Property Tax Increase Bill Re-Circulating

This week, legislators re-circulated a bill that opponents argue would increase property taxes for Wisconsin businesses. LRB 1665, authored by Rep. Rob Brooks (R-Saukville) and Sen. Duey Stroebel (R-Saukville) along with 16 other Republicans, combines SB 291 and SB 292, both of which failed to pass last session.

LRB 1665 addresses two issues. First, the bill seeks to fix the “dark store loophole” that claims businesses are using old, run-down, “dark” properties as comparable value to modern, occupied properties. The bill would require property to be assessed at its “highest and best use” and would remove vacant properties, or “dark stores,” as comparable sales for the purposes of property tax assessment, thus allowing assessors to value occupied property more solely because of its occupancy. The businesses targeted say the bills are designed to make it easier for assessors to tax them at higher rates using practices that are currently in violation of Wisconsin’s Uniformity Clause.

Second, the bill reverses 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. The bill further allows taxing on anything of value “inextricably intertwined” with the property. Overall, these provisions essentially allow for a second income tax.

Together, the bill’s provisions related to these two issues pose significant changes to the process of assessing property and a potentially massive property tax increase for Wisconsin businesses. 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. The uncertainty created by this legislation would harm Wisconsin’s economy and lead to more costly litigation.