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Guest Column, July 2017

Saturday, July 22, 2017   (0 Comments)
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Fighting for Fairness: Closing the “Dark Store” Loophole

By  Representative Rob Brooks, 60th Assembly District

 

Assembly Bills 386 and 387 have wide bipartisan support and are being introduced at the request of local units of government, school districts, and other political subdivisions who wish to stop additional tax shifts from large retail stores to homeowners and small businesses. The litigation and tax-refund costs associated with what is commonly referred to as the “Dark Store Theory,” have devastated our local government partners, and we must find a workable solution.  

 

Assembly Bills 386 and 387 clarify the best assessment practices as proscribed by the Wisconsin Property Tax Assessment Manual. Moreover, these proposals seek to provide clarity and direction to the Board of Review and courts when determining the value of property.

 

The intent of these proposals is to prevent further potential tax shifts from big box stores to small businesses and homeowners by making sure assessments are fair and equitable for all taxpayers. It is imperative to denote that neither of these bills will result in an overall property tax increase. Our local partners work under strict levy limit caps and these bills do not change the amount a community can tax, they only ensure that the process is fair and equitable to everyone.

I have worked hard for more than two years to ensure Assembly Bills 386 and 387 meet the standards of our state’s tax uniformity clause and are devoid of constitutional concerns. I have met with stakeholders on both sides of this issue and believe we have two bills that will provide the needed clarity in state statute.

 Assembly Bills 386 and 387 assess properties at their highest and best use. Highest and best use is defined as, “the specific current use of the property or a higher use to which the property can be expected to be put in the immediate future, if the use is legally permissible, physically possible, financially feasible, and provides the highest net return.”

Assembly Bill 386 provides that, for property tax assessment purposes, to determine the value of a property using generally accepted appraisal methods, an assessor must consider all of the following as comparable to the property being assessed:

  1. Sales or rentals of properties exhibiting the same or similar highest and best use with placement in the same real estate market segment.
  2. Sales or rentals of properties that are similar to the property being assessed with regard to age, condition, use, type of construction, location, design, physical features and economic characteristics.

The bill also provides that a property is not comparable to the property being assessed if the seller has placed significant restrictions on the highest and best use of the property or if the property is dark property and the property being assessed is occupied.  The bill defines “dark property” as property that is vacant or unoccupied beyond the normal time period for property in the same real estate market segment. 

Our second bill, Assembly Bill 387  provides that, for property tax purposes, real property includes any leases, rights and privileges pertaining to the property that transfer with the property shall be used in determining the value of that property. 

Ordinarily, the best information for assessing a property’s fair-market value for property tax purposes is a recent arm’s-length sale of the property. This is true in Wisconsin for all properties except single-tenant retail facilities, which have relied on the Wisconsin Supreme Court’s 2008 ruling in Walgreen Company v. City of Madison (2008), to convince courts that their assessed values should be less than half of the actual sale price of the property. A recent example of this occurred when the Wisconsin Court of Appeals relied on Walgreen Company v. City of Madison (2008) to affirm that a single-tenant retail facility in Appleton should be valued at $1.8 million, significantly lower than the city’s $4.4 million assessment, which was based on an actual sale of the property. Appleton must now make a $350,000 tax refund.

Detractors also claim these proposals create a new tax by taxing the success of the business within the property; this is erroneous. Assembly Bill 387 clearly states that “lease terms, not the labor, skill, or business acumen of the property owner or tenant, are employed as the basis for evaluation”.

Like many of you, I contend that it is critical to the fairness of our tax system that all properties be assessed at their fair-market value. Assembly Bills 386 and 387 ensure all properties will be assessed using consistent methods and creating greater uniformity in the tax system. The facts are clear—these bills provide much-needed codification to Wisconsin’s property tax assessment process.

 


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