The decision is a significant victory for local governments.
RULING LIGHTS DARK STORES: Legislator Still Wants Bill to Insure Tax Policy
Legislation Would Insure End to Artificial Lowering of Property Values
June 5, 2016
By: Dave Rogers
Let there be light!
A Michigan Court of Appeals ruling against a Big Box retailer in the Upper Peninsula validates the case against the "Dark Stores" property valuation method, and the need for an immediate legislative fix to the problem, representatives of three local government associations said in a joint statement.
And Rep. David Maturen, R-Vicksburg, says he is pressing forward with legislation to ensure the Michigan Tax Tribunal follows what the court has ruled.
Maturen says he wants to proceed with his "Dark Stores" legislation, even though the fresh Court of Appeals ruling may accomplish what he wanted to do with his bills.
Big Box retailers have been arguing that because their buildings would be hard to sell because of their size and deed restrictions, that they aren't worth much and they should be paying a lot less in property taxes.
The Michigan Tax Tribunal has agreed in many rulings lowering big box taxes over the past few years, but now the court of appeal has ruled that all properties should be taxed at their "highest and best use", and the Menards, Meijers, Lowes, Walmarts and other big chain stores should be no different.
They have thrown it back to the Tax Tribunal to reevaluate their policy.
Maturen says his legislation would tell them exactly what to do.
Maturen says he hopes the court ruling will accelerate the process of approving his bill, and hopes the speaker will schedule a vote soon.
In Menard, Inc. v. The city of Escanaba, a three-judge panel said the Michigan Tax Tribunal made an error of law in accepting a Dark Stores-style appeal by Menards and cutting the retailer's value by more than half from the original assessment.
The decision is a significant victory for local governments that have argued against the Dark Stores technique's artificial lowering of property values around the state. It also validates the reforms embodied in House Bill 5578, sponsored by Rep. Maturen, now before the Michigan House of Representatives.
The decision is a significant victory for local governments that have argued against the Dark Stores technique's artificial lowering of property values around the state.
"This is a huge step forward for fairness in tax law," said MAC Deputy Director Steve Currie. "The court made note that using just the sales approach is insufficient, that deed restrictions have to be considered in how a property is valued and that there is an "anti-competitive" nature to deed restrictions being used in an inappropriate fashion."
"This ruling confirms what the Michigan Municipal League and other organizations have been saying. The ruling is also consistent with the intentions behind HB 5578. We hope the ruling affirms to legislators that the Dark Stores theory is flawed and a legislative fix like HB 5578 is necessary," said John LaMacchia, assistant director of state affairs for MML.
"The decision validates local governments' long-standing concerns with past Michigan Tax Tribunal 'Dark Store' rulings," said Judy Allen, Michigan Townships Association director of government relations. "As the court confirmed in its ruling, deed-restricted properties unfairly drag down the true cash value when they're used as comparables in the assessing process. In the end, small businesses and homeowners are the ones left to pick up the tax burden if the loophole isn't closed."
MAC, MML, and MTA filed amicus briefs in support of the City of Escanaba's position in the case. The matter now returns to the Tax Tribunal for reconsideration and the presentation of additional evidence.
HB 5578, which was advanced by the House Tax Policy Committee on May 18 on an 11-2, bipartisan vote, awaits action by the full House.