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Kmart is suing hundreds of local governments in a Chicago bankruptcy court, trying to get out of paying millions of dollars the financially troubled discount chain owes in taxes across the country.
In Florida alone, Kmart has yet to pay about $3.5-million in tangible property taxes it owes for 2002, including about $550,000 owed to Pinellas, Hillsborough, Pasco, Citrus and Hernando counties.
Kmart says its 2002 tax bill should be slashed dramatically and it should get a refund for 2001 because it paid too much. The suit does not involve 2003 taxes.
At issue are the taxes levied on store fixtures such as shelves and display cases and equipment such as cash registers, computers, phone systems and forklifts. Kmart is objecting to the way property appraisers value the equipment.
Take, for example, the Kmart store at 9500 Dr. Martin Luther King Jr. St. N in St. Petersburg. Kmart says the store's property, which was appraised at $1.3-million for 2002, was really worth only $687,934, which would reduce the tax bill from $30,786 to $16,088, according to its calculations. Kmart favors a more complex valuation system than local governments use.
For 2002, Kmart owes $208,913 to Pinellas County, $159,884 to Hillsborough County, $90,191 to Pasco County, $50,236 to Citrus County and $40,121 to Hernando County, according to figures compiled by the Palm Beach County tax collector's office, which is leading Florida tax collectors' defense.
"They're playing dirty and trying to weasel out," Palm Beach tax collector John Clark said.
Kmart emerged from bankruptcy reorganization last year still obligated to pay its local property tax bills. Now the company is trying to use bankruptcy court to reduce bills it incurred before and during bankruptcy proceedings.
Dozens of local governments have settled rather than fight the case long distance. However, most Florida tax collectors have joined Clark's group. The state's property appraisers also are concerned about the battle since retailers have been attacking their valuation methods for years.
"We've litigated this extensively in the state courts and won," said Sherri Johnson, a Sarasota lawyer who represents a group of property appraisers, including those from Pinellas and Citrus counties. "It's been all the way to the Florida Supreme Court and the courts have routinely accepted property appraisers' methods. Kmart is trying to get a second bite at the apple by asking the bankruptcy court for a reduction in these assessments."
Even before filing for bankruptcy, Kmart sued Pasco County in circuit court to dispute its property taxes for 2000, 2001 and 2002. All three cases are still pending.
It's a common tactic among corporate taxpayers, said Pasco property appraiser Mike Wells. As long as the tax bill is in dispute, the company pays what it thinks it owes. A judge can order the company to pay more, but cases can take years to come to trial if the company drags its feet. "It's rather frustrating because we think our values are good, and I think we would be able to convince a judge of that, too," Wells said.
Kmart has sued Hernando County appraiser Alvin Mazourek several times in the past five years, although no suits are pending, said Nick Nikkinen, Mazourek's director of special projects. As part of a settlement with the retailer, the property appraiser's office agreed to recalibrate the useful life and depreciation tables using new market data, Nikkinen said.
Kmart says it simply wants correct tax procedures to be used.
"We're not looking for a windfall," said Joseph Harrison, a Texas lawyer representing Kmart.
Florida tax collectors say the federal bankruptcy court should not have jurisdiction in the case, that tax assessments are an issue for state courts. However, it is not unusual for companies to challenge local taxes in bankruptcy court.
- Times staff writers Bridget Hall and Kelly Virella contributed to this report, which also used information from the Wall Street Journal.