Big box stores face higher taxes after court ruling

Michael Gerstein
The Detroit News

Lansing — The Michigan Supreme Court on Friday rejected an appeal from retail giant Menard over a tax assessment method that local governments across the state have said left them millions of dollars short of what such companies should be paying.

Michigan’s highest court upheld a 2016 decision from the state’s Court of Appeals in Menard, Inc. vs. City of Escanaba that found the state was assessing taxes unfairly by not taking into account multiple ways of assessing property value. The decision, which was issued without an opinion, could change how much big box stores pay in local taxes.

The so-called “dark stores” method of evaluation that Menard and other big box stores have used led to about $100 million on lost local revenue since 2013, according to the Michigan Association of Counties.

Friday’s ruling stemmed from a particular dispute between Escanaba and Eau Claire, Wisconsin-based Menard over how much a local store in the Upper Peninsula city was worth. Escanaba said the property was worth about $8 million, while an appraiser for Menard said it was worth about $3.3 million.

The Michigan Tax Tribunal accepted Menard’s substantially lower assessment. But the Court of Appeals reversed the decision and ruled that there were flaws in the way both groups valued the store’s property, according to a state Supreme Court summary of the case.

​“This is a most promising development,” said Stephan Currie, executive director of the Michigan Association of Counties. “The Tax Tribunal has to return to this matter and operate under the orders given by the Court of Appeals to properly assess the value of commercial property.”

Currie’s organization, which represents county governments across the state, was one of several groups to file amicus briefs in support of Escanaba.

John Pirich, a lawyer for Menard, said in oral arguments before the state’s highest court that Escanaba improperly assessed the property’s value.

“We’re trying to pay the appropriate level of taxes based upon the market conditions,” Pirich said during the oral testimony in response to questions from Supreme Court Justice Richard Bernstein.

Bernstein said he was attempting to find out whether Menard used a different method to evaluate its property value for tax purposes than it would if the company were trying to sell a property.

“How does Menard internally list this value? Do you base the value of this property based on how it’s assessed by the city … or do you have your own internal way you’re going to value this?” Bernstein asked.

The Tax Tribunal will now have to reevaluate the store’s property worth, which could change how much Menard pays in local property taxes in Escanaba.