Walgreens has filed several lawsuits against DeForest, each time claiming the village overtaxed its distribution center, located off of Highway 19.

DeForest voters will see two referendum questions on their Nov. 6 ballots relating to “dark store” tax loopholes.

Back in June, the DeForest Village Board unanimously approved adding a question to local ballots asking voters if the state’s Legislature should prevent commercial and manufacturing property owners from using tax loopholes by enacting laws that prohibit using the “dark store theory,” which is when vacant properties are used as a comparable for determining the assessed value of open, fully-operational businesses. The board’s question also asks if the Legislature should overturn the 2008 Wisconsin Supreme Court decision in Walgreens Co. v. City of Madison, which is interpreted by the courts as requiring municipalities to assess many leased commercial properties at a substantial discount.

Shortly after trustees approved the ballot question, the Dane County Board authorized a county-wide referendum question that asks, “Should the state legislature protect residential property taxpayers by preventing commercial and manufacturing property owners from using tax loopholes to shift the tax burden to homeowners?”

The board was then asked by Dane County officials to consider rescinding the resolution adding the referendum to local ballots. During the village board’s July 17 meeting, Village Attorney Al Reuter said he was concerned with the wording of the county’s question, stating it was not as specific as DeForest’s, which led him to believe it might not have as much “legislative sway.”

The board decided to keep its original question on the November ballots, meaning voters in DeForest will see two referendum questions regarding dark store loopholes when they cast their ballots in a few weeks.

The village has seen its fair share of issues related to the dark store tax loopholes. Currently DeForest is fighting a lawsuit filed by Walgreens last year which claims it was overtaxed on its distribution center off of Highway 19. Walgreens wants a $236,205 refund from the village. It’s one of several lawsuits Walgreens has filed against DeForest; there have been four settlements so far totaling $555,566 in lost property tax revenue to the village, DeForest Area School District, Dane County, state and Madison Area Technical College.

Walgreens filed another lawsuit against DeForest in July. According to court documents regarding that lawsuit, Walgreens is claiming the property taxes imposed on the facility for 2018 “were excessive in at least the amount of $222,507.”

During the board’s June 5 meeting when they passed the resolution adding the question to ballots, a few trustees weren’t sold on the possible influence of the referendum’s outcome, but others said they believed if many municipalities got involved, officials would have to notice.

Trustee Jeff Miller was one of those who said hopefully the message will be sent by not only DeForest voters, but others, too.

“I’m hoping this shakes the tree a little bit and gets some people to maybe actually take some action on something that should have come before them much sooner than this,” Miller said during the June 5 meeting.

A League of Wisconsin Municipalities analysis of 12 communities concluded that homeowners could see their property taxes increase by 8 percent or more if commercial and manufacturing property values fall by 50 percent as a result of the loopholes.

Tim Kiefer, a member of the Dane County Board and an attorney from Waunakee, supported putting the county referendum question before voters.

“The point is to find out what the voters think,” said Kiefer. “It’s not for us as a board to tell them how to think.”

Opponents to dark store tax loopholes say they are used by big box retailers to reduce their property taxes by having properties appraised as if they were vacant or “dark” stores. That results in a lower tax assessment for them.

What then happens is that the burden for those property taxes is shifted to residential property taxpayers. Municipalities must raise property tax levies to pay for services, which are also used by those same commercial and manufacturing entities.

Kiefer compared it to a balloon.

“If you push on one side, it pushes out on the other side,” said Kiefer. “If you cut someone else’s taxes, it takes from someone else’s group.”

The question, for Kiefer, is, how is commercial or manufacturing property valued? In applying the dark store tax loophole, companies push to have those properties assessed in comparison with nearby stores that are vacant. They argue that the newer properties could also quickly become empty. Kiefer said those vacated properties used for comparison may not have had commercial potential in the first place.

It’s becoming a bigger issue for local governments, according to Kiefer, and it’s a complicated matter for courts. Kiefer said that Wisconsin Legislature has the power to fix it.

State legislation has been introduced to stop the corporate tax strategies, but has failed to make it to the Senate or Assembly floors for a vote.

Peter Lindblad, associate editor for the Waunakee Tribune, contributed to this article.

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