The New York Times wrote this week about an aggressive effort by big box retailers to slash property taxes by claiming lower values on their properties because of the impact of online retailing. Yes, it’s underway in Arkansas.
With astonishing range and rapidity, big-box retailers and corporate giants are using an aggressive legal tactic to shrink their property tax bills, a strategy that is costing local governments and school districts around the country hundreds of millions of dollars in lost revenue.
These businesses — many of them brick-and-mortar stores like Walmart, Home Depot, Target, Kohl’s, Menards and Walgreens that have faced fierce online competition — maintain that no matter how valuable a thriving store is to its current owner, these warehouse-type structures are not worth much to anyone else.
So the best way to appraise their property, they contend in their tax appeals, is to look at the sale prices on the open market of vacant or formerly vacant shells in other places. As shuttered stores spread across the landscape, their argument has resonated.
To municipalities, these appeals amount to a far-fetched tax dodge that allows corporations to wriggle out of paying their fair share.
We are talking BIG money. Take a single example from Pulaski County. In 2017, Walmart challenged its property tax on 10 properties in Pulaski County, using the dark store argument, the assessor’s office said. The county court denied that claim Jan. 2 because it was filed too late. But Walmart is back this year to challenge the 2018 assessment and that appeal is still under consideration. Joe Thompson, deputy assessor, says Walmart and other retailers have regularly contested assessments before, but the new wrinkle is the claim to use “dark stores” to lower value of open stores.
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The table below shows the impact only in Pulaski County for 10 properties of Walmart. Appraised in 2018 at a cumulative $145.5 million, Walmart is seeking a reduction in the appraisal to $93.6 million.
Property taxes are assessed on 20 percent of appraisal. Millage rates differ across the county, depending on the rates set by school districts (the biggest recipient) and local governments. But a reduction of value of more than a third of the existing appraisal would have a similar percentage impact on tax receipts.
According to the assessor’s figures, the Walmart/Sam’s Club property taxes would drop cumulatively by almost $600,000 in Pulaski County alone. Most of that money, about two-thirds, would come out of school districts. Mutiply this by dozens of stores statewide and it adds up, particularly if other retailers join the parade. The biggest cut in Pulaski, for property of the Supercenter and Sam’s at Bowman and Chenal, would slice the cumulative appraisals of those stores from more than $30 million to $16.7 million, cutting property taxes, about two-thirds for the Little Rock School District, by $130,000 a year.