Closing costly ‘Dark Store’ loophole will increase funds for local schools, public safety and libraries.

LANSING, Mich., July 10, 2024 — A bipartisan group of Michigan legislators introduced a package of bills aimed at closing the “Dark Store” tax loophole, which has cost local municipalities an estimated $2 billion in lost tax revenue in recent decades. State Reps. Jenn Hill (D-Marquette), Julie Brixie (D-Okemos), Mai Xiong (D-Warren) and Greg Markkanen (R-Hancock) are leading the charge to address unfair tax practices employed by big-box retailers. The package includes House Bills 58658.

“Hometowns across the Upper Peninsula have been unfairly burdened by the ‘Dark Store’ loophole for far too long, and the public revenue losses have devastated local services. Our legislation will ensure big-box retailers pay their fair share of property taxes, just like every other business and homeowner,” Hill said.

‘Dark Store’ loopholes allow retailers to reduce property tax liabilities by claiming in court that their stores should be assessed based on sale prices of vacant, often deed-restricted stores. Individual local governments lose millions of dollars a year that could instead go toward schools, public safety and infrastructure. It has been a significant problem for the Upper Peninsula and communities across Michigan, while other states like Wisconsin and Maine have taken action to address the loophole.

“Many communities across Michigan have had to repay millions in property taxes to big box stores that successfully appealed, devastating their budgets and forcing them to cut vital services. This loophole has contributed to blight and held back communities for too long,” Brixie said. “It’s time we level the playing field and close the tax loopholes that wealthy corporations are exploiting.”

The bill package would prohibit retailers from using vacant, deed-restricted stores as comparables, require petitioners to provide appraisals when filing appeals and set standards for the Tax Tribunal’s independent determinations of true cash value that ensure they are made in accordance with generally accepted appraisal principles. Similar legislative fixes in Michigan have received broad support in past legislative sessions, but haven’t been signed into law.

“Our Upper Peninsula communities are driven by small businesses. Unfortunately, many of our locally-owned businesses are at a serious disadvantage under current law, which allows large national retailers to receive an unwarranted and unfair property tax break. We are grateful for this bipartisan effort to ensure all retailers are treated equally, and that small, local retailers have a chance to compete,” said Marty Fittante, CEO of InvestUP.

“Lawyers have created a very successful legal argument to substantially reduce their property taxes that citizens and small businesses are unable to qualify for,” said state Rep. Greg Markkanen (R-Hancock). “This is a legal argument that has been used all across the country with varying degrees of success. It has been particularly successful in the state of Michigan, disproportionately affecting rural communities. It’s time we close this loophole in Michigan.”

“By closing ‘Dark Store’ loopholes, we can restore much-needed revenue to our municipalities, allowing them to maintain vital public services and infrastructure like public safety and libraries,” Xiong said.

The primary benefit of the bill package is to ensure fair property tax assessments for big-box retailers, thereby restoring significant lost revenue to Michigan’s municipalities. This restored revenue will enable local governments to maintain and improve vital public services and infrastructure, ultimately benefiting the communities and residents who rely on these services. By closing the ‘Dark Store’ loophole, this legislation aims to create a fairer tax system, protect the financial health of municipalities across the state and develop strong hometowns in Michigan.

“From Marquette to Meridian Township and all the places in between, every community needs strong schools and healthy hometowns,” said Molly Sweeney, Director of Organizing at 482 Forward. “This is an important piece of a larger effort to show that we are prioritizing our students and holding these wealthy corporations accountable.”