Closing time for ‘dark store’ loophole?
An effort is underway to rewrite state laws and close a tax loophole that lets big-box retailers reduce their property taxes at the expense of homeowners and small businesses, but it’s not moving fast enough for one local community.
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If there’s a loophole, someone is going to exploit it.
In the case of Walmart, the big-box retailer has filed suit against the city of Monona to reduce its tax assessment from $24.5 million to $9.5 million, citing a 2008 state Supreme Court ruling over a Madison Walgreens store that allowed the pharmacy retailer to lower its assessments to reflect the value of other stores that are “dark,” or vacant.
The high court ruled that the city of Madison assessors had overvalued the Walgreens store.
Since then, other big-box retailers have used the strategy to lower their own property tax assessments.
No one likes to be overassessed but big-box critics say that by taking advantage of this loophole, large retailers are essentially shifting their tax burden onto homeowners and small business owners in the community, two groups that are far less able to handle higher taxes than the multibillion-dollar retail giants.
Earlier this year a bipartisan group of state lawmakers introduced companion Senate and Assembly bills (SB 292 and AB 386) aimed at closing the “dark store” loophole, but both bills are currently stalled in the Legislature. The Assembly version had a public hearing in June but no action has been taken since then. The Senate version actually passed unanimously out of the Revenue, Financial Institutions, and Rural Issues Committee on Oct. 11, but it has yet to be scheduled for a full Senate vote.
Meanwhile, Monona and other Wisconsin communities are left hanging.
“Big-box stores like Menards, Target, and Walmart, to name a few, are successfully arguing in court that their property should be assessed as a vacant or abandoned building of the same size, not including the value of the business on the property,” Monona Alder Andrew Kitslaar wrote in an editorial this summer. “Such victories will have dire consequences on municipalities large and small because big-box stores will push a significant tax burden onto small businesses and homeowners.”
“If Monona’s Walmart is successful in reducing its assessment, Walmart’s tax bill would be reduced by an estimated $433,000,” notes Kristie Schilling, executive director of the Monona East Side Business Alliance. “The city would lose $111,000 in tax revenue and the Monona Grove School District would lose about $245,000. As a result, the city would have to drastically cut services, or raise the tax rate for homeowners and small businesses. To maintain the current level of city services, it would cost the average homeowner an additional $113 in property taxes, and the average commercial property, or small business, approximately $600 more.”
Schilling says Monona is home to eight big-box stores and if Walmart’s lawsuit were successful the other large retailers would likely follow Walmart’s lead, resulting in more taxes being handed off by these entities to residents and small businesses in Monona.