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‘Dark store’ fight continuing in Alabama

By MARY SELL, Alabama Daily News

The Alabama Department of Revenue is continuing to pay for legal help for Alabama communities in property tax disputes with big-box stores who want to pay less in property taxes under what’s called “dark store theory.” 

That’s when the owners of large, operating commercial properties argue they should be appraised and valued as if they are vacant or “dark.” Retailers say their stores are built for a specific purpose and have less value when empty.

Media reports from several states show that when their argument is successful, it costs local communities millions of dollars.

In states such as Michigan and Indiana, this argument has largely withstood judicial scrutiny, leading to hundreds of store devaluations and to hundreds of millions of dollars in estimated lost tax revenue to local governments, according to a 2018 Standard and Poor’s report.

The home improvement store Lowe’s in 2016 had appealed the valuation of its properties in more than 20 counties, the Alabama Department of Revenue had previously said.

Former state Sen. Phil Williams, now director of policy strategy and general counsel at the Alabama Policy Institute, sponsored multiple pieces of successful legislation to help communities defend companies’ challenges to their tax bills.

“What we have is a clear indication that some corporations are attempting to create their own version of reality by claiming that a building they build for themselves can’t be used for any other purpose,” he said. 

He said a former Lowe’s in Gadsden is now an Academy Sports.

“The idea that a Lowe’s store can’t be repurposed is ludicrous,” Williams said.

“… It’s an expensive raiding of the public coffers, and really trying to wear out the local communities with litigation that makes it difficult to afford.”

To help those counties and coordinate litigation efforts, Revenue hired in 2016 a private law firm, Webb and Eley in Montgomery, for $200,000. Now, Revenue has a new, two-year contract worth up to $500,000 with the firm.

There are currently challenges to tax valuations on properties in about 20 counties, according to Revenue.

“Every one of them has to be defended in the county where the store is located,” said Sonny Brasfield, executive director of the Association of County Commissions of Alabama. But it’s not just big box stores that argue they should pay less. 

Brasfield said subsidized housing complexes are also arguing they should be treated differently and make some of the current challenges.

Under Section 42 of the Internal Revenue tax code, developers receive tax credits for offering low-income housing, but the properties are subject to income and rental restrictions.

In other states, complex owners have successfully sued over their tax valuations, saying their federally regulated property can’t be compared to open-market properties for tax purposes.

Revenue’s legal contract with Webb and Eley includes litigation involving the valuation of multi-family housing units, a spokesman for Revenue said.

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