KOKOMO – The Indiana Supreme Court on Thursday will hear a case involving the Howard County assessor and Kohl’s that could have far-reaching implications on tax bases across the state and lead to significant local tax revenue losses.
The case will decide whether vacant big-box stores, also known as “dark boxes,” can be used as comparable properties when deciding a property’s market value.
Kohl’s has argued in favor of the technique, while officials across Indiana have warned against the financial dangers of allowing such a methodology, contending that a ruling in favor of Kohl’s could cost the state billions of dollars in assessed value reduction.
In the case, Kohl’s officials say their roughly 88,000-square-foot Boulevard Crossing store was over-assessed from 2010 to 2012. During those years, Howard County assessed the property at $5.9 million, $5.6 million and $5.9 million, respectively.
Kohl’s officials argue, with a differing interpretation of Indiana market value-in-use standard, that those figures should be $3.6 million, $3.8 million and $3.6 million, respectively.
After the Howard County Property Tax Assessment Board of Appeals affirmed the original assessments, the Indiana Board of Tax Review ruled on Dec. 31, 2014, that Howard County over-assessed the Kohl’s property.
The IBTR ruling was later affirmed on Sept. 7 by the Indiana Tax Court.
As explained in court documents, the Kohl’s appraisers believe nine Midwestern big-box retail stores “were appropriate comparables to use in valuing the subject property because...they were vacant at the time of the sale and thus their sales prices reflected the value of the real property alone.”
The real property value was described as not taking into consideration “intangible values, such as tenant quality, that are often included in the sale of leased fees.”
However, the Indiana County Assessors Association, the Indiana Municipal Lawyers Association and Accelerate Indiana Municipalities, formerly known as the Indiana Association of Cities and Towns, have each filed a brief in support of the Supreme Court’s review of the case.
In fact, a study done by Policy Analytics, LLC, at the request of the Association of Indiana Counties and ICAA, showed the “potential local property tax revenue impact that may occur if the 'dark sales' pricing methodology becomes the de jure methodology of property tax assessment for large and retail structures.”