TOPEKA — The Kansas Supreme Court waded into a simmering dispute in the appraisal industry over valuing real property of big-box retails stores Friday by overturning lower court decisions faulting Johnson County’s evaluation of nine Walmart Inc. and two Sam’s Club stores.
The state’s highest court rejected a 2021 decision of the Kansas Court of Appeals and a previous ruling by the Kansas Board of Tax Appeals that found the county had overvalued property held by Walmart. The lower courts said the commercial buildings should have been valued at what each would sell for if vacant or “dark” rather than at what the retail companies paid for construction, land and improvements on those sites or earned through lucrative lease agreements. The difference was approximately $60 million.
Walmart took legal action to challenge methods used by Johnson County that resulted in appraisals nearly double previous values for the same 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 of 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 and that BOTA’s decision wasn’t reasonable. The divided Court of Appeals, however, determined BOTA appropriately adhered to Kansas law. That took the case to the state Supreme Court, which offered instructions to BOTA as it reconsidered the case.
Alan Cobb, president of the Kansas Chamber, said the state Supreme Court broke with precedent and expressed confidence BOTA would subsequently affirm BOTA “overstepped its authority by drastically increasing big-box valuations.”
He also 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” of a 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.”
In Kansas, statutory provisions related to taxation must be construed in favor of taxpayers. The taxing entity is required to assume a hypothetical sale on the open market of the property on Jan. 1 of the applicable tax year. And, fair-market value is the amount an informed buyer was justified to pay and an informed selling would be justified in accepting.
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