Kansas Supreme Court reverses property tax decisions favorable to Walmart, Sam’s Club

Legal issue involves Johnson County’s controversial valuation of big-box stores

By: - July 1, 2022 9:56 am
The Kansas Supreme Court issued a ruling Friday in a legal dispute about how Johnson County appraised for property tax purposes Walmart and Sam's Club retail stores. (Kansas Reflector screen capture from Kansas Supreme Court website)

The Kansas Supreme Court issued a ruling Friday in a legal dispute about how Johnson County appraised for property tax purposes Walmart and Sam’s Club retail stores. (Kansas Reflector screen capture from Kansas Supreme Court website)

TOPEKA — The Kansas Supreme Court waded into a simmering dispute Friday in the appraisal industry on valuing real property of big-box retails stores by overturning lower court decisions rejecting Johnson County’s evaluation of nine Walmart Inc. and two Sam’s Club stores.

The state’s highest court unanimously reversed a 2021 decision of the Kansas Court of Appeals and previous action by the Kansas Board of Tax Appeals that found the county overvalued the retailers’ property by tens of millions of dollars. The lower jurisdictions said the buildings should have been valued at what each would sell for if vacant or “dark” rather than at values that reflected earnings through lucrative lease agreements associated with those businesses.

Walmart took legal action to challenge methods used by Johnson County that resulted in 2016 and 2017 appraisals nearly double 2015 tax values for the properties. The case raised questions about whether standards set forth in law by the Kansas Legislature were appropriately applied.

After receiving Johnson County’s appraised value of the 11 properties, Walmart sought intervention by the state board of Tax Appeals. BOTA lowered valuations of each property and ordered Johnson County to refund overpayments for the 2016 and 2017 tax years.

Johnson County appealed to the state Court of Appeals by claiming BOTA incorrectly interpreted state law. The divided Court of Appeals, however, determined BOTA appropriately adhered to Kansas law. That took the case to the state Supreme Court, which issued an opinion instructing BOTA to reconsider the case by fully reviewing the county’s evidence on property appraisals.

Ed Eilert, chairman of the Johnson County Commission, said the state Supreme Court’s reversal of the Court of Appeals in the dark-store case would enable consideration of all evidence of market value.

“A Kansas Supreme Court decision on the valuation of big-box retailers is critical for local governments across the state of Kansas,” Eilert said. “This case has been about equity for taxpayers. Every property owner in Kansas, from the large retailer to the homeowner, should be treated equally as the Kansas Constitution requires. Equity is an important factor in property appraisal.”

Walmart spokesman Randy Hargrove said the company would again make its case to BOTA in light of the state Supreme Court’s decision.

“While we disagree with the decision,” he said, “we look forward to asking the Board of Tax Appeals to reaffirm its prior findings about the proper assessed values of Walmart’s stores.”

Alan Cobb, president of the Kansas Chamber, expressed confidence BOTA would subsequently conclude Johnson County “overstepped its authority by drastically increasing big-box valuations.”

He said it was clear Johnson County’s government leaders and the county appraiser’s office disregarded state law when it “concocted the imaginary fairy-tale” theory of imposing property taxes on these retailers.

“Their absolute dishonesty in claiming that these companies did not want to pay their fair share of property taxes is particularly appalling,” Cobb said. “To blame retail businesses for skirting the law or their tax obligations is entirely false. It’s this type of deceitful behavior that leaves the public doubting the competency of some public officials.”

Justice Dan Biles, writing for the state Supreme Court, said the highly contested issue boiled down to deciding whether appraisals relying on build-to-suit lease data was admissible in Kansas. BOTA, relying on a 2012 state Court of Appeals decision in the Prieb Properties case, determined rental rates from commercial leases weren’t reflective of market conditions.

“We (state Supreme Court) hold Prieb’s rationale invades BOTA’s longstanding province as the fact finder in the statutory process for appraising real property at its fair market value,” Biles wrote. “By following Prieb, BOTA imposed an exclusionary rule on the county’s evidence rather than simply considering its weight and credibility.”

The state Supreme Court remanded the case to BOTA and instructed that board to evaluate the county’s evidence without Prieb’s constraints.

“Though BOTA may reach the same result on remand, that decision must be based on its own determinations of the facts and witness credibility,” Biles wrote.


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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International.