Bill Ends Chain Store Tax Loophole

Big box chain stores like CVS Pharmacy, Lowe’s, Target, Menards, and Walgreens would no longer be able to use a legal loophole to slash their property taxes under a pair of bills sponsored by GOP lawmakers. The state’s largest business lobby, Wisconsin Manufacturers & Commerce (WMC), which usually sides with Republicans, opposes the bills because businesses would pay more taxes.

Currently, large chain stores have successfully challenged and slashed their local property tax assessments numerous times throughout the state by arguing the value of their operating stores should be based on the substantially lower tax assessments of empty big-box stores. The so-called dark store loophole is based on a 2008 Wisconsin Supreme Court case that municipalities say artificially lowers the value of operating stores and unfairly shifts large property tax burdens to homeowners and smaller business. Municipalities also say the assessment challenges are creating large legal costs.

One bill, sponsored by GOP Sen. Duey Stroebel and Rep. Rob Brooks, both of Saukville, would require big-box stores to be assessed at their “highest and best use.” The other measure, sponsored by GOP Sen. Roger Roth, of Appleton, and Brooks, would prohibit tax assessments on operating stores from being based on nearby rundown or abandoned properties. Instead, tax assessments on operating stores would be based on other properties with comparable age, use, construction, and economic characteristics.

Media reports – here, here, and here – show that big-box retailers have shaved hundreds of thousands of dollars off their property tax bills by using the dark store loophole.

In Fond du Lac, Menards successfully reduced the assessed value of one its properties from $9.2 million to $5.2 million. Menards filed more than a dozen lawsuits against Wisconsin municipalities in 2016 challenging tax assessments on its stores.

The city of Oshkosh paid out more than $300,000 to Walgreens in 2015 after the city lost its case. In Sun Prairie, Target had its tax assessment reduced by more than $1 million and was refunded $85,000 in property taxes after successfully arguing it was overtaxed between 2012 and 2014. In Wauwatosa, Target was refunded almost $190,000 in property taxes in 2014 after arguing it was overtaxed by the city. In Kenosha, the mayor and other officials say the city has refunded more than $500,000 to big-box stores that challenged their assessments during the past two years.

The bills put majority Republican lawmakers at odds with one of their most powerful campaign and electioneering allies in WMC. More than a dozen special interests represented by WMC, including business, real estate, manufacturing, and construction, contributed $16.7 million between January 2011 and December 2016 to Republican legislators.

In addition to direct special interest contributions, WMC has spent an estimated $18.6 million since 2010 on mostly undisclosed, outside electioneering activities to support Republican and conservative legislative and statewide candidates.