Reilly promotes legislation to curb use of dark store theory
Mayor, other municipal leaders dub Dec. 11 Dark Store Day

By Hannah Weikel - Freeman Staff

Dec. 13, 2017

 Walmart in Pewaukee recently filed a lawsuit against the village under the dark store theory, asking for its 2017 property tax assessment to be cut in half.
Hannah Weikel/Freeman Staff

WAUKESHA — Mayor Shawn Reilly is drawing attention to pending litigation statewide brought by big box stores under the dark store theory by promoting state legislation that would promptly end tax reductions for those businesses.

Reilly and other municipal leaders in Wisconsin have rallied behind Senate Bill 291 and 292, which would invalidate the dark store argument that has, for several years, led to local governments issuing tax refunds to businesses like Menards, Target and Walgreens across the state.

Under the dark store theory, big box stores are able to argue that their businesses should be assessed the same as if they were a vacant property. After a 2008 U.S. Supreme Court decision, chain drug stores are also able to pay property taxes at half of the actual fair market price.

The issue, Reilly said in a press release, is not only that the stores’ tax avoidance strategy has allowed them to greatly reduce their property taxes; it has also increased the property tax burden on small businesses and homeowners in those municipalities.

Two businesses in Waukesha used the dark store strategy this year to file lawsuits, resulting in over $30,000 in tax refunds, according to a city property tax settlement document. Those businesses, Farm & Fleet and Target, have received tens of thousands in property tax reimbursements since 2015.

Requests for comment sent to the corporate headquarters of Menards, Woodman’s and Walmart on Tuesday morning were not returned before deadline.

Scott Gosse, village administrator in Pewaukee, said Walgreens and Menards have come forward in the past to challenge their assessments. He said the community reimburses the property owner, but then files paperwork with the Wisconsin Department of Revenue that then distributes the refund between other local taxing districts like schools and technical colleges.

Two more big box stores in Pewaukee filed lawsuits Monday morning, requesting their 2017 property tax assessments be cut in half, according to court documents.

Menard, Inc., with its property in Pewaukee assessed at $14.4 million, is asking to be assessed at no more than $6.1 million. CJM & W Investment Company, owner of Walmart, asks that their property in Pewaukee be assessed at no more than $9.8 million, instead of its current assessment of $16.6 million.

Many of these cases are mediated and settled out of court.

“Stores should not receive an unfair property tax break, especially when the result is a continued unfair tax shift to constituents,” Reilly said.

Dark Store Day

Reilly joined other state officials Monday in designating Dec. 11 as Dark Store Day to raise awareness about the issue and call for state legislators to schedule a vote in January on SB 291 and 292.

“Both of these bills have broad bipartisan support and will easily be passed if a vote is scheduled,” Reilly said in a statement.

Gosse said Pewaukee adopted a resolution earlier this year asking state legislators to support the law change, but the similar bills have faced stiff opposition from Wisconsin Manufacturers and Commerce.

WMC’s opinion

In a press release from June 2017, WMC offered their testimonial against closing the dark store loophole, which they said would make it easier for aggressive assessors to raise property taxes on businesses.

According to the WMC, some assessors in Wisconsin have already tried to increase property values up to 500 percent to make additional tax revenue.

“Wisconsin already has some of the highest property and income taxes in the country. It’s disappointing and frustrating that lawmakers seek to worsen this crushing burden for businesses by allowing local governments to tax lease income through the property tax,” said WMC Senior Director of Government Relations Jason Culotta in a June statement.

Wichgers: Legislation would ‘even the playing field’

Rep. Chuck Wichgers, R-Muskego, co-sponsored both bills after his constituents in municipal government told him about the burden reduced tax assessments would in turn have on small business and residents.

Wichgers said he also weighed the wishes of big box stores and commercial properties before supporting the legislation, but decided the impact on those corporations wouldn’t be detrimental if the bills pass. He said the bills would “even the playing field.”

SB 291 would close the gap in Wisconsin’s property assessment laws that allow businesses like Walgreens and CVS to claim that their property value isn’t what it appears to be, he said.

SB 292 would stop national big box stores from challenging their assessed property values based on the dark store theory.

Wichgers said his goal is to make the property tax burden as fair and equitable as possible in Wisconsin.

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