Counties seek state relief from big-box retailer tax appeals

For years, Elise Nieshalla has served as an at-large council member for Boone County, where she oversees one of the fastest-growing regions in Indiana.

But 2018 ended with a series of challenges regarding such growth, shifting her perspective about taxation issues and prompting county leaders like her to seek statewide help.

For Nieshalla, it all started with a popular grocery and general merchandise store in the heart of Whitestown.

When Boone County assessors priced the real value of the Meijer grocery store at $14 million, the company disagreed, noting that its properties elsewhere in the state—particularly those in economically distressed communities—were valued at a lower price. Meijer operates at least 30 stores in Indiana, according to its corporate website.

After the Midwest retail chain received an $11.5 million assessment, Meijer decided to appeal the decision. Even after a third party appraised the property at $14 million, Meijer demanded its Whitestown property’s worth be lowered to almost 50 percent less than the appraisal.

Under the original assessment, Boone County taxes the property at $61 per square foot each year. If Meijer succeeds in its appeal, that annual rate would drop to $49 per square foot.

After several hearings in late December, both parties were told it could take up to a year for a final opinion from the Indiana Tax Court, Nieshalla said.

Across the state, county assessors and their communities are facing similar challenges from some of the country’s most popular grocery stores, retail outlets and pharmacies.

In particular, Meijer’s case with Boone County exemplifies what a growing number of assessors are referring to as a “dark box store tax loophole,” a process by which retailers will insist properties valued at higher rates should be assessed at rates equal to their lowest-valued, or “dark,” establishments, as if they were vacant.

This argument assumes the properties should be assessed without considering factors such as daily business traffic.

“Our focus is to keep prices as low as possible for our customers,” Meijer officials said in a statement about the Whitestown appeal. “One of the ways to do that is by making sure we pay a fair and equitable amount of property tax.”

The company declined to discuss the appeal further.   

For those like Nieshalla, this argument is problematic. She and those against the theory argue it unfairly permits large corporations to pay less in property taxes on their most active establishments, which ultimately yields more profit for the company while leaving other groups—such as homeowners and competing businesses—to pay additional property taxes.

Property taxes are needed from big-box retailers to help fund emergency services, like firefighters and local police, who often respond to retail locations to handle theft reports. In 2017, Nieshalla said, the Whitestown Police Department responded to 158 service calls at the Whitestown Meijer.

“They are not a dark store as far as their use of public dollars,” Nieshalla said.  

The trend of big-box appeals in Indiana’s Tax Court and similar chambers around the country has been growing in recent years. It includes appeals dating back to 2012 in Indiana, and states like Wisconsin and Texas reporting numerous appeals in the last decade.

Appeals proliferated in the state after the Indiana Board of Tax of Review ruled in 2014 that another Meijer, off East 96th Street in Marion County, should have received an assessment at $30 per square foot instead of the $83-per-square-foot rate assigned by the county.

In Indiana alone, there are more than 300 pending tax appeals involving big-box retailers. The cases span more than 15 counties, touching all corners of the state.

Nieshalla said Boone County declined Meijer’s offer to settle, fearing the number of appeals with other companies would increase.

“We knew other big-box stores would be waiting at our doorstep,” she said about the decision.

Now, leaders in the Association of Indiana Counties say they hope to end the ordeal once and for all this legislative session.

County leaders are seeking a legislative fix that would set a state-level precedent for what constitutes a viable property-value comparison, potentially putting a stop to costly county appeals and providing taxpayers with “taxing fairness,” according to a document provided by AIC.

“We maintain that the value of a property to the current user and for the current use is a fair and equitable basis for taxation, rather than skipping to the value of the property to a future buyer purchasing it as a vacant building,” the document reads.

Some lawmakers have already answered the AIC’s call.

In the Senate, Sens. Brian Buchanan, R-Lebanon, and Phillip Boots, R-Crawfordsville, filed a bill to address various property tax matters, including several provisions to solve the concerns voiced by the AIC.

Their bill—Senate Bill 623—would introduce protections for county leaders, empowering them to adopt ordinances that could reimburse assessors’ legal fees in appeals that are “uncommon and infrequent in the normal course of defending appeals.”

Additionally, SB 623 would prevent companies who appeal property assessments from using second-generation properties in sales comparisons. In other words, if the company owns an inactive property — like a vacant grocery store that it rents out to seasonal tenants or holiday retailers—it could not compare that property’s assessed value with active establishments, or first-generation properties.

Buchanan said the bill would only affect new big-box store appeals, not the hundreds that are already filed or pending before the state tax board.

“When a commercial retailer chooses to appeal, and that’s their right, the counties are often forced to settle,” Buchanan said. “We’ll protect their right to appeal, but we’re also working hard to find a solution everyone can live with.”