Overturn the Walgreens Decision

Walgreens Court Decision Causing Significant Tax Shift



The Issue:  Walgreens and CVS stores rely on a 2008 Wisconsin Supreme Court decision, Walgreens v. City of Madison, to successfully argue that the assessed value of their properties for property tax purposes should be less than half of the actual sale prices of such properties on the open market. Walgreens and CVS have won dramatic assessment reductions across the state since 2008 by arguing that the rent they pay for their newly-constructed, highly-visible corner locations doesn’t accurately reflect its fair market value for property tax purposes. Also since 2008, drugstores have become the most popular single-tenant properties in the national real estate investment market. Walgreens in the Milwaukee metro area, for example, are selling for $5 million or more. But attorneys for Walgreens and CVS, relying on Walgreens v. Madison, argue that their actual sale prices don’t represent market value and the underlying leases are the wrong tool for determining the property’s value for ‘property tax purposes.’ Instead, they say, the assessments should hinge on the amount the landlord could get if the drugstore moved out and a different retailer moved in. The courts have agreed and as a result, these stores are regularly assessed at half or less than their sale prices. Other taxpayers must pay more taxes to make up for the artificially low taxes these stores are paying.

Oshkosh Example: Walgreens challenged the City of Oshkosh’s assessments of two of its stores.  The city based its assessment on the actual amounts for which the properties were sold. The court rejected the city’s approach and ordered that the two Walgreens be refunded for several tax years. The total amount of the refunds equaled $305,672. Other taxpayers in Oshkosh now have to pick up Walgreen’s former share of the tax burden. There are over 200 Walgreens located in Wisconsin’s cities and villages.

Appleton Example:  CVS challenged the City of Appleton’s assessment of its store. Relying on Walgreens v. City of Madison, the Wisconsin Court of Appeals recently affirmed that the value of the CVS property in 2013 was $1.8 million, much less than the City’s $4.4 million assessment based on an actual sale of the property in 2009.  Other taxpayers in Appleton now have to pick up the difference.

Solution:  Pass legislation overturning the 2008 Walgreens v. Madison decision and stop the tax shift to home owners that is occurring. Pass legislation clarifying that actual lease amounts are appropriately factored into the valuation of leased properties.
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