Real Estate Tax Valuation Legislative Proposal AB 146/SB 130 Property Tax Assessments AKA "Dark Stores"
This proposed legislation affects all businesses - not just large retailers.  It will raise your property taxes!
Municipalities are again urging legislators to change Wisconsin law on how business property taxes are assessed in Wisconsin. This proposal, which failed during the last legislative session, would do nothing more than increase property taxes for small businesses. These municipalities claim there has been a “tax shift” to residential property owners and businesses should pay more. This is not the case. There has not been a shift from commercial property tax collections to residential collections. Over the last ten years, residential property tax collections, as a percentage of total tax collections, have declined 2.8% while commercial collections have increased by 2.7% statewide.

Many restaurant franchisees (those who own their own business, but pay franchisee fees to corporate entities) will be the first to be targeted by this bill. Because traditional lenders are not always eager to loan to restaurateurs, many franchisees use sale-leasebacks or financing leases to build or remodel their businesses. These sales and lease arrangements are not based on the value of the building. They are based on the sales generated by the business. Using these values will greatly drive up taxes paid by small business owners. Our industry has one of smallest average profit margins already, so adding thousands of dollars in taxes will likely drive businesses to either raise prices to the consumer, not remodel property or possibly close the location and move to a more favorable municipality.

In our opinion, there are only losers in this scenario. Many independent restaurants lease their restaurant space, usually in triple net lease agreements. If this bill would be enacted, chances are these restaurateurs will also be subject to significant increase in costs, and will face the same consequences as their franchisee colleagues. This bill would punish businesses for financing growth and hiring. The bill taxes financing agreements that are inextricably intertwined with the property. The property tax is meant to tax real property – the bricks and sticks that make up the building – not intangible assets like loans. Punishing businesses that seek financing is not good tax or economic policy and sends exactly the wrong message to entrepreneurs looking to open or expand a small business. If municipalities are able to value a property based on the ability to generate “income” such as sale-leasebacks, many small businesses, like restaurants, will be put out of business due to a spike in their taxes or lease payments.

The so-called “dark stores” legislation would close a loophole that does not exist and make it more expensive for businesses to operate.

Dark Store Legislation
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