Legislature must close ‘dark stores’ tax loophole

Dan Gilmartin, left, is executive director and CEO of the Michigan Municipal League. Timothy K. McGuire, right, is executive director of the Michigan Association of Counties.

Michigan’s local governments and schools are losing millions of dollars that otherwise would go to libraries, classrooms and police, fire and senior services through a gaping tax loophole large retailers across the state are quietly exploiting to lower their local property taxes.

Under the loophole, retailers such as Lowe’s, Wal-Mart, Target and Meijer across Michigan are seeking to have their “big box” stores that are open for business assessed for local taxes as if the stores were closed and vacant. The loophole was created in a 2013 decision by bureaucrats and political appointees to the largely obscure Michigan Tax Tribunal. The loophole has since become known as the “Dark Store” theory of determining tax assessments, and it has resulted in property tax assessments for big box stores being cut by up to 50 percent by these Lansing appointees. Bridge Magazine reported on the loophole back in early August.

This tax loophole is especially unfair to smaller businesses and homeowners, who are paying their fair share of taxes while having to give up community services because of these tax refunds stemming from Michigan Tax Tribunal decisions. A study of property taxes in Oakland County showed the average property tax rate for most retailers is now twice the average rate for big box stores — and significantly below the same rates they are paying for these same stores in other states.

Republicans and Democrats in the Michigan Legislature have joined to close the Dark Store loophole by introducing House Bill 4909 and Senate Bill 524 to advance the legislative discussion and ultimate resolution of this crisis.

Quick action is imperative, as big retailers across Michigan already have pocketed millions of dollars in local taxes refunded to them by cities, counties, townships, public schools, libraries and community colleges under the Dark Store loophole since 2013, according to a survey by the Michigan Association of County Treasurers. The bills would restore clarity and fairness to the assessment process and stop what has become a stampede of retailers asking for similar property tax cuts in communities all across the state.

Most communities welcome a Wal-Mart, Lowe’s or Home Depot. But they don’t expect those stores to then ask to be taxed as though they are closed when they are still open and making a profit off the local residents who shop there. Our simple goal is legislation to require that big box stores be valued and taxed in the same manner as any other Michigan storefront business and any other taxpayer.

Michigan’s municipalities, townships and counties have suffered tremendously over the past decade through the decline of state revenue sharing dollars and property taxes. Leaving local governments on the hook to refund millions of dollars in property taxes to big box retailers because of a tax loophole created by bureaucrats is robbing our communities of vital services.

Other states — including business-friendly Indiana — have passed laws or are working on legislative solutions to close Dark Store loopholes. The Indiana law recently passed on a vote of 98-0.

We urge Michigan lawmakers to support legislation that brings clarity and fairness to the assessment process.