Appleton takes on 'dark store' tax loophole
APPLETON - If tax refunds from Appleton to large retailers using what's known as the "dark store" tax loophole continue, homeowners and small business owners could see their property taxes increase another $140 a year, according to City Assessor DeAnn Brosman.
In response to what Brosman calls an "onslaught" of lawsuits by retailers such as CVS or Target to have the city assess their occupied property values like vacant storefronts, city officials are poised to take a stand against the practice.
The city's Community and Economic Development Committee unanimously passed a resolution urging the state Legislature and Gov. Scott Walker to pass a law to ensure that occupied commercial properties are valued differently than vacant commercial properties. The Appleton Common Council will take up the proposal and a nearly $340,000 tax refund to CVS next month.
RELATED: 'Dark store' loophole could cost millions in Green Bay
RELATED: Cities brood over 'dark store' tax lawsuits
RELATED: Appleton settles tax claim with Walgreens
"These tax loopholes are used around the country and it works well for these retailers," Brosman told the committee on Wednesday. "As the tax base erodes, it either can shift the burden to homeowners and small business owners, or the city reduces services."
If the Common Council approves the tax refunds to CVS next week, the city will have spent more than $800,000 paying back four retailers for property tax refunds in the last four years — or about $32 for each of the 25,000 property owners in Appleton.
But another 130 similar properties in the city could ask for a similar refund, potentially creating a tax burden of another $140 a year, Brosman said.
Since a 2008 state Supreme Court decision, large retailers, including Target, Walgreens and Menards, have been appealing their assessed property values in individual municipalities like Appleton to be more comparable to say a vacant, older but similar-sized building. Some initially go to the city's Board of Review to request another assessment of their property. When the municipality disagrees, some have jumped straight into a lawsuit to get a tax refund either through litigation or a settlement.
"Wisconsin assessors are required to value property at its market value — what it would sell for on the open market," wrote Brosman in a memo to the Community and Economic Development Committee. "Wisconsin courts, however, have not recognized that fully occupied commercial buildings have a higher market value than vacant, abandoned (i.e. "dark") commercial buildings."
This Supreme Court decision has led to an "onslaught" of lawsuits throughout the state, including in Appleton, Green Bay, Neenah, Oshkosh and more.
What's difficult is there's room for interpretation about how properties can be assessed since that decision, Deputy City Attorney Chris Behrens told the committee. A state statute, similar to those debated in Indiana and Michigan, could close the loophole by narrowing any room for interpretation.
Appleton recently spent six years in court fighting CVS, which wanted a tax refund. Its property on Wisconsin Avenue was initially assessed at $4.5 million but was dropped to $1.8 million. The property had initially been developed for $4.5 million and had been sold twice for $4.5 million, Brosman said.
Other recent tax refunds in Appleton, which total more than $800,000 with the CVS refund of $339,594, also include:
- A $79,128 refund to Target in 2013
- A $385,633 refund to Walgreens in 2015
"National retailers have very good attorneys and unlimited funds, so they file lawsuits and try to settle, and municipalities don't have the same funds (to fight the lawsuits)," Brosman said.
Appleton has spent $246,805 on outside attorneys for legal cases against retailers seeking a tax refund, according to the city attorney's office. The city has lost every case against these retailers, in both circuit court and appellate court. Those costs don't include the costs of time spent by city attorneys on these cases.
If new lawsuits are received from other retailers seeking a similar refund, both Brosman and the city attorney's office will need to review each case before determining what action the city will take, said Chad Doran, the city's communications coordinator.
Madeleine Behr: 920-996-7226, or mbehr@postcrescent.com; on Twitter @madeleinebehr