Big box stores use argument to force locals to drastically reduce taxes

LANSING, Mich. — State Sen. Tom Casperson and Rep. John Kivela introduced legislation on Thursday to help local governments that are losing money when big box stores successfully argue to the Michigan Tax Tribunal that their taxes should be drastically reduced.

“Creative lawyers working for big corporations should not be the force behind the state’s tax policy — a policy that is devastating local units of government and is unfair to local retailers and residents,” said Casperson, R-Escanaba. “Unfortunately, the tax tribunal is letting it happen with its embrace of this ‘dark stores’ theory, which permits national retailers to receive unfair and unfounded tax reductions at the expense of our schools, libraries, seniors, public safety departments, public transit agencies and residents.

“These national and regional corporations argue that newly built stores are almost entirely worthless as soon as construction is complete and that their stores are different from every other store. That is nonsense. Fortunately, we have crafted a solution that finally closes this loophole.

“It has been a challenge, but after much research and with the help of many people — especially those from Marquette County, which retained one of the foremost tax experts in the state to assist us in crafting this solution — I am confident this solution will ensure that all retailers are treated equally and that the big corporations are no longer able to perpetrate this crippling, anti-competitive business practice and tax-avoidance scheme.”

Senate Bill 524 and House Bill 4909 will bring clarity and fairness to the assessment process regarding large commercial and warehouse stores, also known as big box stores.

SB 524 amends the General Property Tax Act, stating that the true cash value of a property shall consider the highest and best use of the property, the value of the property as vacant, and the value of the property as improved. For any limited use property, like a big box store, the highest and best use of the property is the continued use of the property as improved.

The bill provides some important direction to ensure that speculative evidence and assumptions are kept out of the assessment process. This means that a corporation couldn’t have their taxes reduced by arguing that their store is less valuable because it couldn’t be used in the future for the same type of store or purpose.

HB 4909 would amend the Zoning Enabling Act by preventing negative use restrictions that prohibit occupancy or use of the property when that restriction goes against the lawful use of the property under a local zoning ordinance.

These negative use restrictions often prevent the reuse of property within commercial districts by a similar store. This causes problems for communities because it can run completely opposite to their master plan and zoning ordinance and hampers efforts to attract and encourage economic development.

“Large national retailers have used what’s known as the ‘dark store’ argument to win huge tax refunds that will permanently decrease the property tax base in Michigan and are devastating to state and local government budgets, as well as local zoning ordinances and master plans they’ve enacted to deal with development,” said Kivela, D-Marquette. “Our bills would ensure that all businesses are assessed equally regardless of who they are, how large their business is, whether they are a successful national business from outside of Michigan or whether they are a local retailer in Michigan.

“National retailers shouldn’t be able to cut their taxes by arguing that their brand-new ‘big box’ store building is worth less than the purchase price of the land. These bills provide for a uniform method for assessing big box stores in the same manner as all other commercial businesses are assessed. This is a problem in many communities in Michigan and other states.

“A nearly identical approach to bring fairness and uniformity to the assessing process was recently approved in the Indiana Legislature, which passed the legislation, 98-0. I look forward to working with my colleagues to pass these bills to fix this problem and protect our communities and the services they provide their residents.”

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