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County assessors may push for stricter big-box tax laws

August 31, 2015

Monroe County Assessor Judy Sharp hoped a new Indiana law that prohibits appraisals from using closed or sold stores as comparisons in determining the value of newer big-box stores would ensure a CVS in her county wouldn’t get a reprieve on its taxes.

So, she was disappointed when the Indiana Board of Tax Review determined in August that the Bloomington CVS had been over-assessed, and as a result, overtaxed for five years starting in 2009.

To Sharp, that was proof that the new law didn’t go far enough to protect counties from losing out on tax revenue from retailers in search of lower tax bills.

The law "was a Band-Aid, but not a total fix,” said Sharp, who is president of the Indiana County Assessors Association. “It was too open-ended.”

Now, some Indiana county officials are pushing lawmakers to strengthen the rules when the General Assembly convenes in January in an effort to restrict stores from using the “dark store theory” in determining the value of their properties. One study found that approach, using vacant buildings in determining the value of brand-new stores, could mean a statewide loss of more than $120 million in tax revenue from more than 17,000 commercial property owners.

“Their appraisers would find properties in less desirable locations that didn’t have the same economic viability and use those for their comparable to a fully functioning store,” said David Bottorff, executive director of the Association of Indiana Counties. “We want to make sure … they’re using appropriate comparisons and not finding the lowest and worst value properties.”

But new legislation would almost assuredly bring another fight with big-box retailers, who say they’re being unfairly taxed. The Indiana Board of Tax Review, or IBTR, has previously ruled in favor of the retail stores, including a late 2014 ruling that a successful Meijer on East 96th Street should have been assessed in 2012 at $7.2 million, not the $19.7 million assigned by Marion County.

Stephen Paul, an attorney with Faegre Baker Daniels who represented retail stores in opposing the 2015 legislation, said retailers would certainly fight any new legislation—and might even push for this year’s law to be repealed.

“I’m confident stores will oppose any further push,” Paul said. “The stores have bent over backwards to cooperate with local government. … There could be [a push to repeal] if the assessors aren’t going to be reasonable about it.”

The 2015 law, authored by Sen. Brandt Hershman, R-Buck Creek, passed both the Senate and House unanimously, and applied to appraisals of non-income-producing buildings newer than 10 years old that are occupied by the original owner. It stated, among other restrictions, that comparable sales should include properties that have been for sale for less than year and are used for similar purposes.

Hershman said he is receptive to revisiting the issue in the next legislative session, but cautious to judge the effectiveness of the new law on the recent CVS decision. Monroe County will have to refund CVS about $150,000 if Sharp, who plans to appeal the decision, is unsuccessful.

The matter will be discussed at an upcoming study committee on fiscal issues, Hershman said.

“I don’t want one case to pass judgment on the effectiveness of a new law,” he said. “The jury is still out. If this is the precursor to a pattern of continuing decisions, that’s something we would take into account.”

Meanwhile, Indiana county assessors are on the lookout for more appeals from retailers. Some counties, including Johnson County, have just sent out their 2016 property tax bills and are still waiting to hear from unhappy taxpayers.

“We won’t know what the aftermath of the big-box assessment law is until the notices are mailed, and the property owners respond [or not],” Johnson County Assessor Mark Alexander told IBJ in an email.

And Paul said retailers are trying to be amenable to the new law by settling cases for higher assessed values than court decisions. He pointed to recent settlements involving Meijer, Target and Lowe's in Johnson County as proof that retailers are making a good-faith effort to pay their fair share of their tax bills.

Hershman stressed that any new legislation would be a compromise between local government and retail stores.

“The message I want to send the business community is the responsibility to create a framework that’s fair to both sides,” Hershman said. “If our fix has not achieved that goal, we’ll be right back at evaluating it.”

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