A judge issued a ruling on Friday allowing a lawsuit to move forward that the Freedom From Religion Foundation and three Madison, Wis., residents filedagainst an unconstitutional tax exemption benefiting the rental properties owned by two religious entities in their hometown.

The suit challenges a property tax exemption that was created and then amended to benefit specific church-owned rental properties to the tune of hundreds of thousands of dollars annually. The Pres House and Lumen House Apartments, both serving student renters and owned by two of the defendants, are explicitly relieved of paying their share of taxes.

The judge denied the defendants’ motions to dismiss and the case will proceed — a big step toward securing a decision that will end the unconstitutional exemption.

The exemption is unlawful under the Wisconsin Constitution on several counts, the plaintiffs contend. The exemption harms property tax-paying plaintiffs Annie Laurie Gaylor and Dan Barker, FFRF co-presidents, and David Peterson, by forcing them and all other city of Madison property taxpayers to pay higher property taxes to make up for the unlawful omission of these properties from the tax rolls. Further, the exemption harms plaintiff FFRF, by favoring rental properties owned by two religious nonprofit organizations to the exclusion of all other nonprofits that may desire to run student apartments in the future.

“The court can make the reasonable inference that the exemption as it exists today does not have a reasonable relation to a legitimate purpose of government,” Dane County Circuit Judge Julie Genovese writes in her court order. “As such, plaintiffs have alleged facts sufficient to support a claim that the exemption violates the Uniformity Clause” of the Wisconsin constitution.

The Wisconsin Legislature enacted the property tax exemption in 2009 to benefit the Pres House Apartments owned by the Presbyterian Student Center Foundation. The Legislature approved an amendment in 2013 to benefit the Lumen House Apartments, owned by St. Raphael’s Congregation within the Diocese of Madison. The Legislature at that time adopted language to prevent additional properties from ever qualifying for this property tax exemption. No other properties in Madison or Wisconsin can ever benefit, and the exemption specifically targets properties serving University of Wisconsin-Madison students to the exclusion of students at all other colleges.

The Pres House Apartments’ current market value likely exceeds $25 million, with estimated property taxes owed in excess of $300,000 annually. The Lumen House Apartments’ current market value likely exceeds $7.6 million, with estimated property taxes exceeding $94,000 annually. Based on their combined estimated $33 million in value, omitting these properties from the tax rolls is approximately the equivalent of exempting an entire neighborhood from paying property taxes, FFRF asserts in the legal complaint.

The city of Madison, which is also named as a defendant in the suit, is unwilling to cease applying this unlawful tax exemption. On April 4, 2024, FFRF’s counsel sent a letter to the city of Madison assessor, Michelle Drea, laying out the legal reasons why the exemption is unlawful under the Wisconsin Constitution. Within hours, Drea replied strongly disagreeing.

The tax exemption that the Pres House and Lumen House Apartments benefit from is unconstitutional for multiple reasons, the plaintiffs contend. The exemption violates the Uniformity Clause of the Wisconsin Constitution, which states, in part, “The rule of taxation shall be uniform.” The exemption breaches, too, the Equal Protection Clause set forth in Article I, Section 1 of the Wisconsin Constitution by creating a distinct classification, student rental properties meeting extremely specific criteria and treating this class significantly differently from all other similarly situated properties. And the exemption is in contravention of Article IV, Section 18 of the Wisconsin Constitution, which states: “No private or local bill which may be passed by the Legislature shall embrace more than one subject, and that shall be expressed in the title.”

Judge Genovese recognized the validity of three claims that FFRF and its co-plaintiffs have put forward, but granted dismissal of the claim that the laws grant unlawful “preference” to religion under Article I, Section 18 of the Wisconsin Constitution.

“We are pleased to move forward with this case,” said FFRF Legal Director Patrick Elliott. “This suit serves all taxpayers in Madison and ensures that the State Legislature is not allowed to favor specific churches for special tax benefits.”

Plaintiffs Annie Laurie Gaylor and Dan Barker are city of Madison, Wis., residents and property owners. Plaintiff David Peterson, as representative of the David Peterson Revocable Trust, is a city of Madison, Wis., resident and property owner. Plaintiff the Freedom From Religion Foundation is a 501(c)3 nonprofit headquartered in the city of Madison, Wis. FFRF works as an umbrella for those who are free from religion and are committed to the cherished principle of separation of state and church.

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