Monday, 10 July 2017

Stopping Dark Stores: The Fight To Prevent Thriving Retailers From Being Taxed Like Vacant Lots

There’s a neat trick that big-box stores like Lowe’s have pulled off in some states. They claim that for tax purposes, their open, thriving businesses should be valued the same as empty property, so that they pay way less. In one state, though, a lawmaker being called back for a special session of the legislature is hoping he can end the practice locally.

Texas state Rep. Drew Springer may now get a second chance to close the loophole that allows it, the San Antonio Express-News reports.

How the Dark Store Game Works

This particular chapter in the dark store saga began last year, when Lowe’s challenged its tax bill in several counties in Texas.

To argue it shouldn’t be paying as much in property tax, Lowe’s employed the “dark store” strategy, claiming it should be valued as if it were an empty shell of a big box store instead of a thriving retailer.

The argument goes something like this: Big box stores are a unique use of real estate. If the holder vacates the property, that leaves a big hollow box that it can be extremely challenging to find a new taker for, and that may become a local blighted spot. Empty stores, that have been vacated, are much more literally “dark,” and nobody wants those since they fail to provide revenue, jobs, or anything else of use.

So the dark-store strategy is basically a dare to local governments: Gosh, it sure is a, thriving retail district you’ve got here! Sure would be a shame if something happened to it, right? So don’t tax us as highly, and we’ll make sure it doesn’t.

But in Texas, counties make tax assessments based on a commercial property’s “highest and best” use — meaning, a store with people shopping at it, not a vacant lot that may find itself as home to a thriving insect population and not a whole lot else.

Rep. Springer introduced the bill to the Texas House to curb the practice and prevent a “cataclysmic loss of property value and tax revenue,” but although it got through two committees, it never made it to the House floor for a formal vote.

However, it may be coming back. Texas Governor Greg Abbot has called a special state legislative session to begin July 18 to address tax reform and other issues that the state legislature didn’t get through in its regular session.

Lowe’s took several Texas counties to court to appeal those rulings. Some were settled last year, and some are still in progress, the Express-News reports. In Bexar County, for example, the value of Lowe’s properties could drop from $80-$85 per square foot to $30 per square foot if Lowe’s lawsuit prevails.

Overall, the Express-News reports, the strategy has been working out as a major cost saver for Lowe’s, which managed to decrease its Indiana taxes by close to $121 million — which led to a nearly $50 million increase in taxes on individuals and other businesses in the state.


by Kate Cox via Consumerist

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