Minnesota Tax Court Case Update: The New Era Begins

07/11/2013 / Timothy A. Rye

The Minnesota Tax Court has two new judges and is awaiting a third. While we wait to find out who will complete the judicial battery at the Tax Court, we have been monitoring some of the early decisions brought forth by the two newest judges: Chief Judge Bradford S. Delapena and Judge Joanna H. Turner. Chief Judge Delapena’s early decisions indicate a desire to preserve a challenge rather than dismiss without a chance to present evidence; and Judge Turner preserves a resolution already in place. Here we have three tax court cases and one court of appeals decision: 1) argues for a motion in limine to exclude appraisal reports that use the larger-parcel appraisal theory; 2) argues for a dismissal of many because of non-payment of taxes by only a few; 3) a logical ruling regarding the all-too-common duplicate filing; and 4) the court of appeals reminds us of the balance between appraisal science, art, and judicial valuation decisions.

Larger-Parcel Appraisal Theory
Blandin Paper Co. v. County of Aitkin
, 2013 WL 2948153 (May 23, 2013).
Chief Judge: Bradford S. Delapena

Blandin owns approximately 4,555 parcels of property across four counties: approximately 3,800 in Itasca County; 516 in St. Louis County; 126 in Aitkin County; and 113 in Koochiching County. Some of the parcels are contiguous and others are not, but Blandin operates all of the parcels as a single economic unit. The properties are a large-scale forest, managed and used to support Blandin’s Grand Rapids Mill. Blandin submitted appraisals for 2010 and 2011 for the subject properties. The valuation in the Blandin’s appraisals was based on the larger-parcel appraisal method where the parcels are valued as a whole rather than as 4,555 individual parcels.

The Counties motioned to exclude Blandin's 2010 and 2011 appraisals from trial on the basis that the larger-parcel appraisal method is unlawful for property tax evaluation; that by not evaluating each individual parcel they are not estimating the market value of those parcels; that the larger-parcel appraisal method violates the Uniformity Clause of the Minnesota Constitution and Equal Protection Clause of the United States; and that Minnesota law per se prohibits any larger-parcel method for determining market value in tax cases because that method involves "bulking."

The tax court denies the Counties’ motion finding that Blandin's appraisals analyzed the steps in developing a value of the market to marketability, from marketability to highest and best use, and from highest and best use to the valuation method. In doing so, Blandin's appraisals determined the appropriate valuation theory is the larger-parcel appraisal method. The court found that based on the evidence on record at the time the Counties had not sufficiently supported the exclusion of the Blandin’s appraisals and there was sufficient evidence to include the appraisals at trial.

The Tax Court does not hold that the larger-parcel appraisal method is the appropriate approach or only approach for the subject properties, rather it notes that it will hear evidence from both sides at trial about the appropriate valuation theory for the 4,555 subject parcels.

If the case makes it to trial an eventual ruling on the larger-parcel appraisal method may have significant ramifications for owners of significant amounts of contiguous real estate. We will continue to monitor this case for updates.

(Partial) Dismissal for Non-Payment of Taxes
Bayport Mainstreet Holdings LLC v. County of Washington, 2013 WL 1487919 (April 8, 2013)
Chief Judge: Bradford S. Delapena

Bayport Mainstreet Holdings filed a petition challenging the Pay 2010 taxes on 50 separate parcels. The parcels consist of single family residential lots. The property taxes were paid on 45 of the 50 lots, but failed to pay taxes on the 5 remaining parcels. Washington County automatically dismissed all 50 parcels for non-payment of taxes under Minn. Stat. § 278.03, subd. 1, and Bayport brought a motion to vacate the dismissal and reinstate the petition for the 45 parcels on which the taxes were timely paid.

The Tax Court holds “that the automatic dismissal [for non-payment of taxes] under Minn. Stat. § 278.03, subd. 1, does not apply to parcels as to which taxes have been fully and timely paid as required, simply because those parcels were included in a single petition brought with respect to multiple parcels.” As a result, only the 5 parcels which had not had the taxes paid in a timely manner were dismissed.

Duplicate Filing:
Cole CN Rochester MN LLC v. County of Olmsted, 2013 WL 2948112 (May 23, 2013).
Judge: Joanna H. Turner

Cole CN Rochester MN LLC challenged the assessments for the January 2, 2009 assessment. However, the county had already settled a petition on the same property with Midwest Theatres Corporation, Cole CN’s Lessee. Cole CN had an opportunity to participate in the proceedings and because there can only be one judgment in a property tax proceeding, the court dismissed Cole CN’s duplicate petition.  

Estate Valuation Dispute
In re Estate of Wingen, 2013 WL 2460190 (June 10, 2013)
Minnesota Court of Appeals

Here is an unpublished Court of Appeals decision bearing on a real estate valuation matter for estate tax purposes; and while not a decision from the Minnesota Tax Court, it is a useful update on valuation issues in court.

In this case the personal representative (Respondent) and a surviving devisee (Appellant) were disputing the valuation used in the administration of the estate. In the final account of the estate the Respondent used the market value from the Blue Earth County assessor and the IRS accepted the assessor’s valuation. Now the Appellant challenges the valuation alleging that the estate had not been equally distributed. At trial the Appellant and the Respondent each presented new appraisals. The County assessor’s value was upheld because it was not attacked as flawed and the IRS had accepted the valuation. The Respondent’s appraisal used the incorrect acreage for one of the parcels and the Appellant's appraisal did not use the date of death. The court concludes by reminding us of the underlying tension between science and judgment in appraisal when it states, "that real estate appraisal 'is at best an imprecise art,' and a district court asked to determine the value of real estate 'brings its own expertise and judgment to the hearing, and its valuation need not be the same as that of any particular expert as long as it is within permissible limits and has meaningful and adequate evidentiary support.'" In re Estate of Wingen, 2013 WL 2460190 (quoting Montgomery Ward & Co. v. County of Hennepin, 482 N.W.2d 785, 791 (Minn. 1992)).