Last month, the International Association of Assessing Officers (IAAO) released a position paper entitled Commercial Big-Box Retail: A Guide to Market-Based Valuation to guide appraisers on the valuation of big-box retail property and to shed some light on some of the valuation issues that have been a recurring theme in the “dark store” theory debate. However, recent developments suggest that this guidance may fall on deaf ears as big box retailers continue to pursue what some call fair and uniform taxation and others call a tax loophole.
The Michigan Supreme Court issued an order Oct. 20, 2017, denying Menard, Inc.’s application for leave to appeal the Court of Appeals’ decision in Menard, Inc. v. City of Escanaba. The case is remanded to the Michigan Tax Tribunal for consideration of the impact deed restrictions have on the comparable sales used to value Menard’s big-box retail property, as well as additional evidence regarding the cost-less-depreciation valuation method.
For those who have listened to the parties’ oral arguments, it appears the Michigan Supreme Court, like the Court of Appeals, had difficulty coming to terms with Menard’s expert’s conclusion that the use of deed-restricted comparable properties did not impact the market value of Menard’s property. Despite the court’s denial of Menard’s appeal, the outcome of the case, thus far, is likely a small victory for opponents of the “dark store theory,” as big box retailers continue to challenge property valuations.
In Arkansas, some counties are preparing for their first round of “dark store” challenges. According to Washington County Assessor, Russell Hill, if big-box retailers are successful in their efforts, it “could cost schools, cities and the county much-needed tax revenue.” The county’s attorney, Brian Lester, also expressed concern over the possibility that big-box retailers might successfully lower property values, pointing out that property taxes are the county’s main revenue source and that “a decline in funding [would] result in the decline of county services,…[impacting] every citizen and visitor of Washington County,” according to the Northwest Arkansas Democrat Gazette.
Although a reduction in property taxes could significantly affect property tax revenues, proponents of the “dark store” theory argue that the cause of the controversy is that they are being unfairly taxed in the first place. In other words, proponents think big-box retailers are being asked to bear an excessive tax burden. According to Judy S. Engel and Lynn S. Linne of Fredrickson & Byron, P.A., what opponents of the “dark store” theory often refer to as a “tax loophole” is “nothing more than a populist propaganda tool” used to blame big-box retailers for budget shortfalls. Engel and Linne contend that local governments are relying on big-box retailers to pay more than their fair share of property taxes, which they claim “ultimately lead[s] to non-uniformity in taxation in violation of most states' constitutions.”
In light of ongoing “dark store” drama, one has to wonder what effect, if any, the IAAO guidance will have on reducing litigation, as proponents and opponents remain starkly divided on this issue.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think the IAAO guidance will positively or negatively impact “dark store” litigation?
Get a free
trial to Bloomberg BNA Tax & Accounting's State Tax solution, a comprehensive research service
that provides deep analysis and time-saving practice tools to help
practitioners make well-informed decisions.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)