction debt retirement of the leased property or both." Further, it states, "[g]ifts, grants and contributions made to [Columbus Park] by individuals, corporations, charitable organizations and governmental entities covered net losses incurred by [Columbus Park] on properties leased to low-income lessees in both 1998 and 1999."

II. PROCEDURAL POSTURE

¶ 6. Columbus Park instituted this declaratory judgment action, seeking a determination that taxes assessed and levied on certain real property of Columbus Park by Kenosha in 1998 were illegal and that Columbus Park was entitled to a refund for taxes assessed by Kenosha and paid by Columbus Park on certain pieces of real estate in 1999. The circuit court granted Columbus Park summary judgment, finding it exempt from taxation under Wis. Stat. § 70.11(4); Kenosha appealed.

¶ 7. The court of appeals affirmed the circuit court's grant of summary judgment, determining that Columbus Park "exclusively used the properties in question for benevolent purposes in both 1998 and 1999." Columbus Park, 259 Wis. 2d 316, ¶ 16. The court of appeals also determined that Columbus Park met the rent use condition in the preamble of Wis. Stat. § 70.11. Id., ¶ 24. Finally, the court of appeals held that Columbus Park satisfied the lessee identity condition in the preamble of § 70.11. Id., ¶ 28.

III. ISSUES

¶ 8. Kenosha raises three issues on appeal to this court: (1) whether a benevolent association satisfies the lessee identity condition in the preamble of Wis. Stat. § 70.11 when it rents property to low-income individuals participating in section 8 of the Federal Fair Housing Act; (2) whether a benevolent association meets the requirement in § 70.11 that it use all leasehold income for the purposes of maintenance of the leased property, debt retirement, or both when it applies a portion of the leasehold income from one property to the maintenance and/or construction debt retirement of another property; and (3) whether a benevolent association meets the requirement in § 70.11(4) that the benevolent association "exclusively use" the properties in question when it leases such property to individual tenants. Because we conclude that Columbus Park has not satisfied the lessee identity condition in the preamble of § 70.11, we do not address the other two issues raised by Kenosha.

IV STANDARD OF REVIEW

¶ 9. This case arises from the circuit court's grant of summary judgment to Columbus Park. We review the grant of summary judgment de novo, applying the same standards as the circuit court. Voss v. City of Middleton, 162 Wis. 2d 737, 748, 470 N.W.2d 625 (1991). This court reverses a grant of summary judgment if it was based on an incorrect interpretation of a legal issue. St. John's Lutheran Church v. City of Bloomer, 118 Wis. 2d 398, 400, 347 N.W.2d 619 (Ct. App. 1984). The resolution of this dispute involves the interpretation of Wis. Stat. §70.11(4) and the application of this statute to a particular set of facts. These are questions of law that this court reviews de novo. Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 79-80, 591 N.W.2d 583 (1999).

¶ 10. In construing a statute, our primary purpose is to give effect to the legislative intent embodied in the language of the statute. Id. at 80. However, when the language of a statute is unambiguous," '[statutory interpretation ... is confined to [] the language of the statute[.]'" Burg ex rel. Weichert v. Cincinnati Cas. Ins. Co., 2002 WI 76, 254 Wis. 2d 36, ¶ 16, 645 N.W.2d 880 (citations omitted). Pursuant to Wis. Stat. § 990.01(1), all words and phrases shall be given their ordinary and accepted meaning but technical words shall be given their accepted legal meaning.

¶ 11: In addition, in construing tax exemption statutes, "taxation of property is the rule and exemption is the exception." Deutsches Land, 225 Wis. 2d at 80. See also Wis. Stat. § 70.109. Thus, this court applies a "strict but reasonable" interpretation to tax exemption statutes. Id. "Since exemption from the payment of taxes is an act of legislative grace, the party seeking the exemption bears the burden of proving that it falls within a statutory exemption." Id. Thus, any ambiguity in the statute is resolved in favor of taxation. Id.

V ANALYSIS

¶ 12. In resolving whether Columbus Park is entitled to a tax exemption under § 70.11(4), this court must answer a single question: Does Columbus Park fall within the plain language of Wis. Stat. § 70.11(4)? Wisconsin Stat. § 70.11(4) exempts from taxation "[p]roperty owned and used exclusively by ... benevolent associations ... but not exceeding 10 acres of land necessary for location and convenience of buildings while such property is not used for profit." Further, §70.11(4) provides: "Property that is exempt from taxation under this subsection and is leased remains exempt from taxation only if, in addition to the requirements specified in the introductory phrase of this section, the lessee does not discriminate on the basis of race."

¶ 13. The introductory section of Wis. Stat. § 70.11 — the preamble — provides:

Leasing a part of the property described in this section does not render it taxable if the lessor uses all of the leasehold income for maintenance of the leased property, construction debt retirement of the leased property or both and if the lessee would be exempt from taxation under this chapter if it owned the property.

Wis. Stat. § 70.11 (emphasis added).

¶ 14. In Deutsches Land, this court construed the preamble of § 70.11 as containing the following requirements:

(1) the exempt organization must use the leasehold income for maintenance of the property, construction debt retirement, or both (the "rent use condition") and (2) the lessee would itself be entitled to an exemption if it owned the property (the "lessee identity condition"). If the exempt organization uses the rental income in ways other than provided for by the statute, no exemption can be claimed on the leased part of the property. Likewise, if the lessee itself is not an exempt organization but rather a for-profit organization, no exemption can be claimed on the leased part of the property.

Deutsches Land, 225 Wis. 2d at 93.

¶ 15. We conclude that Columbus Park is not entitled to a tax exemption under § 70.11(4) because it cannot meet the lessee identity requirement in § 70.11. Columbus Park cannot meet the lessee identity condition because the individuals to whom Columbus Park rents — its lessees — would not qualify under § 70.11 as tax exempt if they owned the property, as § 70.11 only exempts property owned by certain organizations and institutions that meet the statutorily specified criteria.

¶ 16. Columbus Park asks us to follow the approach utilized by the court of appeals in construing the lessee identity condition. The court of appeals reasoned that although the Authority "is not the true lessee of the properties within the technical definition of the term, the Authority's control is a relevant consideration in making a determination as to the ability of Columbus Park to qualify for an exemption." Columbus Park, 259 Wis. 2d 316, ¶ 26. The court of appeals further reasoned that because Columbus Park's tenants would not be able to pay rent but for the federal government subsidies provided by the Authority and because the lessees were not for-profit businesses,

[i]t would be an unreasonable construction of the word "lessee" in the context of this statute to apply it to the very individuals who are the objects of the tax-exempt activity. Consequently, we conclude that the term "lessee" should not be so technically defined so as to preclude the applicability of the tax exemption to Columbus Park.

Id., ¶ 29.

¶ 17. We .consider the court of appeals' rationale flawed because, as noted by Judge Synder's dissent, the majority of the court of appeals did not cite to any legal authority for the proposition that an organization that is involved in establishing a lease on behalf of another and partially subsidizes the lease, but does not occupy the property or retain any possessory interest in that property, may nonetheless be considered the lessee of said property. Id., ¶ 34. Moreover, the court of appeals did not explain what it meant by "relevant consideration"; nor did it elucidate what "non-technical" definition of "lessee" it was invoking.

¶ 18. The term "lessee" is an unambiguous legal term; under the applicable statutory rules of construction, we must ascribe to it its technical legal meaning. The term "lessee" is defined as "[o]ne who has a posses-sory interest in real or personal property under a lease; TENANT." Black's Law Dictionary 914 (7th ed. 1999). The court in Deutsches Land, 225 Wis. 2d at 94 n.13, interchangeably referred to this provision of the preamble of § 70.11 as "the tenant identity condition," and the " 'lessee identity condition.'" Id. at 93. "Tenant" is defined as "[o]ne who pays rent for the temporary use and occupation of another's land under a lease or similar arrangement." Black's Law Dictionary 1479 (7th ed. 1999).

¶ 19. Further, although the record does not contain a properly authenticated copy of an actual lease between Columbus Park and one of its lessees, the record does contain a sample lease with the signature of Executive Director Rippon. This sample lease states, "[ljandlord and [t]enant understand that their rights and obligations under the [c]ontract are subject to . . . Wis. Stat. Chapter 704, Wis. Admin. Code Chapter ATCP 134 . . . ." Wisconsin Admin. Code § ATCP 134.02(12) defines "tenant" as "a person occupying, or entitled to present or future occupancy of a dwelling unit under a rental agreement. . . ." Wis. Admin. Code § ATCP 134.02(12)(June 1999)(emphasis added). Section ATCP 134.02(6) incorporates the definition of "lease" found in Wis. Stat. § 704.01(1). Section 704.01(1), Stats., defines "lease" as "an agreement, whether oral or written, for transfer of possession of real property, or both real and personal property, for a definite period of time." Wis. Stat. § 704.01(1) (emphasis added).

¶ 20. Under the established legal definition of "lessee," there can be no other conclusion except that Columbus Park's "lessees" are the low-income individuals to whom Columbus Park rents. It is undisputed that the Authority does not sign the leases, occupy the property, or retain any possessory interest in any of the rental units in question. At the court of appeals, Columbus Park conceded "its low-income tenants, who are not tax-exempt organizations, sign the leases .. .Columbus Park, 259 Wis. 2d 316, ¶ 25. Moreover, Columbus Park itself refers to the low-income individuals to whom it rents as "tenants" and the affidavit of Executive Director Rippon refers to Columbus Park's tenants as "lessees."

¶ 21. More important, however, is the undisputed fact that Columbus Park receives rent subsidies from the Authority under section 8 of the Federal Fair Housing Act. In order to participate in the assisted housing program, the federal government requires the Authority to approve of the lease entered into "between tenant and owner." 24 C.F.R. § 982.308(b)(1).

¶ 22. Further review of the regulations governing section 8 housing programs supports the obvious conclusion that the low-income individuals, not the Authority, are Columbus Park's lessees. For instance, in order to receive rent subsidies, "[t]he tenant must have legal capacity to enter a lease . . . ." 24 C.F.R. § 982.308(a). An entity such as the Authority cannot lack legal capacity to sign a lease.

¶ 23. Moreover, the regulations provide:

The PHA [Public Housing Authority] failure to pay the housing assistance payment to the owner is not a violation of the lease between the tenant and the owner. During the term of the lease the owner may not terminate the tenancy of the family for nonpayment of the PHA housing assistance payment.

24 C.F.R. § 982.310(b)(2) (emphasis added). Likewise, if a tenant defaults on payments, the Authority is not evicted; the low-income family is evicted. In fact, every reference to the "lessee" or "tenant" in the regulations governing section 8 programs refers to the lessee or tenant as the low-income individual or family actually renting a unit.

¶ 24. In addition, we find it significant that the Authority is involved in both sides of the landlord-tenant, lessor-lessee relationship. If Columbus Park's tenants cannot be considered independent lessees because of the Authority's involvement in administering the section 8 program, Columbus Park, 259 Wis. 2d 316, ¶ 26, then under the same rationale, Columbus Park itself can hardly be considered an independent lessor. Utilizing the court of appeals' methodology, we note that the Authority: (1) approves of a family's unit and tenancy, 24 C.F.R. .§ 982.1(a)(2); (2) may provide information regarding tenancy and drug history to owner to assist in owner's screening of tenants, 24 C.F.R. § 982.307(b)(2); (3) receives a copy of a notice of termination of the lease from the family, 24 C.F.R. § 982.309(d)(2); (4) may determine the composition of a family that will receive housing assistance for rental unit, 24 C.F.R. § 982.201(c)(3); and (5) may provide, although not require, a model lease form for the owner and tenant to use, 24 C.F.R. § 982.308(c)(2). Finally, the lease itself, which is generally chosen or drafted by the landlord, must contain certain provisions mandated by the Department of Housing and Urban Development (HUD). 24 C.F.R. § 982.308(c)(1).

¶ 25. Therefore, we conclude that the Authority's involvement in administering the section 8 leasing program does not render it a de jure lessee for the purposes of § 70.11(4), as it does not occupy any of the units and none of the activities the Authority engages in confers upon it a possessory interest in any of the rental units. The Authority is no more a lessee simply because it makes payments on behalf of the low-income renters than the parents of college students are lessees because they subsidize their son or daughter's housing.

¶ 26. Columbus Park further argues that under Town of Menominee v. Skubitz, 53 Wis. 2d 430, 192 N.W.2d 887 (1972), this court may "enlarge" the meaning of the word lessee to encompass the Authority. In Skubitz, the appellant, a member of the Menominee Indian Tribe, owned several buildings on land owned by Menominee Enterprises, Inc. Id. at 433. Appellant repeatedly refused to enter into a lease or purchase the property upon which her buildings were located; however, she did pay a "land-use" fee to Menominee Enterprises. Id. The issue on appeal was whether Wis. Stat. §70.17 permitted the Town of Menominee to assess personal property taxes on the land that was owned by Menominee Enterprises but occupied by the appellant. Id. at 434. Although the court found that there was no formal or implied lease between the parties, id. at 435-36, after examining the legislative intent, the court concluded:

It is evident that the legislature intended to define the treatment to be given to certain property situated on the land of another and did not mean to limit the relationship of the occupier of the land and the owner of the real estate to that of lessor-lessee.... [T]he term "leased lands" contained in sec. 70.17, Stats., should be construed broadly enough to encompass a multitude of situations in which the occupier of lands not owned by him places improvements on those lands.

Id. at 438-39. The court applied the rule that "the meaning of some words in a statute may be enlarged or restricted in order to harmonize them with the legislative intent of the entire statute." Id. at 437.

¶ 27. However, Skubitz is readily distinguishable from the case at hand. First, the court in Skubitz enlarged the term "leased lands" to include the situation where an individual owned buildings on land owned by another and paid a land use fee but had no formal lease. The appellant in Skubitz actually occupied the lands and possessed the buildings thereon. As discussed supra, a lessee necessarily is someone who pays consideration for-the temporary possession and occupancy of property. In contrast, as previously noted, the Authority has absolutely no possessory rights in Columbus Park's property, nor does it occupy the property. Under no judicial contortion of the word "lessee" can the term be expanded to include someone who partially pays for the possessory rights of another in a piece of property.

¶ 28. Further, the rule in Skubitz is limited to situations where such an expanded or restricted construction of a word would further the legislative intent of the statute. As discussed infra, we find no clear indication that the legislature intended to exempt benevolent associations, such as Columbus Park, who rent their property to low-income individuals. Also, to apply the rationale of Skubitz in this case would violate the rule that in construing tax exemption statutes, "taxation of property is the rule and exemption is the exception." Deutsches Land, 225 Wis. 2d at 80. See also Wis. Stat. § 70.109. Finally, application of the rationale in Skubitz to this case would be repugnant to the established rules that any ambiguity in a tax exemption statute is resolved against the taxpayer, Deutsches Land, 225 Wis. 2d at 80, and that the taxpayer must "take the statute as it stands and bring [itself] plainly within [the statute's] terms." Bowman Dairy Co. v. Wisconsin Tax Comm'n, 240 Wis. 1, 5, 1 N.W.2d 905 (1942).

¶ 29. Thus, it is clear that under the standard legal definition of the word "lessee" and the facts and circumstances present, the "lessees" for purposes of § 70.11 are the low-income individuals to whom Columbus Park rents. It is undisputed that these low-income individuals would not qualify as tax-exempt under § 70.11 if they owned the property in question because § 70.11 only exempts property owned by certain specified organizations and institutions that meet the statutory criteria. Therefore, we hold that Columbus Park is not entitled to a property tax exemption under Wis. Stat. § 70.11(4) because under the plain language of § 70.11, its lessees would not qualify as tax exempt if they owned the units they rent.

¶ 30. We now turn to Columbus Park's arguments that despite the fact that it cannot meet the lessee identity condition in the preamble of § 70.11, it is nonetheless entitled to a tax exemption. First, Columbus Park asks us to construe the lessee identity condition as applying only where a benevolent association leases to a for-profit business entity. Columbus Park relies on our language in Deutsches Land that "if the lessee itself is not an exempt organization but rather a for-profit organization, no exemption can be claimed on the leased part of the property." Deutsches Land, 225 Wis. 2d at 93.

¶ 31. In Deutsches Land, this court analyzed whether a benevolent association devoted to the preservation of Germanic culture and heritage was entitled to a property tax exemption under § 70.11(4) when it leased a portion of the land it owned, the Bavarian Inn, to a for-profit entity. Id. at 76-79. Our language in Deutsches Land in no way limited the applicability of the lessee identity condition contained in the preamble of § 70.11 to situations where the benevolent association leases to a for-profit business. The language in Deutsches Land was couched in those terms merely because those were the facts presented to us in that case.

¶ 32. Moreover, Columbus Park's proposed reading of § 70.11 would ignore the plain language of the statute. First, the preamble itself does not contain any language that would limit its application to situations where a benevolent organization leases to a for-profit business. Further, § 70.11(4), the particular exemption here, explicitly refers to the language in the preamble: "Property that is exempt from taxation under this subsection and is leased remains exempt from taxation only if, in addition to the requirements specified in the introductory phrase of this section, the lessee does not discriminate on the basis of race." Wis. Stat. § 70.11(4) (emphasis added). Thus, we conclude that under the plain language of the statute, the lessee identity condition in the preamble of § 70.11 is not limited to those instances where a benevolent association rents to a for-profit business entity.

¶ 33. Next, Columbus Park argues that it is entitled to a tax exemption as a matter of public policy. A good portion of its briefs and oral argument was concerned with the extent to which Columbus Park is engaged in eleemosynary activities, the fact that its lessees are the object of its benevolent activities, and the possibility that but for its benevolence, the low-income individuals to whom it rents would be homeless. In essence, Columbus Park asks this court, to carve out an exception to the lessee identity condition and hold that this condition does not apply if the lessees are the objects of the organization's benevolence.

¶ 34. Whether this court is of the opinion that Columbus Park should receive a tax exemption is irrelevant. Certainly Columbus Park's efforts to serve the poor are indeed laudable. However, whether an organization should benefit from a tax exemption is a policy decision, as tax exemptions exist purely by virtue of "legislative grace." Deutsches Land, 225 Wis. 2d at 80. "This court has long held that it is the province of the legislature, not the courts, to determine public policy." Flynn v. DOA, 216 Wis. 2d 521, 539, 576 N.W.2d 245 (1998). Under our tripartite system of government, it is the duty of this court to apply the policy the legislature has codified in the statutes, not impose our own policy choices — to do otherwise would render this court little more than a super-legislature. Id. at 529. Thus, we must apply the statute as written, not interpret it as we think it should have been written.

¶ 35. As noted by Columbus Park at oral argument, Wis. Stat. ch. 70 is not a comprehensive, perfectly woven web of tax exemptions covering the entire universe of tax paying entities; rather, it represents a conglomeration of exemptions granted to specific and well-delineated entities and property used in a certain fashion. The plain language of § 70.11(4) and § 70.11 limits the tax-exempt status of a benevolent organization that leases property to situations where the lessee would be tax-exempt if it owned the property — where the lessee is another tax-exempt organization. It does not contain an exception for individual lessees that are the subject of the benevolent organization's charity. If the legislature had not meant the lessee identity condition to apply in circumstances such as these, it could have explicitly limited the applicability of the preamble in subsection four. Our conclusion is buttressed by the fact that the legislature has carved out exceptions to the lessee identity requirement in other subsections. For example, subsection two, relating to municipal property states: "Leasing property exempt under this subsection, regardless of the lessee and the use of leasehold income, does not render that property taxable." Wis. Stat. § 70.11(2) (emphasis added).

¶ 36. Having determined the statute is unambiguous, our interpretation is confined to its plain language. Weichert, 254 Wis. 2d 36, ¶ 16. Nevertheless, analysis of the legislative history validates our conclusion that the exemption does not apply to Columbus Park. The lessee identity requirement in the preamble of § 70.11 and the reference thereto in § 70.11(4) were added to the statute effective 1984 by virtue of 1983 Wis. Act 327. Essentially, the legislature moved the lessee identity and rent use condition from subsection four to the preamble and added a reference to the preamble in subsection four. In adding the reference to the preamble in subsection four, the legislature deleted the following language: "Leasing a portion of such property to an organization which if it owned the property itself would be exempt from taxation under this section ... shall not render the property taxable, if all the leasehold income is used for maintenance." 1983 Wis. Act 327, § 4 (emphasis added).

¶ 37. As the previous version allowed an exemption to leased property only if the property was leased to another charitable organization, and § 70.11 currently only exempts certain property owned by specific organizations or institutions, there is no indication that the legislature intended to expand the exemption to cover benevolent organizations that rent to individuals. Rather, the legislature merely eliminated what would have been a redundancy when it reorganized the statute. The statutory revision did not change the nature of the lessee identity condition. The result of the change was simply that the rent use and lessee identity conditions now apply to all subsections, unless specifically excluded.

¶ 38. The most persuasive indication that the exemption Columbus Park seeks was not intended is that the legislature added the exact exception that Columbus Park asks this court to impose to the lessee identity requirement to Wis. Stat. § 70.11(3)(b) by virtue of the same Act that amended subsection four and the preamble. Section 70.11(3)(b) was amended by 1983 Wis. Act 327 to read as follows: "In addition to the exemption of leased property specified in the introductory phrase of this section, a university or college may also lease property for educational or charitable purposes without making it taxable if it uses the income derived from the lease for charitable purposes." 1983 Wis. Act 327, § 4 (emphasis added). This is the exact same exception to the lessee identity requirement that Columbus Park asks this court to judicially graft onto subsection four. The fact that the legislature added this language to subsection three but not subsection four when it reorganized subsection four is a strong indication that it did not wish to exempt charitable organizations that lease property to individuals in order to further their charitable purposes.

¶ 39. Analysis of the proposed bill also confirms our conclusion that the lessee identity condition applies with equal force to Columbus Park as does the rent use condition contained in the preamble. The Report of the Joint Survey Committee on Tax Exemption analyzed the bill as follows:

This bill would allow a person who owns property which is exempt under s. 70.11 to lease a part of that property without changing the tax-exempt status of the property if:
1. The lessor used all of the rental income for "maintenance, construction debt retirement or both" and
2. If the lessee would be exempt from taxation under ch. 70, Stats., if it owned the property.

Report of the Joint Survey Committee on Tax Exemption (Sept. 1983) (emphasis in original). The analysis by the Legislative Reference Bureau is substantially similar. See Legislative Reference Bureau Drafting File for 1983 Wis. Act 327, Analysis by the Legislative Reference Bureau of 1983 A.B. 89. Thus, the legislative history of §70.11(4) indicates that the legislature intended to exempt property owned and leased by benevolent organizations from taxation only when the property was leased to another tax-exempt organization under § 70.11.

¶ 40. Because our duty is to apply a "strict but reasonable" interpretation to tax-exemption statutes, and the language of § 70.11(4) is clear and unambiguous, we decline to carve out an exception to the preamble of § 70.11 to meet Columbus Park's situation. Contrary to Columbus Park and the dissent's assertion, to apply an unambiguous statute as written is not unreasonable; rather, it would be unreasonable to ignore the plain language of § 70.11 simply because of Columbus Park's humanitarian efforts. As this court stated in Engineers and Scientists of Milwaukee, Inc. v. City of Milwaukee, 38 Wis. 2d 550, 562, 57 N.W.2d 572 (1968), "while an exemption for activities of this kind might wéll serve a public purpose, the decision to allow the exemption must be clearly spelled out by the legislature." Columbus Park remains free to lobby the legislature to create a specific exemption for its circumstances.

¶ 41. Columbus Park also directs our attention to a series of cases where Wisconsin courts have purportedly concluded that certain benevolent organizations were tax-exempt under § 70.11(4), where their lessees were the objects of their benevolence. See Family Hosp. Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 254 N.W.2d 268 (1977); Milwaukee Protestant Home for the Aged v. City of Milwaukee, 41 Wis. 2d 284, 164 N.W.2d 289 (1969); Friendship Vill. of Greater Milwaukee, Inc. v. City of Milwaukee, 181 Wis. 2d 207, 511 N.W.2d 345 (Ct. App. 1993); and St. John's Lutheran Church v. City of Bloomer, 118 Wis. 2d 398, 347 N.W.2d 619 (Ct. App. 1984). However, none of these cases addressed the lessee identity requirement found in current § 70.11. These cases merely addressed the question of whether certain nursing and retirement homes constituted benevolent organizations within the meaning of § 70.11(4). Not a single one of these cases stands for the proposition that an organization seeking an exemption under § 70.11(4) that does not meet the lessee identity requirement is nonetheless entitled to a tax exemption simply because of its benevolence.

¶ 42. Finally, Columbus Park argues that if we are to give § 70.11(4) its literal interpretation, severe consequences will result because a variety of property owned by benevolent organizations including, inter alia, nursing homes, summer camps, and portions of hospitals dedicated to the treatment of drug and alcohol abuse, would be denied tax exemptions. Columbus Park relies upon the court of appeals' decision in M&I First National Bank v. Episcopal Homes Management, 195 Wis. 2d 485, 536 N.W.2d 175 (Ct. App. 1995) as evidence of the supposed absurd results our decision will create.

¶ 43. The issue in M&I First National Bank was which party had a priority security interest in a fund in excess of $1,000,000 that contained entrance fees paid by the residents of Lake Oaks at DeKoven, an assisted living center for the elderly, when said facility defaulted on its mortgage obligation. Id. at 488. In affirming the circuit court's imposition of a constructive trust on the fund in favor of the residents, the court of appeals concluded that the "residency agreement" entered into between the tenants and the owner constituted a leasing arrangement under Wis. Adm. Code § ATCP 134.02, despite language in the contract stating it was not a lease. Id. at 500-502.

¶ 44. In reaching this conclusion, the court of appeals noted that the dominant and primary purpose of the residency agreement was to pay rent for the use and occupation of property and not the provision of services to the elderly. Id. at 501. The court noted that the facility was marketed as an assisted living center, not as a nursing home or life-care facility, and that the owner reserved the right to terminate the resident agreement if the resident could no longer independently care for himself. Id. at 504-05. Specifically, the court stated that DeKoven "was neither a nursing home nor a continuing care facility." Id. at 505. Thus, the thrust of the court of appeals opinion in M&I First National Bank, for our purposes, is that an agreement whereby residents pay an entrance fee and continue to make monthly payments in exchange for the use and occupation of property constitutes a lease under Wis. Adm. Code § ATCP 134.02, in the absence of evidence that the primary or dominant purpose of the agreement was the provision of services.

¶ 45. We are not persuaded by Columbus Park's slippery slope argument, as we see nothing in the language of M&I First National Bank that would lead to the cataclysmic results Columbus Park predicts. Both nursing homes and continuing care facilities charge fees for the primary and dominant purpose of the provision of services. Residents in these facilities would not constitute "lessees" for purposes of § 70.11, as there is no "lease" in existence under the rationale of M&I First National Bank. A hospital providing alcohol and drug treatment and counseling similarly charges fees for the primary and dominant purpose of remuneration for the counseling and treatment services it provides. Likewise, it can hardly be said that the dominant and primary purpose of charging fees for various summer camps is for the use and occupation of property. Thus, our decision today will not undermine the tax-exempt status of these types of organizations.

VI. SUMMARY

¶ 46. In conclusion, we hold that under the plain language of Wis. Stat. § 70.11(4), Columbus Park does not qualify for a tax exemption on the leased properties in question because Columbus Park cannot meet the lessee identity condition in the preamble of § 70.11, as its lessees — the low-income individuals to whom it rents — would not be entitled to a tax exemption if they owned the property. Columbus Park has failed to "take the statute as it stands and bring [itself] plainly within [the statute's] terms." Bowman Dairy Co., 240 Wis. at 5. Furthermore, we decline to limit the application of the preamble of § 70.11 to situations in which a benevolent association leases its property to a for-profit business. Finally, we decline to carve out a judicially created exemption to the lessee identity requirement where the lessees are the subjects of the organization's benevolence. We hold that Columbus Park is not entitled to a tax exemption under § 70.11(4) because it has not met the lessee identity requirement in § 70.11. We therefore reverse the decision of the court of appeals.

By the Court. — The decision of the court of appeals is reversed.

SHIRLEYS. ÁBRAHAMSON, C.J.

¶ 47. 0dissentin-g). Applying a strict but reasonable interpretation to tax exemption statutes, I would affirm the decision of the court of appeals and the judgment of the circuit court. I dissent because the majority opinion's approach is more strict than reasonable.

¶ 48. The issue in this case is whether Columbus Park Housing Corp., a not-for-profit benevolent housing association, is entitled to a tax exemption under Wis. Stat. § 70.11(4). The City of Kenosha stipulated that Columbus Park is a benevolent association within the meaning of § 70.11(4). Indeed, the City granted tax exemptions to Columbus Park's properties while they were being rehabilitated. The City denied exempt status to the properties only when the properties were subsequently occupied by low-income individuals. The sole dispute between Columbus Park and the City is over whether Columbus Park satisfies the lessee identity requirement contained in the preamble of Wis. Stat. § 70.11.

¶ 49. The court of appeals in this case concluded that the City's interpretation of Wis. Stat. §§ 70.11 and 70.11(4) produces an absurd result, namely, that Columbus Park qualifies for a tax exemption so long as it does not rent its properties to low-income individuals. The incongruity arises because Columbus Park cannot be a tax-exempt benevolent association to provide low-income housing to the poor and at the same time provide the benevolent service if it wishes to take advantage of the property tax exemption under §70.11(4). In essence, the majority opinion's interpretation undermines the benevolent purpose of the benevolent institution. This is a strange interpretation and outcome, and our court has consistently held that "an absurd or unreasonable" construction of a statute is to be avoided. An exemption should not be construed so narrowly as to defeat the legislative purpose.

¶ 50. The legislative history of Wis. Stat. § 70.11(4) shows that similar restrictions on leasing have been part of the statute since the 19th century. The statutory history about the meaning of the restriction is inconclusive. I agree with Columbus Park that the primary concern of the legislature and courts seems to have been to limit the leasing of otherwise tax-exempt property for commercial purposes, not to prevent leasing to individuals who are the objects of a benevolent association's benevolent activities.

¶ 51. The majority opinion makes much of the fact that the word "lessee" is an unambiguous legal term and resorts to the legal dictionary for its meaning. Yet case law has recognized that the word "leased" in a statute does not always mean leased and that the word "owned" in a statute does not always mean absolute ownership. These words depend on their context and legislative intent.

¶ 52. The majority opinion focuses on the fact that an individual signs the "lease," and the individual, not the Kenosha Housing Authority, is evicted on a breach of that lease. While these are legitimate points that explain why, as conceded by the court of appeals, the Housing Authority is not a true lessee, the majority opinion does not account for the fact that the low-income tenants aremot true lessees. True lessees do not require large subsidies from the government to secure housing. Likewise, true lessees need not comply with the stringent requirements of a government agency in order to maintain their leasehold.

¶ 53. The court of appeals wisely acknowledged that although the Housing Authority "is not the true lessee of the properties within the technical definition of the term, the Authority's control is a relevant consideration in making a determination as to the ability of [Columbus Park] to qualify for an exemption." The court of appeals determined that even though the Housing Authority's name is not on the lease, "to pretend that [Columbus Park's] tenants are independent lessees ignores the role of the Authority in administering and subsidizing the tenants." I agree with the court of appeals that the Kenosha Housing Authority's pervasive control over the housing rentals coupled with its substantial financial contribution to the rent of the low-income occupants rendered the Housing Authority a lessee for purposes of this tax exemption statute.

¶ 54. A strict but reasonable construction of Wis. Stat. §§ 70.11 and 70.11(4) would appreciate that the relationship between the Housing Authority and the low-income individuals occupying Columbus Park's housing is sufficiently substantial to qualify the Housing Authority as a lessee for purposes of § 70.11. This interpretation of the statute is the better interpretation because it avoids the illogical result of discouraging benevolent associations created to provide low-income housing from providing low-income housing.

¶ 55. For the foregoing reasons, I dissent.

       All subsequent references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise indicated. While the tax years in question predate the 1999-2000 version, there are no differences in the applicable statutory sections.

       Kenosha disputes that all of Columbus Park's leasehold income is used for such purposes.

       All references to the federal statutes and regulations governing the section 8 housing program are to the 1999 version unless otherwise noted. Any difference between the 1998 and 1999 versions of the United States Code and Code of Federal Regulations are immaterial to the provisions cited.

       According to Columbus Park, the involvement of the authority is as follows: The Authority (1) requires new tenants of publicly-subsidized housing in the city to attend an orientation session that the Authority holds; (2) issues vouchers to income-qualified tenants that allows them to participate in the section 8 housing program; (3) conducts an initial inspection of the rental units to ensure compliance with minimum housing standards; (4) conducts an annual inspection of the rental units to ensure compliance with minimum housing standards; (5) requires the low-income tenants to make reports directly to the Authority showing a change in income; and (6) adjusts the monthly rent subsidies based on changes in the tenant's income. The Authority also enters into a contract directly with the owner to make payments on behalf of a family. 24 C.F.R. § 982.1(a)(2).

       This "sample lease" was marked in the record as Exhibit 1 and was attached as part of Kenosha's brief in opposition to summary judgment. While Columbus Park objected to this sample lease in its briefs to the circuit court, the record does not indicate that Columbus Park ever made a motion to strike this material or that the circuit court did in fact strike this exhibit from the record. In any event, the sample lease is part of the record before us. While the lease is dated March 2001, we note that it is a standard lease form, drafted by an attorney, and it contains a 1999 copyright.

       Even if the sample lease was not authenticated, and thus not "properly" part of the record before us, Wis. Admin. Code Chapter ATCP 134 "applies to the rental of dwelling units located in this state." Wis. Admin. Code § ATCP 134.01 (June 1999). Thus, the above-cited provisions would be applicable to any lease executed in 1998 or 1999 regardless of whether the lease included a specific reference thereto.

       We note the current version of the regulation is more specific and requires that "[t]he tenant and the owner must enter a written lease for the unit. The lease must be executed by the owner and the tenant." 24 C.F.R. § 982.308(b)(1) (2003).

        See, e.g., 24 C.F.R. § 982.301(b)(12)(Public Housing Authority (PHA) must provide a list of landlords "willing to lease a unit to the family-"); 24 C.F.R. § 982.310(c)(2)(owner may terminate tenancy if tenant is engaged in various criminal activities); 24 C.F.R. § 982.309(d)(2)(family must give PHA notice of termination if it decides to terminate lease); 24 C.F.R. § 982.4309(d)(2)(housing assistance payment includes a payment by the PHA to the owner for rent under the family's lease; lease between owner and tenant establishes conditions for occupancy of the dwelling unit by the family); 24 C.F.R. § 982.1(a)(2) (the family selects and rents a unit); 24 C.F.R. § 982.310(d)(l)(i)(owner may terminate lease for failure of family to accept offer of new lease or revision); 24 C.F.R. § 982.309(b)(3)(providing that while the Authority may cancel the contract with the owner or terminate assistance to the family, the lease itself terminates only when either the tenant or the owner terminate the lease).

       This could also be an alternative interpretation of the court of appeals' decision, as it found that although the Authority was not the true lessee, because of Columbus Park's altruism and the economic plight of its tenants, it would be "an unreasonable construction of the term 'lessee' in the context of this statute to apply it to the very individuals who are the objects of the tax-exempt activity." Columbus Park Housing Corp. v. City of Kenosha, 2002 WI App 310, ¶¶ 26-29, 259 Wis. 2d 316, 655 N.W.2d 495.

       The issue in Family Hospital Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 314, 254 N.W.2d 268 (1977), was whether the nursing home in question was a benevolent nursing home under the 1970-1971 version of Wis. Stat. § 70.11(4). Likewise, in Milwaukee Protestant Home for the Aged v. City of Milwaukee, 41 Wis. 2d 284, 291, 164 N.W.2d 289 (1969), this court merely considered whether retirement homes operating on a fee-charging but nonprofit basis qualified as charitable or benevolent associations under § 70.11. In Friendship Village of Greater Milwaukee, Inc. v. City of Milwaukee, 181 Wis. 2d 207, 220, 511 N.W.2d 345 (Ct. App. 1993), the court was only required to determine which entity owned and used the property in question. Finally, in St. John's Lutheran Church v. City of Bloomer, 118 Wis. 2d 398, 400, 347 N.W.2d 619 (Ct. App. 1984), the court again only addressed whether a retirement home for the aged constituted a benevolent association.

        Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 80, 591 N.W.2d 583 (1999).

        See, e.g., State v. Delaney, 2003 WI 9, ¶ 14, 259 Wis. 2d 77, 658 N.W.2d 416 ("[W]e may construe a clear and unambiguous statute 'if a literal application would lead to an absurd or unreasonable result1"). For cases reiterating the same interpretive rule, see, e.g., State v. Jennings, 2003 WI 10, ¶ 11, 259 Wis. 2d 523, 657 N.W.2d 393; State v. Zielke, 137 Wis. 2d 39, 51, 403 N.W.2d 427 (1987); DeMars v. LaPour, 123 Wis. 2d 366, 370, 366 N.W.2d 891 (1985); Green Bay Redevelopment Auth. v. Bee Frank, Inc., 120 Wis. 2d 402, 409, 355 N.W.2d 240 (1984); City of Madison v. Town of Fitchburg, 112 Wis. 2d 224, 236, 332 N.W.2d 782 (1983); Braun v. Wis. Elec. Power Co., 6 Wis. 2d 262, 94 N.W.2d 593 (1959); Guse v. Indus. Comm'n, 189 Wis. 471, 476, 205 N.W. 428 (1925); Ricco v. Riva, 2003 WI App 182, ¶ 35, 266 Wis. 2d 696, 669 N.W.2d 193.

       Majority op., ¶ 18.

        Town of Menominee v. Skubitz, 53 Wis. 2d 430, 438, 192 N.W.2d 887 (1972) (the term "leased lands" in a tax statute "should be construed broadly enough to encompass a multitude of situations").

        State v. Jelco, 1 Wis. 2d 630, 635, 85 N.W.2d 487 (1957) (the word "owned" can be used to designate a great variety of interests in property and does not have to be restricted to absolute ownership).

       Majority op., ¶¶ 19-24.

       As the court of appeals explains:
      The Authority: (1) requires new tenants of publicly-subsidized housing in the City to attend an orientation session that the Authority holds, (2) issues vouchers to income-qualified tenants that allows them to participate in the Section 8 housing program, (3) conducts an initial inspection of any Columbus Park rental unit selected by an income-qualified tenant to ensure compliance with applicable minimum housing standards, (4) conducts an annual inspection of Columbus Park's Section 8 rental units to ensure compliance with applicable minimum housing standards, (5) requires reports to be made by Section 8 tenants directly to the Authority showing any changes in monthly income, and (6) makes monthly adjustments to Section 8 tenants' rent subsidies based on changes in their income.

        Columbus Park, 259 Wis. 2d 316, ¶ 25 n.4.

         Id., ¶ 26.

        Id.