The “Dark store theory” may be a misnomer, but its impact is felt by local governments. A recent court ruling may impact how the tax appeals are determined in the future.
WMUK’s Sehvilla Mann recently reported on the dark store theory for NPR. She takes a deeper look at how companies, usually big box retailers, appeal to lower their property tax bills.
The Michigan Tax Tribunal has been hearing many of these appeals and siding with the companies, granting the lower property tax bills. The retailers search for “comparable properties” to compare their assessment. They argue that property tax is paid on the property, not what it’s in the store. So the companies say there’s nothing wrong with comparing an open store with a closed one.
But officials with local units of government, argue that it’s important to know why the property is vacant. Is it because they are in a part of town that was once a busy shopping area that has since fallen out of favor? Some of those closed stores also have deed restrictions, that prevent a competitor from moving in. Local government officials say that also skews the value of the property.
State Representative Dave Maturen has proposed legislation to limit the “dark store” appeals. The Republican represents parts of Kalamazoo and Calhoun Counties has a background in property assessment. Maturen told Mann that local units of government, are already pinched financially. He says the rulings from the tax tribunal have squeezed their budgets more. Maturen says many of those communities can’t afford to take the issue to court.
But the Upper Peninsula town of Escanaba did file a lawsuit over the new assessment granted to Menards for a store in their town. The Michigan Tax Tribunal found in favor of Menards, but the Michigan Court of Appeals found that the tribunal has failed to consider the impact of the deed restrictions on the property. The Michigan Supreme Court upheld the Appeals Court ruling. That sends the case back to the Michigan Tax Tribunal.
Critics of the “dark store theory” hope the court ruling sets a new precedent. But the case isn’t over, because the tax tribunal has to issue a new ruling on the Menards in Escanaba. More battles over how big box stores are valued are likely in Michigan and other states.