Kmart Sues {Three} Wyoming Counties {Over Property Taxes}

Cheyenne Wyoming Tribune-Eagle ^ | 04-15-04 | Lowell, Jessica

[Theodore R.]

Kmart sues Wyoming counties The corporation is using its bankruptcy case to challenge past personal property taxes.

By Jessica Lowell rep5@wyomingnews.com Published in the Wyoming Tribune-Eagle

CHEYENNE - When Brenda Arnold opened a sheaf of legal papers from a bankruptcy court last fall, she thought she had gotten them by mistake, because her office doesn't deal with bankruptcies.

Arnold, the Laramie County assessor, took a closer look and saw she was named in the papers.

Kmart Corp., which sought bankruptcy protection in 2001, is suing within its bankruptcy case to reduce its personal property taxes for the second half of 2001 and all of 2002 in 456 taxing jurisdictions across the country.

In Wyoming, the retailer is seeking relief from only three counties - Laramie, Campbell and Teton - even though it operates stores in nine counties. Personal property taxes fund school and other districts such as fire districts in Wyoming.

Arnold and her colleagues are puzzled on two counts. The first is how Kmart can ask for tax relief long after the appeal period for those years has expired. The second is why only three counties were sued when all Wyoming counties determine personal property tax the same way under state law.

Kmart, which has emerged from bankruptcy, responded to an inquiry by the Wyoming Tribune-Eagle with a prepared statement.

"In order to ensure a continued focus on the local neighborhoods we serve, we must take seriously our obligation to our employees, our customers and our shareholders to challenge our tax assessment and zealously protect our interests when we have been overcharged," the statement reads.

"We find it ironic to note that many of the cities which are publicly protesting our rights for fair property tax assessment are granting our competitors significant tax breaks and incentives to enter these communities."

"I can tell you that there have not been any tax breaks afforded to retail stores," Arnold said Wednesday. "In fact, Wyoming law doesn't allow for tax breaks. The constitution requires property to be valued at fair market value, and we all use the same method."

The assessors see this as a matter of fairness. Other businesses, including Kmart's competitors, have paid their taxes for that 18-month period, while Kmart has not.

Of the three counties being sued, only Teton County has seen a similar request from a company in bankruptcy.

Teton County attorney Keith Gingery said United Airlines challenged its personal property tax in a lawsuit over the value of such items as its luggage carts after it had sought bankruptcy protection.

The stakes in the three Wyoming counties are fairly small. Kmart is seeking reductions of $2,739.94 from Laramie County, $2,477.68 from Campbell County and $639.84 from Teton County.

When Arnold was served, a list of the cities, towns and counties where the taxes were being challenged came with her legal papers. The list shows that in many cases, Kmart is seeking a few thousand dollars, but the range covers from as little as $181 in relief from Medford City, Wis., to more than $19,000 from Anchorage, Alaska.

County officials are a bit stung that Kmart never challenged its assessments for 2001 or 2002; the company just didn't pay.

"All property owners have the same statutory right to appeal the valuation within 30 days of the mail date on the assessment schedule," Arnold said.

Instead, the company invoked section 505 of the U.S. Bankruptcy Code, which allows the court to determine the amount or legality of any tax, fine or penalty relating to a tax, or any addition to tax, whether it was previously assessed, paid or contested before and adjudicated by a judicial or administrative tribunal.

Kmart, according to its prepared statement, has successfully resolved more than one-third of the dollar value of original disputes.

Arnold is challenging Kmart's lawsuit, as are officials from Teton and Campbell counties. Even as they want to collect the taxes owed - plus the interest that has been adding up - they don't want to spend more in tax dollars than they are owed.

"Our question is how much do we spend fighting the lawsuit? We may end up spending more than we are owed," Gingery said. "All we really care about is the property tax."

It's not clear why Kmart picked only three counties. Gingery said maybe Laramie, Campbell and Teton are the most expensive counties. And maybe the company had already paid its bills in the other counties, he said.

Natrona County, which was not sued, has not been paid. It's the same for Albany County.

Wednesday was the last day to file an appeal.

Arnold said Kmart didn't challenge the process this year.

"We did receive a report from Kmart for 2004," Arnold said. "We used that information to arrive at their assessment, and they did not appeal it.

"If they did not appeal in the 30 days," she said, "under Wyoming law, it's presumed to be correct. It's the same equipment that we valued and assessed using the same procedures as we used today. And today, by not appealing, they are saying those procedures are correct."