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 Tim Carpenter, Kansas Reflector

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 for Walmart. Those courts said the commercial buildings should have been valued at what each would sell for if empty or “dark” rather than at what the retail companies paid for construction, land and improvements on those sites.

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.

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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