Is closing the loophole the answer?
Two sides to the dark store issue

By Brianna Stubler

May 31, 2019

WEST BEND — The dark store loophole has gained increasing attention as companies like Menards file lawsuits and state politicians vow to press the issue legislatively. There are proponents for closing the so-called loophole, but others are adamant that this is not the appropriate action to reach the desired outcome.

State Sen. Duey Stroebel, R-Cedarburg, said the dark store issue affects all communities and is pervasive across the state.

“Communities like West Bend have suffered when large retailers challenge their property tax bills,” he said. “These legal challenges have increased property tax bills for homeowners and led to costly litigation throughout the state.”

His solution is changing the legal code.

The dark store loophole is a legal argument big-box retail chains like Walmart, Target and Menards use to drastically reduce their property taxes by assessing active stores as if they were vacant. The practice has resulted in the loss of millions of dollars in taxable value to communities in Wisconsin and other Midwestern states. “By passing legislation to close this loophole, we can get back to the balanced property tax distribution that existed before the courts created this loophole and avoid future litigation,” Stroebel said.

It is important to do so now because damage has already been done, he said, and the sooner it is corrected the better.

“The current loophole shifts an increasing share of the property tax burden onto homeowners,” he said.

There was a public hearing on the bill last session in the Assembly and the Senate, so this issue is not new at the state level.

“After my colleagues in the Senate heard from community leaders and others, they voted unanimously to advance this bill out of committee,” Stroebel said. “I hope we can have the same dialogue this session and ultimately have this bill signed into law.”

While closing the loophole has gained support, there are opponents to that as well. Greg Luce from the La Crosse Tea Party is opposed to such legislation.

“It is my position that the supposed ‘dark store loophole’ is really just property owners fighting back against over-taxation,” he said. “Big government liberals are fighting to continue looting property owners unfairly to finance their social-engineering schemes, and playing the average homeowners against ‘evil corporations’ is their modus operandi.”

This comes down to assessing value, he said. Homes are not valued differently based on whether there are occupants or if they are vacant — that would be ridiculous, Luce said. Similarly, he said commercial properties should not be valued based on this criteria.

“Commercial properties should be assessed based on quantifiable parameters like square footage and zoning, not occupancy,” Luce said. It also will not have the desired outcome many hope for, he said.

“This scheme by big government liberals to stick it to big corporations simply won’t reduce the cost of living for area homeowners,” he said. “Corporations don’t pay taxes, their customers pay the taxes built into the cost of their products.”

Thus, companies like Menards, which was recently involved in a lawsuit with the city of West Bend; Walmart, which filed a similar suit against Delafield; or any other of that nature, will just pass the cost along to the consumer, he said.

“Walgreens or Menards simply increase the cost of their products so that they achieve the proper margin for their business model,” Luce said. “And those customers that think they will benefit from eliminating the dark store loophole are simply paying the tax difference in the cost of their purchases at these stores.”

This is not the solution most people are looking for, he said; it is not the means to the end goal.

“I know people want improved roads and infrastructure, and politicians are promising that they should get big corporations to pay for it,” Luce said. “But the answer lies in reining in frivolous government spending, not looting the producers.”