Pick any time of the day or week, and you’ll find your nearby big-box store humming with activity. Cars in the parking lot. Lines at the registers. The steady beep of items being scanned.
But when it comes time to pay the tax bill, the corporations that run these stores are asking communities to act as if they’re empty.
Across the country, large retailers are seeking huge reductions in the assessed property value of their stores, using ambiguity in tax law to argue that even successful stores aren’t worth very much, and should be paying tens of thousands of dollars less in local taxes.
No matter how the cases ultimately turn out, the whole process places an unfair burden on municipalities. The Legislature should step in and straighten it out.
It’s called the “dark store theory.” Retailers argue that for the purposes of property assessments, open and thriving big-box stores should be compared to closed, or “dark,” ones.
Using empty stores as comparisons significantly cuts what a store owes in taxes. In Brunswick, Walmart wants to cut about $7 million off the value of its store, which would cost the town roughly $128,000 in revenue. In October, the town of Scarborough settled with Walmart and Sam’s Club, costing it more than $170,000 in taxes. These are just two of several such cases in Maine.
And the same argument, with the same outcomes, has been made in at least 20 states, according to CityLab. In Michigan, dark-store appeals cost residents roughly $100 million in tax revenue between 2013 and 2017, according to testimony from the Maine Center for Economic Policy.
The argument, which has won over some courts but not others, has at least some merit. Property values are assessed in part using similar properties as comparisons, and when big-box spaces go on the market, they often have little resale value.
But that hardly captures the unique realities presented by large retailers.
The retailers built these huge stores, often with local tax breaks, to take advantage of their own scale. Sometimes they place restrictions on the deed to keep competition out of the area if they decide to move.
Should they get a tax break now, just because some of those buildings have closed – often when the retailer moves on to a bigger building down the road – and now have little use? What does that have to do with the store as it is now, busy from open to close, utilizing taxpayer services such as roads and emergency response at a high rate?
How should comparison properties be treated when there are so few properties that qualify, each with its own individual circumstances?
As it stands now, communities are on their own to answer those questions. If they take the retailers’ side, they leave residential taxpayers to cover the bill. If they don’t, they risk legal action from well-resourced corporations.
On Wednesday, the Taxation Committee will review L.D. 2045, which would require retail sites of 20,000 square feet or more to be assessed based on current use. As written, it may face state constitutional issues.
The committee should work through those problems and give cities and towns clear direction on how to handle assessments of big-box stores. Municipalities shouldn’t have to choose between much-needed revenue and legal threats.
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