Amending AB 963 to Retain Jobs and Protect Taxpayers

Determined to save over 600 family supporting jobs throughout Central Wisconsin, Representative Kevin Petersen (R-Waupaca) co-sponsored Assembly Bill 963 which was introduced to encourage paper companies to preserve Wisconsin manufacturing.

Petersen made the bill even stronger by adding an amendment that both protects jobs as well as Wisconsin’s taxpayers by addressing the dark store tax loophole. 

Petersen explained: “State investments should be tied to jobs created or retained in our local communities.  Additionally, we need to ensure property owners are protected so businesses receiving tax incentives maintain their property assessment at the sale or rental value of properties exhibiting the same or a similar highest and best use with placement in the same real estate market segment.”

His amendment to Assembly Bill 963 codifies in state statute, with guidance provided by the Department of Revenue’s Wisconsin Property Tax Assessment Manual, clarification that when assessors use sales of comparable properties for determining the value of a property, they must use properties that are within the same market segment and similar to the property being assessed with regard to age, condition, use, type of construction, location, design, and economic characteristics.

Incorporating the strong amendment to AB 963 will not only assure keeping family sustaining jobs in the state, but clarifies a few core provisions in the state statute ensuring assessors, property owners, and the courts have a clear direction, thereby closing the dark store loophole and subsequent tax shift burden being placed on small business and residential property.

December 2017 tax bills for property taxpayers in Manawa, Wisconsin exemplify the effects of the dark store loophole.  Median value homes in the $90,000 range received tax increases of $370.00 to $400.00.  Homes valued at the approximate statewide average of $150,000 received tax increases of $500.00 to $530.00.

Small businesses in Manawa saw increases of $800.00 to $900.00. Often we hear tax rolls increased because of a local referendum’s passage. Manawa’s tax hikes though, were a direct result of a twist on an assessment ploy known as the dark store loophole.

During an Assembly Committee on Ways and Means hearing, testimony provided the dark store theory or loophole definition.  Large businesses and big box chains use the loophole to argue that the assessed value of a store or manufacturing plant in a thriving location should be based on comparing their buildings to sales of vacant stores in abandoned locations from a different market segment.

In Manawa, TreeHouse Foods’ appeal to use the dark store loophole occurred in 2011 after it bought out Sturm Foods, and also occurred following the community’s payoff of an infrastructure Tax Increment Finance District (TIF) set up for Sturm Foods expansion projects.

According to a memo Petersen received from the Wisconsin Department of Revenue, Manawa’s property taxes increased because of: “…the effect of a successful property tax appeal by Sturm Foods.” In explaining the dark store loophole as it pertains to a manufacturer, the memo stated: “If a big taxpayer, whether it’s a big box retail store or a manufacturer, successfully appeals its assessment and gets its property tax reduced, all other taxpayers in those taxing jurisdiction must pay for their portion of that refund. Property taxes don’t go away. They shift when a tax bill is reduced or eliminated.”

Altogether there are currently 266 businesses in Wisconsin including both retail stores and manufacturers who have used the dark store loophole, including several dozen cases still open. AB 963 with Petersen’s amendment gives tax incentives to retain jobs in Wisconsin while simultaneously providing an added layer of protection for Wisconsin property taxpayers.