“Dark Stores” Legislation

(2017 SB 291\AB 387 & 2017 SB 292\AB 386)

During the 20170-2018 legislative session, WIB spent a considerable amount of time lobbying against two legislative proposals which alter the way in which property is assessed in Wisconsin. Collectively, these are referred to as the “Dark Stores” legislation. If they were to become law, we believe the result would be an increase in the property tax burden for small businesses which own or lease their property.

The assessment of real property is guided by the Uniformity Clause of Wisconsin’s Constitution and state law. The Uniformity Clause requires the method or mode of taxing real property to be applied uniformly.

State law requires assessors to use a three-step process to assess the value of real property – the land and all buildings and improvements affixed to the land. The first step is to base the assessment on any recent arm’s-length sale of the property. If the property has not been recently sold, an assessor must consider sales of reasonably comparable properties. If there are no such comparable sales, an assessor may use a “cost” or “income” assessment approach, considering all factors which have a bearing on the value of the property.

2017 Assembly Bill 386/Senate Bill 292 specifies new property tax assessment practices for the use of the comparable sales approach. More specifically, a property may not be considered comparable if the property is a dark property. The term “dark property” is defined as a property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.

Proponents of this legislation claim these new assessment practices are needed to prevent big-box retailers from having their fully-operational stores assessed at the same value as a vacant property in a different location. While this legislation may accomplish that objective, the Uniformity Clause requires assessors to apply this assessment practices to the sale of property owned by a small, hometown business.

In communities throughout Wisconsin, there are many vacant commercial properties. These vacancies adversely impact the value of occupied commercial property. We believe restricting assessors from even using vacant property to discern the value of occupied property will lead to higher assessments for hometown businesses.

2017 Assembly Bill 387/Senate Bill 291 redefines real property to include any leases, rights, and privileges pertaining to the property, including assets that cannot be taxed separately but that are inextricably intertwined with the real property.

The stated intent of this legislation is to reverse the 2008 decision by the Wisconsin Supreme Court in Walgreen Company v. City of Madison. In this case, the Wisconsin Supreme Court unanimously ruled that a property tax assessment of retail property leased at above market rent values should be based on market rents.


From our perspective, the key commentary from this ruling was:

“If we were to expand the law in the direction the City (Madison) requests, property assessments would in essence become business value assessments, with assessors improperly equating financial arrangements with property value. This is in contravention of the general principle that real property assessments should not be based on business value. Rather, the valuation of the fair market value of property for purposes of property taxes is by its nature different from business, or income tax assessment. “[A]n assessor’s task is to value the real estate, not the business concern which may be using the property.”

We agree with the Wisconsin Supreme Court. The job of the assessor is to value the real estate, not the business using the property. Therefore, we do not believe it is appropriate to overturn the unanimous ruling of the Wisconsin Supreme Court.

State lawmakers failed to reach consensus on either of the so-called “Dark Stores” proposals during the 2017-2018 legislative session. As a result, local assessors must continue to follow the existing law process for the assessment of commercial property.