U.S. Property Tax Association, Inc.


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Fighting For The Underdogs In Commercial Property Tax Appeals

Part 2: Minnesota’s Unequal Protection Under the Law

On Behalf of | Jan 29, 2021 | Commercial Property Tax Appeals

Regular readers of our Minnesota Commercial Property Tax Appeals Blog undoubtedly recall we recently published the first half of “Minnesota’s Unequal Protection Under the Law.” In it, we dove into the case of a Martin County Walmart where its value is assessed at a rate 21 times greater than the Kmart big-box store about a mile away,

Attorneys for Walmart are challenging the disparity in valuation rates, arguing that the stark imbalance violates the 14th amendment to the U.S. Constitution and the right to equal protection under the law.

The case has been pushed all the way to the Minnesota Supreme Court.

Dark store comparison

In the previous post, other retail chains, including Target, Home Depot, Lowe’s and Menards have also challenged unfair commercial property tax assessments in Minnesota and other states. The retailers argue that a fair and equal application of the law is found in a “dark store” comparison.

The dark store comparison is straightforward: properties should be valued at what they would bring on the open market.

For instance, if owners of a Best Buy want to relocate, they will put their property up for sale. The value of the building and lot are not determined by how much electronic gear was sold at the Best Buy. It is determined by the market, i.e., what a willing buyer will pay for it being “prudently motivated.”.

The dark-store argument gained momentum when the Great Recession roiled the nation, resulting in the closure of companies such as Sears, Herberger’s and Toys ‘R’ Us.

Rarified air

As the Star Tribune noted, “Walmart’s approach in Minnesota seems to be an anomaly.”

With its argument rooted in the equal protection clause of the 14th amendment, it moves its challenge to unfair valuations out of the tax court. Retailers’ attorneys say the tax court has for years rubberstamped the unequal commercial property tax assessment rates.

A glance at any Minnesota Tax Court decision regarding big box retailers during the past three years confirms the suspicion that hostility toward the taxpayer itself has substituted for the logic of the “actual sale prices” paid for their real estate.

The tax court’s peculiar-legally anomalous-declaration that sales no longer matter when determining the market value of big box stores speaks volumes when one pauses long enough to consider what is being declared to be “true.” As anyone licensed to appraise real property knows, such declaration is devoid of substance but drenched in finality.

Not a wise combination to allow in any administrative tribunal charged with following market sales not disdaining them altogether under the guise of “being the final arbiter of the tax laws of the state of Minnesota.”

Fairmont challenge

With the Fairmont Walmart store, an attorney for Martin County argued in district court that state law (Chapter 278) meets the due process standard and that it allows taxpayers to challenge assessments.

An attorney for Walmart countered that the privileges and immunities afforded all U.S. citizens under the Equal Protection Clause of the 14th Amendment, meant the taxing authorities “had no right” to infringe upon Walmart’s “right to equal treatment” in the uniform administration of the overall property tax levy.

Because Chapter 278 is confined to assessments done in good faith—without the on-going disparate treatment evidenced by, and resulting from, the intentional discrimination demonstrated by the Martin County assessor’s repeated actions—the Minnesota Tax Court “has no jurisdiction to consider these constitutional claims,” and

Chapter 278 itself cannot be made a bar to a constitutional violation perpetuated against Walmart year-after-year.

The case has moved to the Minnesota Supreme Court. Oral Arguments, set for March 1, 2021, are open to anyone capable of witnessing history via a link to the Minnesota Supreme Court Website!

We will update readers immediately after the oral argument; then again when the high court delivers a decision that might just alter the “process by which commercial property tax assessments are arrived at” in Minnesota: And any place else where assessors may single out a major taxpayer for “disparate treatment” in what is presumed to be the uniform practice of assessing real property based on what it sells for—not what an ambitious county attorney can get away with in front of an agency primed to do his bidding at the expense of appraisal principles altogether.

Stay tuned. It is finally becoming hot in the kitchen.