A 'dark store' tax loophole enjoyed by Target and Lowe's is costing American schools billions
When they win, schools end up losing billions of dollars, Edweek reported.
In what is often described as a tax loophole, these retailers utilize a legal argument dubbed the "dark store theory" to decrease their annual property taxes. They say that their taxes should be calculated as if their stores were vacant or "dark," rather than when they are at full capacity.
Property taxes for retailers are most commonly assessed looking at the "best and highest use" of the store, so a fully functional store would be taxed higher than a vacant store.
Property taxes finance school district budgets, just as they finance other public services like libraries, parks, and police departments.
The impact of a retailer winning a legal dispute under the dark store theory is significant.
Texas has estimated that within five years, the dark store theory could cost $2.6 billion annually and $1.2 billion in losses for schools, according to Edweek.
And in Michigan, about two-thirds of districts lost at least $75 million, according to Edweek, which said retailers have been winning the argument in courts.
Local governments object to the theory because it decreases revenue to the state while also increasing the burden of increased taxes on other property owners. Schools, roads, and other public services still need funding.
Governments have attempted to pass legislation against using the dark store theory, according to The National Law Review.
With so much on the line for both retailers and local and state governments, the issue isn't going away soon.
Editor's Note: An earlier version of this story included a reference to Home Depot. A spokesperson for the company reached out and said they don't use the strategy.