The complexity of tax law is well displayed by the ongoing issue of the valuation of property for "big box" stores in Michigan. According to the tax statutes, the property tax on a piece of property is to be based on "true cash value." Seem simple enough.
But then we have to define what "true cash value" means. According to the Michigan Municipal League, the state accepts three methods of determining this valuation: "the sales comparison/market approach, the cost less depreciation approach, and the income approach."
Some of these large retailers have been pushing the use of comparables, which they cleverly then assert have virtually no value, as only a shuttered or vacant property would qualify as a comparable due to their claim that the retailer would never sell the property.
To further lower the value, they impose deed restrictions on the property that may mean a former retail location cannot be sold to another retailer. This may virtually eliminate the likely market for a 125,000 square foot space in a mall or shopping center.
While this may result in favorable tax treatment for these buildings, it means local government has to cut services. It also creates inherent unfairness for many small local businesses, which do not have the market power to obtain these advantages.
This is a complex area of tax law, and if your business has questions regarding its property tax and is assessed value, it is important that you consult with a tax attorney prior to attempting to dispute this number. You may not be able to use the same valuation formula that big box retailers.
Source: freep.com, "Bills target property tax cuts for 'big box' stores," Paul Egan, October 3, 2015