The Walgreens Loophole Explained

Walgreens, CVS, and other commercial and manufacturing businesses that lease their space rely on a 2008 Wisconsin Supreme Court decision, Walgreens v. City of Madison, to argue that the assessed value of their properties for property tax purposes should be less than half of the actual recent sale prices of such properties.


In Walgreens, the court concluded that the actual rents Walgreens pays should not dictate the value of the real estate for property tax purposes. Instead, assessors should value the property based on hypothetical “market rents”, rather than the terms of the actual leases.


Since the decision, leased drugstores have become the most popular properties in the national real estate investment market, regularly selling for $5 million or more in Wisconsin. Attorneys for Walgreens and CVS successfully argue that the 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.


A real example: The Court of Appeals found that a CVS property in Appleton should be valued at $1.8 million, much less than the City’s $4.4 million assessment, even though the higher value was based on an actual recent sale price of the property.


No other taxpayers receive similar special treatment. A homeowner, for example, could not claim that the assessed value of his or her home should be half the amount for which it was purchased. Courts in other states have rejected Walgreens’ low value argument.


Walgreens, CVS, and other leased stores consistently use the recent sale price of the property as the value of the real estate for all other purposes, including federal income tax forms. They claim the lower value only for property tax purposes.


There are over 200 Walgreens and 84 CVS stores located in Wisconsin’s cities and villages. In addition, other commercial and manufacturing businesses that lease their space are beginning to use the same arguments to lower their property tax bills.


Bottom-line: Homeowners deserve a return to a fair allocation of the property taxes necessary to pay for essential municipal services.



Dark Store Loopholes allow big box retailers to avoid paying their fair share of property taxes.
Wisconsin homeowners already pay a too-high 68% of property taxes, and may soon pay an even bigger share.
Big box retailers use more municipal services like police & fire, but soon will pay even less for them.
Closing the Dark Store Loopholes has broad bipartisan support, but bills need to be allowed a vote.