A Wisconsin tax loophole exploited by big box stores could soon be closed if two newly introduced bills get passed into law. Senate Bills 291 and 292 would change the way properties are assessed to prevent businesses from being assessed at the same rate as an empty, or “dark,” store would be.
Under Wisconsin’s current assessment system, a fully operational business such as a Menards or Walgreens, could be valued the same as a vacant or even demolished store. In one instance, a Menards in Howard County claimed that it should be assed at $5.8 million based on a comparison to nearby vacant big box stores. The county ultimately assessed it at $12.45 million. Menards sued but eventually dropped the lawsuit.
In 2008, the Wisconsin Supreme Court ruled in favor of Walgreens and ordered that certain assessment practices that tied a property’s value to above-market leases could not continue.
Jerry Deschane, executive director of The League of Wisconsin Municipalities, which supports the recent legislative proposal, wrote that, “As a result [of the ruling], numerous newer buildings housing Walgreens stores have sold for millions of dollars more than the value at which they can be assessed for tax purposes.”
The proposed bills would close this loophole by mandating how property values have to be determined. Senate Bill 291 establishes a “highest and best use” standard to evaluate properties, and Senate Bill 292 clarifies that “a property is not comparable to the property being assessed if… the property is dark property and the property being assessed is not dark property.”
In a memo sent to the state Senate and endorsed by seven other groups, Corey Fish, Wisconsin Manufacturers & Commerce director of tax, transportation, and legal affairs, encouraged senators to vote down the bills.
“These pieces of legislation are detrimental to Wisconsin’s business climate,” he said. “The passage of these bills would lead to increased property tax assessments for all businesses, legal uncertainty, and more litigation.”
The League of Wisconsin Municipalities said that leaving current assessment policies in place would impact taxpayers by shifting the cost burden to them if larger stores don’t pay more in property taxes.
“Over time, these loopholes will slash the commercial property tax base in Wisconsin, and more of the property tax burden will be shifted to small businesses,” Deschane wrote in support of the bills.
Senate Bills 291 and 292 were introduced by Sens. Roger Roth and Duey Stroesel, both Republicans. The Senate bills correspond with Assembly Bills 386 and 387, which were introduced by Republican Reps. Robert Brooks and David Steffen.
The bills have gained wide bipartisan support and are expected to be voted on when the legislature has its next scheduled floor time in mid-January. Gov. Scott Walker has not indicated any position on the proposal.