Dark Store Tax Re-Assessments Save Retailers Millions on Property Taxes

The strategy of re-visiting assessed retail property values known as “Dark Store” is taking off across the country. Commercial property taxes can be a huge cost for businesses. Some ‘big box’ retailers who feel that they have been over-taxed have used this strategy to win appeals, which have netted them huge tax refunds and cuts.

In this post, we look at the basics of the Dark Store theory, as well as some appeals that are in process, and some which have been won.

What is Dark Store theory? In a nutshell, the Dark Store theory argues that the value of a store should be the same, whether that store is open and functioning for business, or whether it is closed. Retailers assert that the property itself is the same regardless, so the value should not fluctuate depending on whether the store is in use or not. Therefore, when assessors are looking at the value of a store, they should be able to take into account sales of vacant or abandoned stores of similar size in the local area.

Some towns and cities are concerned about the dark store approach, because vacant properties, especially vacant large commercial properties like big box stores, typically sell for less. If these vacant properties are taken into account when setting the assessed value, the value of a new store would likely go down, and the town would receive less property taxes. However, retailers argue that the way assessments are currently being calculated, their commercial properties are being over-assessed.

Wauwatosa, Wisconsin

Target, Lowe’s and Firestone have appealed their assessments to the City of Wauwatosa. They claim their assessed property values are too high. Some examples of appeals that are currently in process in Wauwatosa are:

  • Lowe’s – assessed at $16 million – the company claims the store is only worth $7 million.
  • Nordstrom – assessed at $29.9 million – the company claims the store is only worth $10.8 million.

Retailers say that just because a property is vacant, it shouldn’t be taken off the table as a comparable property. They think towns are cherry-picking the types of “comparable” properties by only looking at operational stores. Courts across the country have agreed, leading them to cut property tax assessments by up to 50% in some cases.

Examples of Dark Store wins in Michigan

  • The Menards store in Oshtemo Township was valued at just under $8.3 million in 2011. They appealed this value, and the property’s true-cash value was reduced to $6.4 million. They saved $75,000 in property taxes over 5 years after this re-assessment. They are appealing again, arguing for a true-cash value of $4.2 million.
  • Costco purchased property in Oshtemo Township for $5.5 million and constructed a store, valued at $12 million, leading to a total value of $17.5 million. The property, partially taking the dark store theory into account, valued the property at $8.6 million. Costco is appealing for a true cash value of $4 million.
  • A Port Huron Menards was able to win a reduction in the store’s valuation of $300,000.
  • Prior to Dark Store re-assessments, the average Michigan ‘big box’ store was assessed at $55 per foot. Now assessments of Menards and Target are less than $25 per foot.

Other examples of Dark Store property value re-assessment wins across the country

  • Alabama: Lowe’s has filed lawsuits seeking assessment reductions on 27 stores. If they win these lawsuits, they could save $1.5 million annually.
  • Fond du Lac: The city’s assessment of a Menards store is $9.2 million, Menards claim the value should be no more than $5.2 million. A similar lawsuit from Target claims the taxes on their store should be reduced by 1/3.
  • New York: Walmart won a $1 million property assessment reduction in the city of Auburn, which will give Walmart a tax refund of about $11,000.

Here at Realty Tax Challenge, we are experts in commercial property tax reduction in NY. We can help you determine whether an appeal of your property value assessment based on the Dark Store theory is right for your commercial property. If so, you could potentially win huge reductions in true-cash value, leading to major property tax savings. Contact Us today to learn more! 

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Here at Realty Tax Challenge, we are experts in commercial property tax reduction in NY. For over 22 years, we have helped NY State commercial property owners reduce their real estate taxes. We have achieved over $50 million in real estate reductions. Learn About Us.

Call us today to speak with a tax assessment specialist at 914-348-9473 or contact us!

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