Howard County officials say a property tax appeal by Kohl’s Department Stores has the potential to force a major change in how property taxes are assessed, with potential implications for other taxpayers.
Kohl’s officials say they were over-assessed from 2010 to 2012 on their local store at Boulevard Crossing, and have asked the Indiana Board of Tax Review to lower those assessments by about a quarter.
Center Township Assessor Sheila Pullen and Howard County Assessor Jamie Shepherd are standing by the numbers they came up with, saying the original number — between $4.8 million and $4.9 million for each of those three years — is accurate and fair.
At issue is whether the county should have put more weight on vacant “big box” retail buildings when creating a set of comparables to establish the market value of the Kohl’s store.
Shepherd said a third-party appraisal valued the Kohl’s store at $1.2 million more than the Kohl’s estimate. The local property tax appeals board turned down Kohl’s protest, so the company took its case to the board of tax review in Indianapolis.
Both sides gave their arguments last month, and a ruling is expected to take months.
Shepherd said the case could create a tax shift in the county, if Kohl’s prevails.
Her worry is any ruling in Kohl’s favor would set a precedent and future commercial property tax assessments would have to lend more weight to vacant buildings.
If commercial assessments across the community were lowered, residential, small business and agricultural taxpayers likely would see their tax burdens increase as a result, she said.
“It’s our belief that vacant properties sell much differently than successful properties, with successful businesses in them,” Shepherd said.
“My overall objective is valuing a property as adequately as possible,” Pullen said. “The implications of using ‘dark box’ sales as comparables will dramatically shift the tax burden.”
Both assessors said professional appraisers still disagree how best to arrive at a tax value for special retail properties like big box stores.
Since a key Indiana Tax Court decision involving the Town of St. John in the late 1990s, Indiana has used a market-based approach called “value-in-use” for determining a property’s tax assessment.
“Indiana’s property tax system is based on the ability to pay. It differs from surrounding states that value [property] on the pure market, not taking into consideration the current use,” Shepherd said.
“A mom-and-pop store in Indiana is valued as a mom-and-pop store. In other states, it could be valued as a potential industrial site, if that is determined to be the highest and best use for that property,” she said, saying pure market value approaches can lead to volatility in assessments and cause shifts from year to year.
Kohl’s officials didn’t respond to a request for comment.
