On August 30, the Senate Committee on Revenue, Financial Institutions, and Rural Issues held a public hearing on a pair of bills that opponents argue would increase property taxes for Wisconsin businesses. Senate Bills 291 and 292, authored by Sens. Duey Stroebel (R-Saukville) and Roger Roth (R-Appleton) and Rep. Robert Brooks (R-Saukville), aim to close the “dark store loophole” that claims businesses are using old, run-down, “dark” properties as comparable value to modern, occupied properties. The businesses targeted say the bills are designed to make it easier for assessors to tax them at higher rates with practices that are currently in violation of Wisconsin’s Uniformity Clause.

SB 291 would require assessors to consider the “highest and best use” of a comparable property in determining the value of a property for property tax purposes. The bill would also remove vacant properties, or “dark stores” as comparable sales for the purposes of property tax assessment, thus eliminating the component of market conditions from assessment practices. SB 292 would reverse the Walgreen Company v. City of Madison decision that said property tax assessments using the income approach must be based on market rents instead of contract rents. The bill allows for the inclusion of above-market leases in the value of property, thus essentially allowing for a second income tax. Together, the bills pose a significant change to the process of assessing property and a potentially massive property tax increase for Wisconsin businesses.

At the Senate hearing, businesses and organizations including Wisconsin Manufacturers and Commerce (WMC) testified about the detrimental effects and unintended consequences the bills would create for Wisconsin businesses and communities of all sizes. Although the bills aim to target “big-box stores,” the costs of the legislation could be far reaching, changing the way small businesses and even residential properties are taxed. When property taxes increase, the burden of these costs shifts not only to business owners but also to consumers. The opponents argue that the bills would increase property taxes, lead to more property vacancies, expensive litigation and cause a detrimental impact on the economic health of Wisconsin communities. The change also may violate Wisconsin’s Uniformity Clause.

Proponents of the bills include Wisconsin municipalities and tax assessors who believe the way the law currently exists is used to subvert what some businesses pay in fair market value.  As Wisconsin courts have repeatedly sided with the businesses that have challenged assessments, local officials find themselves having to reimburse these businesses for incorrect assessments leaving a hole in their budgets.  They believe changing the law will leave them less vulnerable to challenges and better able to assess at higher levels.