WAUSHARA COUNTY v. Sherri L. GRAF, 166 Wis.2d 442 (1992), 480 N.W.2d 16, Supreme Court of Wisconsin. Submitted on briefs October 4, 1991.Decided February 17, 1992.

Click here to go to online publication of he entire case.


The Procedural History and Opinions [Trial Court, Court of Appeals, Supreme Court of Minnesota]:

  •  Trial Court: The issue considered was “whether the holding of religious services on a parcel of real estate, even though extending over a period of time, exempts that property from real estate taxation. In holding that it does not, the trial court concluded: “[Basic Bible has] not followed any of the traditional or authorized means of obtaining tax exempt status on this property. They have indicated that there is no need to do so. Under the position proposed by respondents, any person could contend, and could actually hold religious services upon a parcel of real estate and declare it exempt from taxation. This could be carried to an unworkable extreme. There would be no control and no means of follow-up. Since all lands are subject to tax unless exempted by law, the burden is upon respondents to show why they are They have failed in meeting this obligation. (Emphasis supplied).”The court found that since Basic Bible was not incorporated and had no 501(c)(3) status, there was no entity to claim  exemption as a church or religious association  [The alleged church held property through trustees.]. The court found that the County complied with the statutory foreclosure requirements, that Basis Bible was not a legal entity, and held that Basic Bible was not tax exempt. It placed emphasis on Basic Bible’s failure to incorporate.
  • Basic Bible, acting, pro se, appealed through three of its members, raising only two issues: (1) Did the trial court err in proceeding without responding to challenges to its jurisdiction? (2) Did the trial court have the authority to hear a case concerning the property of a church (nonstate entity)?

    Court of Appeals: Reversed the judgment of the trial court, totally ignored the only issues raised by Bible Baptist, reviewed the entire trial court decision and concluded that the trial court’s holding that a church must incorporate before it can claim tax exempt status before it can claim tax exempt status under the statute was erroneous. The court held that, by not arguing on appeal the bona fides of Basic Bible waived that issue. The court further held that the title to the real estate was properly held in the name of the trustees for the benefit of Basic Bible, and that the trust was an “entity” which “could claim tax exemption. The court did not decide whether Basic Bible was tax exempt.
  • The county appealed to the Supreme Court of Wisconsin: 

    The Court stated that the court of appeals had no obligation to look beyond the issues raised by Bible Baptist, but had the discretion to do so. The principle issue which it in its discretion addressed was the circuit court’s conclusion that for a “church” to claim a tax exemption, it must be incorporated under the laws of Wisconsin or another state. The Supreme Court of Wisconsin agreed with the conclusion of the appeals court that the church need not be incorporated to claim a tax exemption. The Court stated: “We need not reiterate the excellent discussion and analysis underpinning that conclusion that appears in the court of appeals opinion. 157 Wis. 2d at 539-49. (The analysis in that opinion will also be looked at and added as a post on this webpage). That conclusion was, however, substantially irrelevant. It was not outcome determinative of the fundamental question posed by this litigation: Did Basic Bible meet its burden to demonstrate that it was tax exempt?” The Court stated that Basic Bible did not even assert on appeal a basis for tax exemption. It only asserted that the circuit court was without jurisdiction. However, [the law] confers plenary subject matter jurisdiction upon the circuit court and [the law] grants circuit courts the jurisdiction to hear tax foreclosure cases.As to the assertion that the court was without jurisdiction “bordered on the frivolous,” and this, the only issue before the court of appeals, could have been dealt with fully in a very summary opinion affirming that court. The fact that the court of appeals correctly concluded that the circuit court erred as a matter of law when it held that incorporation was necessary for a tax exemption did not in itself warrant a reversal of the circuit court. The only question posed is whether the taxpayer has sustained its burden to prove tax exemption. It is clear from the record that it did not. The appeals court concluded that the entire record, which demonstrated taxpayer’s lack of proof of right to exemption, was non-existent because the county waived any objection to the bona fides of the church by not attacking the bona fides on appeal.

    The county had no reason at all to assert or argue a position on which it had prevailed—a position that was not assailed by the appellant in the court of appeals. It is obviously unfair to expect the “respondent” to “respond” to issues not raised by appellant. The record shows a total failure of proof of tax exempt status. The trial court’s error in that respect cannot be converted into an affirmative tax exempt status. It merely demonstrated that one of many reasons for not affording tax exempt status was incorrect. The controlling issue on this review is whether Basic Bible is a “church” or “religious association” entitled to property tax exemption under sec. 70.11(4), Stats. The burden of proving tax exempt status is upon the taxpayer. “Tax exemption statutes are matters of legislative grace, and they are to be strictly construed against the granting of the exemption.” Where the facts are established, the determination of whether a taxpayer is a “church” or “religious organization” under sec. 70.11(4), Stats., is subject to de novo review.

    The court then stated five tests necessary to prove that a church” or “religious association” entitled to tax exempt status under [the statute]: (1) the taxpayer must be a bona fide church or religious association; (2) the property must be owned and used exclusively for the purposes of the church or religious association; (3) the property involved must be less than 10 acres; (4) the property must be necessary for location and convenience of buildings; and (5) the property must not be used for profit.

    The first test requires the circuit court to consider the sincerity of the organization’s asserted beliefs, considering all the evidence and determining whether the beliefs are held in good faith or whether the “forms of religious organization were erected for the sole purpose of cloaking a secular enterprise with the legal protections of religion. [two federal cases cited which accept this means of determination]. “Moreover, it avoids the inherent constitutional difficulty in attempting to define “church” or “religious association” in a theistic manner.”

    Again, the court stated that incorporation is not a prerequisite to tax exempt status. 459. “It is clear that had the legislature intended to require churches and religious associations to incorporate to gain tax exempt status, it in all likelihood would have specifically so provided…. Most importantly, however, the trial court must consider whether the alleged religious beliefs are sincerely held or whether they are merely a subterfuge designed to evade taxation. 460. As the trial court noted, any person could contend, and could actually hold religious services upon a parcel of real estate and declare it exempt from taxation. In 1978, the acting IRS Commissioner described a modern ‘tax avoidance device’:

    “Some individuals and organizations are marketing and promoting ‘plans’ to avoid income taxes. While the ‘plans’ vary in certain respects, a common theme calls for an individual taxpayer to obtain minister’s credentials and a charter for a church or religious order by mail for a fee from churches that may or may not be recognized as exempt from federal income tax under I.R.C. § 501(c)(3). No profession of adherence to a creed, dogma, or moral code is required and no duties or fiduciary responsibilities are undertaken in order to receive and administer these charters or credentials.

    “The ‘plan’ then calls for the individual to take a ‘vow of poverty’ and to assign his assets (house, car, savings account, etc.) and the income earned from current employment to the purported church or order. A major portion of the income assigned to church or order from this unrelated occupation is set aside for housing, food, clothing, and other items

    “. . . .

    “Those interested in protecting the preferences for churches must agree that the Service has an obligation to be vigorous in stopping such schemes.”

    The court then examined the facts in the record and concluded that the record as a whole supports the conclusion that Basis Bible is not a bona fide church or religious association under [the law—sec.70.11(14]. “The evidence indicates that Basic Bible was established to evade taxation. Basic Bible failed to meet its burden of proving that it is a “church” or “religious association” under [Wisconsin law]. The court held that Basic Bible is not tax Exempt.


Basic Bible conveyed real estate to Sherri L. Graf and Barbara J. Pogue in trust for the church’s benefit. Basic Bible was not incorporated, nor did it obtain 501(c)(3) status. Basic Baptist filed a property tax exemption certificate with the local tax assessor and the exemption was not granted. The county began in rem tax foreclosure proceedings.

“Basic Bible responded that it was a religious organization, and pursuant to sec. 70.11(4), Stats., was not subject to taxation on the real estate because it was used for religious purposes. Basic Bible presented numerous witnesses, all of whom testified that they had attended “religious services” on the property at various times since 1977. Other activities on the property included bible studies, a memorial service, counselling, agricultural training, and legal research.

“Sherri Graf, an ordained minister in the Life Science Church, testified that she is a trustee of Basic Bible, that her husband, Wilbert Kelly, is the pastor of Basic Bible, and that they have resided on the property since 1977. Sherri Graf testified that the parent church in Minneapolis is an exempt organization under I.R.C. sec. 501(c)(3), but acknowledged that Basic Bible had not applied for and did not have such status. Sherri Graf acknowledged that Basic Bible had not taken any action under any state or federal law to incorporate or formally charter Basic Bible. Her testimony revealed that neither she nor Wilbert Kelly had any income and that they lived on donations from individuals visiting Basic Bible. Sherri Graf stated that Basic Bible was always open and was open to everyone.

“Assertedly, Basic Bible’s beliefs are based upon the King James version of the Bible, the United States Constitution and the Declaration of Independence. Among the “fundamental beliefs” of Basic Bible, set forth in a cover letter its members are charged to distribute along with the Declaration of Independence and the United States Constitution, is the following:

“The Laws of Nature and of Nature’s Creator are in part set out in the Declaration of Independence and the Constitution of the United States. These are the fundamental Laws and are recognized by the Basic Bible Church.

“The members of the Basic Bible Church are bound by oath or affirmation to support these Fundamentals as these represent the Will of the Creator and the Laws of Nature in part; a sacred belief is that each individual owns the right to his own life, that he owns no right over the life of any one else, and that no one else owns any right over his life.

“Other beliefs include a conviction that income taxes are illegal, and that federal reserve notes are “frauds” in violation of the law of God and of the Constitution.

Other facts brought out in the Supreme Court of Wisconsin opinion:

“Included in the record of this case is a solicitation letter issued by the parent church of Basic Bible, which states:

  • “The Basic Bible Church of America offors [sic] a religious program whereby you can set up an Auxiliary Church of the Basic Bible Church of America out of your own home, office or business and use the Auxiliary Church that you and your trustees have complete control of the assets of to distribute the church tenets and doctrine to the general public.
  • “This auxiliary church may compliment your own particular church and gives you the opportunity for religious fulfillment and practice of your own religion according to the dictates of your own conscience.
  • “As is shown in the brief attached hereto, as an incidental benefit you can become completely exempt from income taxes, in some states, property taxes, Social Security Taxes and sales taxes in most states, plus-discounts at most stores and airlines.
  • “The Basic Bible Church of America is incorporated under the laws of Minnesota and as shown by the tax exempt letter attached hereto, has a Federal Tax Exempt letter of recognition.

“Attached to the letter is a ‘brief’ discussing the attributes of a ‘religious organization’ under the IRS Code. Of nine pages included in the letter, one is the above invitation to join, one is a statement of the “fundamental beliefs and philosophy” of the Basic Bible Church, and fully seven pages are devoted to the tax exempt status of the church. The only inference that can be drawn from this letter is that the Basic Bible Church of America is a subterfuge designed to evade taxation. Sherri Graf’s testimony at trial strengthens this inference:

  • “Our Church Charter also informs us that we are created pursuant to 501(c)(3) of the Internal Revenue Code. As far as state tax exemption, to the best of my knowledge, Chapter 11000 has not applied for such an exemption. We believe, under the laws, the first amendment, as well as the Constitution of the State of Wisconsin, and the tax laws in the State of Wisconsin, that Church property is exempt and that we are doing what is required and would fall into consideration under such law.”

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