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Wednesday, 08 June 2016 16:06

Michigan House advances ‘Dark Store’ legislation

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Left: Vacant Target store on Sherman Boulevard in Muskegon. Right: Current Target store on Harvey Street near The Lakes Mall in Muskegon. Left: Vacant Target store on Sherman Boulevard in Muskegon. Right: Current Target store on Harvey Street near The Lakes Mall in Muskegon. PHOTO: MIBIZ STAFF

LANSING — Legislation aimed at closing a controversial tax loophole today cleared a major hurdle.

The Michigan House of Representatives passed HB 5578, which would eliminate the ‘Dark Store’ loophole and apply “generally accepted appraisal principles” to all commercial real estate property in the state.

The bill passed the House by a margin of 97-11 and will now head to the Senate for consideration, most likely later this year, sources said.

The controversial loophole allows retailers such as Walker-based Meijer Inc., Wal-Mart and Home Depot Inc. to appeal their property tax assessments and have their stores assessed at rates comparable to nearby closed or vacant stores.

The practice has cost Michigan municipalities about $100 million since 2013, as MiBiz has previously reported.

“Every community I talk to has either had this situation, knows of one that has or can see it coming,” said Chris Hackbarth, director of state affairs for Ann Arbor-based municipal lobbying firm Michigan Municipal League. “This is important policy."

Additionally, the substitute bill — which is what passed today — gained the support of organizations like Lansing-based Michigan Association of Realtors, who were against the initial bill.

According to Brian Westrin, director of public policy and legal affairs for the organization, the bill that passed today allows for greater clarity on generally accepted appraisal principles and allows for those to be extended to all commercial property and not just dark stores.

“That’s where we planted our flag,” Westrin said of the association's support for the substitute bill.

According to an analysis done by the House Fiscal Agency, the legislation "could potentially prevent large reductions resulting from appeals in the future. It is not possible to determine a net fiscal impact because there are too many unknown factors. The number of appeals and their magnitudes cannot be predicted in advance, nor can the manner in which the Tax Tribunal will interpret the provisions of the bill.”

The bill’s sponsor, Rep. David Maturen, R-Brady Township, is a former real estate appraiser. Several sources said that experience made him an ideal champion for the legislation.

“The properties they have been using as comparables would not be considered comparable by trained appraisers because they don’t have the same highest and best use,” Maturen said in a statement. “My legislation requires the Michigan Tax Tribunal to consider the three universally accepted appraisal principles – cost, income and sales comparison – and will ensure that the tribunal’s assessment determinations are fair to all parties involved.”

Rep. Maturen, while speaking in April on a conference call with reporters, credited MiBiz’s previous coverage of the dark store issue as a catalyst for crafting this legislation.

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Nick Manes

Staff writer

nmanes@mibiz.com