The “Dark Store” Tax Loophole and Why It Matters to You

By Mayor Kathy Ehley

It’s the fun time of back to school and the tough time of the City Budget. In fall, we present the 2019 budget for city services to the Common Council for their review and adoption. Every year is challenging but this year is much more so.

Compounding the fiscal picture are the many lawsuits from commercial and manufacturing property owners seeking significant reductions to their property value assessments.

At the heart of this issue is big commercial property owners fighting to reduce their property assessments to pay less taxes using tax loopholes. The two most used are the Walgreens Supreme Court decision and the “dark store.” It is complicated but hopefully this information will help you understand the concept and the risk to communities all over Wisconsin and what you can do.

Only the Wisconsin State Legislature can close these loopholes. I have been working for several years with other municipal and state elected representatives to bring forth legislation to close the loopholes, but now we need your help.

What is the “dark store” loophole? The “dark store” loophole is a tax break trick that commercial and manufacturing property owners use to save themselves from paying their fair share of property taxes. Tax attorneys for properties like Walgreens, Lowes and Meijer use the “dark store” loophole to argue that the value of their property in a busy, popular area (like Wauwatosa) should be based on the value of similar-sized empty “dark” stores that could be located anywhere not necessarily in Wauwatosa (See the photos). If they win this argument, it means they pay less in taxes and then someone else has to cover for that.

What does this mean for you? Every year property taxes are collected from homeowners, landlords and business owners and used to provide city services, like police and fire protection, snow plowing, garbage pickup, recycling services, street and road repair, libraries and to support for our schools.

mayor's message graphicCities prepare their annual budget to pay for these services based on the amount of property taxes they expect to receive from taxpayers. If there is a shortfall in property taxes collected, cities need to find ways to make up the difference, like raising taxes or cutting services.

If the big commercial property owners use the “dark store” loophole to cut the amount of their property assessment, they pay less in property taxes and cities are forced to shift that amount over to the remaining tax payers or cut services.

Why would I have to pay more taxes? Think of a city’s budget as a series of buckets. Property tax is the biggest revenue bucket in the budget and all property taxes go into this bucket. Homeowners, landlords, and all business (large and small) pay property taxes into this bucket. If one tax payer pays less, others must pay more to keep the bucket full and the budget balanced.

Is this happening in Wauwatosa? Yes. One of the Walgreens in Wauwatosa recently sold for $8 million. Walgreens is arguing its tax assessment should be $1.5 million. Another Walgreens sold for $4.9 million, and is claiming its assessment should be $2 million.

As a thriving community, Wauwatosa has been especially hit hard. Over the last five years we have seen this number increase. Currently, we have 13 lawsuits pending from commercial properties seeking lower assessments. This means a probable tax loss of about $5.3 million. If they win, the tax burden shifts to the homeowner and small business owners. That would mean a 7% increase or $382.12 for the owner of the average home valued at $230,000.

In addition, our City has paid $2.5 million in legal fees since 2011 to fight the property assessment challenges and lawsuits from commercial and manufacturing properties. If this trend continues our legal costs will continue to go up.

What can I do? Learn more, then contact your state senator and assembly representatives. Tell them to pass legislation to close the “dark store” tax loopholes for commercial properties, so you don’t have to pay more taxes. Do it today and continue until these loopholes are closed!

Only the Wisconsin Legislature can close the loopholes and stop this unfair tax shift. I have been working with other municipal leaders and our state representatives for years to close these loopholes. We have testified at Wisconsin Senate and Assembly hearings, held press conferences and met one-on-one with state senators and representatives and will continue to do this until the state passes legislation to close these tax loopholes. But we need your voice to be heard as well.

Want to learn more? Visit the “Close the Dark Store Loopholes” website at You can take action and contact your Legislators directly through the “ACT” button on this website. You can also watch the video at the League of Wisconsin Municipalities YouTube channel, I can also be reached at or 414-479-8915.