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Michigan Set to Tackle "Dark Stores" Assessment

by Morgan Thomas, Chicago, September 2015


Michigan lawmakers say they will work to pass new laws this year to end perceived special property tax discounts for big box retail stores.


When large retail outlets appeal their property tax assessments, the Michigan Tax Tribunal often uses a "dark stores" methodology, which treats the buildings as if they are vacant. The result is a lower property assessment and tax bill.


Some legislators feel this is unfair to other business property that is not assessed the same way.

Pros and Cons


Big box retailers argue that their properties are worth much less than the construction cost because they are built for a specific purpose and user. They contend these types of stores should be valued based on comparable sales of dark stores of comparable size and utility.


Critics of the dark stores strategy explain that when big box retailers move out of a property, they often put a restriction on the deed that prevents a competitor from moving in. As a result, the property can remain dark for long periods and continue to lose taxable value.

Proposed Legislation

As part of the effort to crack down on special discounts for big box stores, lawmakers plan to introduce legislation to curb deed restrictions. Another idea is to charge annual user fees when property taxes are discounted and do not cover the cost of the public services required. House Bill 4681 was filed in June.


The proposals in Michigan come on the heels of a law passed this year in Indiana to regulate the practice of using dark store comparables in the appeal process. Indiana now requires tax assessments for big box retail be based on the cost approach. It forbids the assessment from being based on comparable properties that have been vacant for more than a year or have restricted deeds. The Indiana law was prompted by a study showing two big box property tax appeals cost local jurisdictions more than $3.5 billion in taxable value.