PROPERTY TAX POST: A SICKENING ASSESSMENT? DRUG STORE CHAINS, COUNTIES BATTLE OVER PROPERTY TAXES

A company that is listed at number 37 on the Forbes 500, with a market value of $90 billion, $72 billion in annual revenues, and $2.4 billion in annual profit, might be an attractive target for a property tax assessment. But Walgreens appears to be working hard to change that perception.

The company has been aggressively challenging tax assessments in counties across the country for a decade now.

But local governments are fighting back—even if it means paying hefty fees to expert witnesses. Kentucky school districts provided Fayette County with $26,000 just so it could hire expert witnesses when Walgreens challenged the assessment on its Lexington store, as reported by Bloomberg Business.

 Walgreens is not the only company employing this strategy. Attorneys representing both corporations and municipalities that were quoted in the Milwaukee Journal Sentinel mentioned Walgreen, Target, Sears, Menards, Kohl’s, Fleet Farm and Farm & Fleet have all aggressively challenged their assessments.

Walgreens’ main competitor, CVS, which is number 12 on the Forbes 500 list with annual revenues of over $126 billion and annual profits of over $4.5 billion in 2013 (a 18.4% increase over 2012), has also used this strategy to aggressively lower its property tax bill.

The crux of the argument for Walgreens and CVS is that their property should be valued as if a non-drug store retailer was occupying the property because drugstores are willing to pay more in rent than other tenants. But local governments are making their assessments based on based on the price that investors pay to own a drugstore lease. This is unfair, the companies contend because it includes monthly rent, property taxes, operating costs, and the development and construction costs.

Despite court decision in several states in recent years that have sided with the companies, county assessors continue to use an assessment method that these companies view as unjust.

From 2008-2014, Walgreens filed assessment challenges for each of its 18 stores in Milwaukee alone, according to the Milwaukee Journal Sentinel. Milwaukee had an annual revenue of just over $1 billion in 2013—or 1.3% of Walgreens’ annual revenue.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Is it fair for large companies to file multiple lawsuits against small cities that cannot as well afford expensive litigation? What would be the alternative?

For more information about state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library