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Based on a 2008 Wisconsin Supreme Court ruling involving a Madison Walgreens, big box stores have sought to lower their assessments to reflect the value of other stores that are “dark,” or vacant. 

On Nov. 6, Dane County will be one of 22 Wisconsin jurisdictions asking voters to weigh in on the state's so-called dark store tax loopholes.

Commercial properties that are considered vacant, or dark, when they are assessed for tax value are said to use the “dark store” approach, where vacant building is assessed less for property taxes than one occupied by a business.

Local governments argue that small business owners and homeowners are burdened when big box stores pay less in property taxes.

“If they’re successful, then other taxpayers have to pick up the slack and cover or supplement for their reduced taxes,” said Curt Witynski, deputy director of the League of Wisconsin Municipalities.

Local governments in Wisconsin are limited in how much property taxes they can collect annually and how much they can depend on the property tax to pay for services like police, fire and road maintenance.

Residential properties made up about 68 percent of the approximately $11 billion in gross property taxes paid in 2017 while commercial properties paid around 22 percent, according to Wisconsin Department of Revenue data.

When one class of property, like commercial, does not pay as much, then other classes, like residential, make up for the difference, Witynski said.

However, Wisconsin Manufacturers and Commerce maintains that property tax assessments should use the “sales comparison” approach, which determines the current market value of a property based on recent sales of comparable properties, and does not take into account building tenants.

Cory Fish, director of tax, transportation and legal affairs for Wisconsin Manufacturers and Commerce, said WMC is concerned that dark store legislation would narrow the use of the “sales comparison” approach for businesses and homeowners.

Fish also argued that the tax burden has moved from homeowners to commercial properties. According to DOR data, residential taxpayers are paying about 1 percent less of the total gross property taxes in 2017 than they were in 2012, according to DOR data.

“Businesses are paying more,” Fish said.

The “dark store” approach has also been called the “Walgreens loophole” after a 2008 Wisconsin Supreme Court decision, Walgreens v. City of Madison. In this case, Walgreens argued that the assessed value of their properties for property tax purposes should be less than half of the actual recent sale prices of such properties.

Attorneys for Walgreens and CVS argued that the actual sale prices are not representative of the market value and that leases are the wrong tool for determining property tax values.

Bob Wipperfurth, president of Dane County Cities and Villages Association, is worried more businesses will start using the dark store approach. To make up for the shift in property taxes, local jurisdictions will likely have to cut spending, he said.

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“We’re concerned that this model some of these companies are challenging their assessments under will broaden in their horizons and more companies will follow suit,” Wipperfurth said.

Referendums calling for a stop to the dark store practice are on the ballots in 17 counties and five cities and villages. In West Allis, a similar referendum was supported by 91 percent in the August primary election.

The Dane County referendum is non-binding and does not affect any laws, but it will send a message to state lawmakers.

Dane County Supervisor Mary Kolar, District 1, hopes the state pays attention to the concerns of local municipalities.

“Why should we subsidize the big boxes?” Kolar said. “I’m just appalled by this.”

The election is Nov. 6.

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Abigail Becker joined The Capital Times in 2016, where she primarily covers city and county government. She previously worked for the Wisconsin Center for Investigative Journalism and the Wisconsin State Journal.