Target, Walmart, and other big box stores want your business; they just don’t want to pay for your schools, fire, and police:
It’s called “The Dark Store Theory”
This tax avoidance gimmick allows big box stores to lower their property taxes, pushing them on to homeowners. Some of the companies using this gimmick are Target, Walgreens, Wal-Mart, Lowes, Menards, CVS, and Kohl’s, among other superstores. Even some car dealers are trying to take advantage of the loophole. Their claimed justification is that if they have to close the store and try to sell it, it will only bring about half of the original price.
Companies build these big box stores, and as soon as they open them, they want them to be taxed as vacant. So the taxing authority has two options: the first is to settle, and the second is to endure costly litigation.
From 2014 thru 2019, Appleton, WI had to refund $723,000 to five retailers that won their lawsuits, and it cost the city $294,000 in legal fees. As a result, Appleton homeowners are now on the hook for $174,000 more in taxes each year.
According to the Michigan Association of Counties, local tax revenue in Michigan has been reduced by $100 million from 2013 to 2017 due to this loophole.
A Lowes store in Wauwatosa, WI was assessed at $13.6 million after spending $16 million to build the store; they claim that it is only worth $7.1 million. So for the purpose of property taxes, the stores want the reduced valuation; but on their books, they value it as the total building cost. That way, it looks better for the bankers and stockholders, plus they get more depreciation, which lowers their income.
In summary, a big box store comes to town and builds a new store. They ask for a tax break right after they open. The city has spent money (probably borrowed) to put in streets, fire hydrants, and utilities, banking on a future tax revenue stream. Then the store uses the loophole to cut the revenue stream.
Less tax revenue means less money for schools, fire, and police. What’s wrong with this picture?
Emerson, J. (2020, April 17). Dark store loophole won’t die. UpNorthNews | Wisconsin News For You.
Robinson, K. & IAAO Publications. (2017, November). Special task force tackles the dark store issue. Fair & Equitable.