State lawmakers introduce bills to close ‘Dark Store’ tax loophole

LANSING, Mich. (WZMQ) – State lawmakers are hoping to create a solution to the dark store tax loophole. Representatives filed the legislation before leaving for the summer, but it’s not the first time state lawmakers have tried to address the problem.

Tax breaks for “dark stores” have been around since the Great Depression, allowing large retailers to pay less property taxes by requiring the price of their stores to be based on the sales price of vacant stores, which are often restricted to freehold properties.

Marty Fittante, CEO of Invest UP, explained that the loophole creates a tax burden in many rural areas that rely on property tax revenue from large retail chains.

New legislation from both parties would prohibit retailers from using vacant, proprietary stores as comparisons and would impose stricter requirements on how a property’s taxable value is determined.

Upper Peninsula State Representatives Jenn Hill and Greg Markkanen are both part of the latest effort to close the loophole. Hill explained that it is the job of the Michigan Tax Tribunals to hear tax appeals for state and local taxes.

Hill said the bills would expand their powers, particularly regarding deeds and restrictions on deeds.

“There’s a direct cost to us because the counties have had to spend hundreds of thousands of dollars on lawyers right now to negotiate new tax rates. Our local government units have lost their funding, and they’ve lost that funding when it’s cut, and it’s cut continuously. That affects our police, our fire, our parks, our local roads,” Hill explained. “The dark stores were a long legal battle to figure out what we could actually do to make a difference. It turns out we literally have to change the definition of what the tribunal can do.”

The costs to smaller communities, such as those in the Upper Peninsula, and the uneven playing field for small businesses have made the loophole a recurring problem in the Upper Peninsula.

“It’s really the way that large retailers can take advantage of the tax policy as it’s been interpreted in the state,” Fittante said. “From an equity and impact perspective, this really deserves and needs to change.”

Similar legislative solutions have gained support in recent sessions, but have not yet been enacted into law. Hill said the Legislature returns to Lansing in September and November, and she hopes the bill will pass then.