Shine a Light on Dark Store Theory

Big box stores are ripping off communities. Some communities have had enough.

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

A fight over, of all things, an appointment to a tax court in Michigan is putting the spotlight on a tactic big box stores are using to lower their tax bills and suck revenue away from local communities. Called “dark store theory,” it’s causing headaches for local lawmakers not just in Michigan, but everywhere from Texas to Wisconsin to New York to Maine.

Several town councils and county boards in Michigan, as well as members of both houses of the state legislature, are asking Democratic Gov. Gretchen Whitmer to withdraw the nomination of Victoria Enyart to the Michigan Tax Tribunal, an administrative court that decides tax disputes. They oppose Enyart, a tax assessor, because they allege that she is a proponent of dark store theory.

That theory has been used by big box stores such as Target, Home Depot, and Lowe’s to lower their property taxes by arguing that their stores should not be valued as if they are big, thriving retailers (during a pandemic that is smashing small businesses, no less), but as if they are closed and vacant, or “dark.”


The big box stores argue that their outlets are so specialized, and therefore difficult to sell, that they shouldn’t be valued at their “highest, best use,” per the property tax parlance, taking into account the loads of customers that shop there or the money they spend, but at a much lower rate comparable to that of empty big box sites in the general vicinity. As one Wisconsin mayor put it, “They’re literally using closed, boarded-up stores as comparables for a recently renovated, vibrant property.”

The stores also employ restrictive sales clauses — such as demanding that their former sites not be sold to a rival corporation — and then cite those very restrictions as a reason to lower their property value assessments, as they make an abandoned store harder to sell.

It all gets a little Alice in Wonderland if you think about it for too long. But the upshot for local taxpayers is much lower valuations, and therefore much lower property tax payments from big corporations.

When courts go along with the dark store argument, it costs towns millions of dollars, lowering property taxes for individual big box stores by as much as 50 percent. Michigan lost more than $75 million in property tax value between 2013 and 2015 alone thanks to this tactic. Some states stand to lose billions, including $3.5 billion in Indiana. Texas identified one school district where $850 million in revenue over just two years is on the line, should dark store theory win the day.

The towns opposing Enyart don’t want this to go any further, at least in Michigan. As the mayor of Escanaba, Michigan, explained, “we have been hurt by the decisions made by the tax tribunal, including Victoria Enyart, to allow big box stores to not get a fair tax assessment, and we’ve been fighting this battle for years. It’s cost us lots of money to argue this in the courts, and this is another step we can take in that fight.” Escanaba is waging a long, campaign against an assessment of a Menard’s store that knocked nearly $5 million off an $8 million property valuation.

Share Boondoggle

The latter point Escanaba’s mayor made is very important: Even if they emerge victorious, fighting the nearly limitless resources of a big box store in court means high costs for small municipalities, diverting resources away from the general work of town government. Instead of fixing potholes or providing support to local, small businesses, taxpayers are paying for lawyers to argue in court over Walmart’s property tax bill.

Courts don’t always play ball with the big box stores: Ohio’s Board of Tax Appeals last week knocked down an effort by Lowe’s to employ dark store theory. But a more surefire way to rein in this abuse by the big retailers is for state legislatures to step in. For instance, earlier this year, New York’s State Assembly passed a bill clarifying that dark store theory should be junked, which could be a model for other states to follow, even though the state senate didn’t take it up.

“The argument, that vibrant businesses should be valued as if they are closed, is incomprehensible. This bill puts into law guidelines and standards by which assessments should be based; providing courts with common sense direction in valuing properties,” said Ken Zebrowski, the sponsor of the New York bill.

Particularly at a time when the pandemic is going to crush state and local revenues for several years, there’s no reason for big box retailers to make off with new, court-imposed tax breaks. More state legislators should step up, shine a light on dark store theory, and then shut it down forever.


One more thing: I wrote a piece for NBC News Think about how Facebook facilitated the spread of conspiracy theories regarding the recent wildfires in Oregon, and how to stop it from happening again in the future. (Hint: The solution does not involve politely asking Mark Zuckerberg to handle it on his own.)

Thanks for reading this edition of Boondoggle. If you liked it, please take a moment to click the little heart under the headline or below. And forward it around to friends, family, or neighbors using the green buttons. Every click and share really helps.


If you don’t subscribe already and you’d like to sign up, just click below.

Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, go here.

Thanks again!

— Pat Garofalo