Kmart includes Clark County in national property tax lawsuit

Alana Roberts

Friday, April 2, 2004 | 11:21 a.m.

Clark County is one of 456 local taxing entities that were named in a lawsuit Kmart Corp. filed last May alleging local assessors all over the country over-charged the discount retailer for personal property taxes.

In the lawsuit, filed in U.S. Bankruptcy Court in Chicago, the company alleges that it overpaid the Clark County Assessor's office for business personal property taxes for the 2001-2002 and 2002-2003 tax years. It did not allege overcharges of the Clark County real estate property tax.

Stacey Welling, a public information officer at Clark County, said the difference between business personal property and real estate property is that business personal property is the merchandise and all of the property that isn't the building or the land while real estate property is the building and the land. She said the amount of personal property taxes Kmart paid for the years in question wasn't readily available.

The complaint doesn't state how much the company believes it overpaid. Kmart says it has nine stores in the Las Vegas area.

In the complaint Kmart asks for a determination of a correct method for calculating the assessments. The complaint was filed on May 5, a day before the company emerged from Chapter 11 bankruptcy protection after having been in bankruptcy since January 2002.

On Jan. 26 the Clark County Assessor's office presented its motion before U.S. Bankruptcy Court Judge Jack Schmetterer to either dismiss the lawsuit or refrain from hearing evidence in the case. A status hearing on that motion is set for April 19.

Clark County's motion states that Kmart is actually asking for a refund because it already paid the taxes due in those years. The Clark County assessor's office alleges in the filing that Kmart has missed its deadlines to appeal the assessments. It also alleges that the bankruptcy court doesn't have the jurisdiction to decide the case.

The county's motion also states that Kmart's taxes were assessed fairly and that if Kmart were to be granted its refund, other property owners would have paid more than they should have, making it unfair to them.

Kmart declined to specify the total it believes it's owed, but in a statement company leaders say the company paid $1.6 billion last year in real estate, personal property, payroll and other taxes. The statement said the amount of money the company is suing the communities for represents less than 1 percent of the taxes the company pays to local communities. The company calls the methods used by the various taxing assessors is "arbitrary and imprecise."

The company said it gives back to the communities in many ways.

"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," the statement said.

Some communities have settled the claims, but Donald Hurley, an attorney for another defendant in the lawsuit, Ventura County, Calif., said there are groups of local tax assessors fighting the claims. He said Ventura County is part of a group of 11 tax assessors in California fighting the claims. He said he isn't sure how many other groups there are, but said there is another group in California and one in Florida.

Hurley said Kmart has sued communities alleging they overpaid both real estate and business personal property taxes, although the original complaint only mentions business personal property taxes.

He said Kmart's lawsuit is a way for the company to win millions of dollars based on the fact that many assessors would either settle or ignore the complaint so that the company would obtain a default judgment.

"It's very difficult for a local public entity to justify the expense of litigating the case. Strategically Kmart knows this," Hurley said.

Kmart said in the statement that it sued based on the fact that it is working to return to profitability.

"Our actions to defend ourselves against unfair taxation are one of the many steps we are taking to build upon this momentum," the statement said.

Hurley said Kmart's method is interesting.

"I've seen it at a lower level. I've never seen it at this scale before," Hurley said.