Tax assessment plan for big box stores plods ahead
Lansing — A plan to prevent big box stores from paying less in property taxes may be gaining steam in the Legislature after the House approved the measure, which supporters say will lead to fairer tax evaluations.
Supporters say the measure is supposed to ensure property taxes are assessed more equitably for large retail stores like Lowe’s or Target. It passed the House by a wide margin despite opposition from big business interests such as the Michigan Chamber of Commerce and the Michigan Retailers Association.
Opponents say the legislation would complicate the tax appeal process, increase the cost of appeals and violate a state constitutional requirement that property be valued uniformly.
But Republican bill sponsor Rep. David Maturen and local government groups say that many Michigan big box stores are allowed to deflate their property taxes by arguing their store’s taxable values should be based on the sales prices of other big box stores that haven’t been used for years and have deed restrictions precluding most commercial uses of the property. Opponents of the tactic refer to it as the “dark stores” method.
It’s a big issue in Ottawa County where Treasurer Bradley Slagh said local governments have lost more than $200 million because of the current criteria for tax determinations, according to a survey the county conducted of 55 Michigan counties.
Ottawa County’s 14 big box stores paid a combined $28.4 million in taxes after appeals to the state’s Tax Tribunal. Slagh said those businesses had a combined taxable value of about $43.2 million.
“Without a major change to the way the Tax Tribunal works, these loss amounts will only be exacerbated as the process moves to smaller box stores like Best Buy, Marshalls, Walgreens, and to Industrial facilities, etc.,” Slagh said.
Amy Drumm, director of government affairs for the Michigan Retailers Association, opposes the legislation. She said it’s an attempt to discourage companies from appealing property assessments.
“The legislation’s changes to the Michigan Tax Tribunal Act are nothing less than an attempt to increase taxes by discouraging taxpayers from challenging the value placed on their property by local government,” Drumm said in a statement.
According to the Michigan Municipal League, the appraisal method allows Lowe’s stores to be assessed at $22.10 per foot in Michigan. In North Carolina Lowes stores are worth $79.08 per square foot for tax purposes.
The league says big box stores before about 2013 were assessed an average of $55 per square foot for taxes. Now Menards and Target are valued at $24.97 per square foot, while Menards goes for $61.23 in Wisconsin. It’s a similar story with Wal-Mart and Sam’s Clubs, according to the Michigan Municipal League.
“If you had to boil it down to that, I think those that have used this so called ‘dark store’ method … are paying less than what they should be paying,” Maturen said.
“It’s just troubling, I guess,” Maturen added.
Maturen, who said he’s the only licensed real estate appraiser in the Legislature, sponsored the bill. He said he was surprised it received broad support from fellow House lawmakers, who approved the legislation 97-11 Wednesday. He said he hopes that support indicates a good shot in the Senate, which likely won’t take it up until fall.
Maturen’s bill would require appeals decisions by the tax tribunal to be “better reasoned” and sets up specific criteria the Tax Tribunal must take into account when considering property tax assessment appeals. He said it’s supposed to make sure it uses “truly comparable” properties in the appeal process, but does not forbid businesses from using vacant stores’ sale prices for comparison.
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