On Wednesday, the eyes of community leaders across the state will be on Pulaski County where a judge is set to hear a case with significant financial implications across Arkansas.Baxter County Assessor Jayme Nicholson says the case is one like many across the country where big-box retailers including Walmart, Home Depot, Target and Walgreens are seeking to slash their property taxes through a loophole known as the “dark store theory.” The case in Pulaski County is a challenge by Walmart to an equalization board decision seeking a 50 percent reduction in its assessment.The concept behind the case is called the “dark store theory” because working stores are compared to closed ones. The large retailers contend their fully operational, often thriving businesses should be assessed the same as vacant buildings or “dark” stores.Nicholson says if a business, such as Walmart, can successfully challenge an assessment using the loophole, it can mean a repayment going back as far as three years. She says a recent decision in Johnson City, Kansas, has led to a reduction in value of 60 million resulting in millions of dollars in lost tax revenue.While the reductions can be a shock to tax receiving entities, particularly school districts, Nicholson says there is nothing wrong with companies and individuals challenging an assessment if they feel it is unfair. But she says the “dark store theory” is different.
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Nicholson says assessors statewide utilize state guidelines and International Association Assessing Officers (IAAO) standards by using comparable sales, cost or income as an approach to value properties.
In contrast, she says the “dark store theory” gives an unfair advantage to these large companies. These companies place sales restrictions on their empty properties, making them difficult to sell on the open market.
Nicholson says while the large stores make this choice to keep a competitor from moving in, it does not give them the right to be treated in a manner different than any other property owner for tax purposes.
She says the issue is one of fairness.
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The Baxter County assessor says she has reviewed the assessments locally for Walmart, Lowe’s, Home Depot and the Hobby Lobby building. She says a 50 percent reduction in the assessments of these four businesses would mean a reduction of $100,000 in revenue to Baxter County.
Nicholson says she has heard it could take another year or more for the Pulaski County case to be settled, perhaps leading to a decision by the Arkansas Supreme Court. A decision by the supreme court would be binding in all counties.
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