State lawmakers are considering a bill that would prohibit large retailers from pressuring municipalities to slash their property taxes based on hypothetical arguments about the reduced resale value of vacant big-box retail space.

In a public hearing, critics urged members of the Legislature’s Committee on Taxation to endorse a bill that would ban a controversial practice big-box retailers have been using in Maine and across the country to try to lower their property tax bills. The practice, known as “dark store theory,” involves arguing that large retail spaces are routinely overvalued for tax purposes because the properties, if vacated, would be largely unappealing to potential buyers and would sell for less than their assessed value.

“Across the country, the large retailers that own big-box stores have used this dubious legal theory to challenge local assessments, arguing they should be taxed as if their properties were shuttered and vacant ‘dark stores’ – even while they’re open for business and raking in revenue,” said Sarah Austin, a policy analyst for the left-leaning Maine Center for Economic Policy, who authored a report on the practice in October. “It’s an effort by major corporations to manipulate the tax code so they pay less, leaving towns and other property taxpayers holding the bill.”

According to Austin’s report, dark store appeals could cost Maine municipalities millions of dollars in local tax revenue reductions.

Retailers have used dark store theory – successfully, in some cases – to appeal their property valuations and have their property taxes lowered in Maine, to the detriment of communities, the critics said.

Walmart, for instance, is involved in a long-running dispute with Brunswick over the value of its store there. The huge retailer says the store property is worth $10 million – about $7 million less than the town’s valuation for tax purposes. According to Austin’s report, Walmart is the most prolific purveyor of dark store theory in Maine.


Coupled with an abatement Walmart is seeking on its property tax bill for a prior year, the lower valuation could cost Brunswick more than $200,000 in property tax revenue.

In October, Scarborough settled a dispute with Walmart and Sam’s Club, which is also owned by Walmart, over the value of its stores there. The retailer will save more than $170,000 as a result.

The “dark store” theory argues that a retail site is only worth what the value of the property would be if the store were vacant. Towns and cities routinely place higher values on commercial properties that are occupied by successful businesses.

The bill under discussion last week, L.D. 2045, would back Maine municipal tax assessors’ arguments and require retail sites of 20,000 square feet or more to be valued based on their current use and, if vacant, on their “highest and best” use.

Dark store theory has cost towns and cities in the Midwest millions of dollars in property taxes, Austin told the committee Thursday. Her analysis found $184 million in reduced property taxes nationwide since 2015 – including $100 million in Michigan alone, where state courts sided with the retailers who appealed their property tax bills.

But the dark store argument is akin to saying, “Your neighborhood has been devalued and everyone has moved out, when, in fact, it is one of the most desirable neighborhoods in town,” Austin said.


Curtis Picard, president and CEO of the Retail Association of Maine, objects to the proposed change. Picard said the bill would set up different – and unfair – rules for valuing retail property. He said all property is valued based on what it would sell for on the open market, and that retail property tends to decline in value over time.

The Council on State Taxation, a Washington, D.C.-based trade group representing multi-state corporations, offered a similar argument against the bill in written testimony. It said the proposed change would “unwisely alter” Maine’s property tax law to bar appraisers from valuing large retail properties using the same valuation practices that apply to other business properties in the state.

“The limitation for the property to be valued (based on ‘current use’ when occupied) could inappropriately restrict an entire class of comparable properties to determine the fair market value of retail properties,” it said.

The proposed law would be discriminatory and would violate the Maine Constitution’s requirement that all property be valued uniformly, said Frederick Nicely, the council’s senior tax counsel.

In written testimony, the Maine Municipal Association backed the proposed legislation, saying it would help towns avoid costly appeals of property tax valuations by retailers. But the association did acknowledge that the law’s constitutionality might be challenged.

Kerry Leichtman, the assessor for Rockport and Camden, also submitted written testimony in support of the bill, calling dark store theory “ludicrous.”

“It is a ludicrous argument that has, nevertheless, prevailed in some venues, causing unnecessary pain to taxpayers who wind up with higher mil rates as a result of large and unwarranted abatements,” Leichtman said.

The committee will take up the bill at a work session on Feb. 18.

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