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Wal-Mart Real Estate Business Trust v. County of Anoka

Supreme Court of Minnesota

July 17, 2019

Wal-Mart Real Estate Business Trust, Relator,
v.
County of Anoka, Respondent.

         Tax Court Office of Appellate Courts

          Mark R. Bradford, Christine Hinrichs, Bassford Remele, P.A., Minneapolis, Minnesota; and Robert A. Hill, Robert Hill Law, Ltd., Wayzata, Minnesota, for relator.

          Anthony C. Palumbo, Anoka County Attorney, Jason J. Stover, Christine V. Carney, Assistant County Attorneys, Anoka, Minnesota, for respondent.

         SYLLABUS

         1. Retail-store properties that lease space within the store to vestibule occupants are income-producing properties under the mandatory-disclosure provision of Minnesota Statutes section 278.05, subdivision 6(a) (2018).

         2. Because the property owner failed to produce the information required by Minnesota Statutes section 278.05, subdivision 6(a), by August 1 of the taxes-payable year, the tax court correctly dismissed the owner's petitions.

         Affirmed.

         Considered and decided by the court without oral argument.

          OPINION

          CHUTICH, JUSTICE.

         In this consolidated tax appeal we must determine whether retail stores that permit franchisees to operate their businesses inside the retail store in exchange for rent are "income-producing properties" within the meaning of the tax statute's mandatory-disclosure provision. See Minn. Stat. § 278.05, subd. 6(a) (2018). When an owner of real property challenges the county assessor's valuation of a property that is "income-producing," the owner must disclose certain information by August 1 of the taxes-payable year. Id. Failure to disclose this information by the deadline results in dismissal of the taxpayer's petition, unless an exception applies. Id., subd. 6(b).

         Relator Wal-Mart Real Estate Business Trust ("Trust") owns three parcels of land in Anoka County ("County"). Each parcel has a Walmart retail store, operated by Walmart, Inc. ("Walmart"). The Trust is a wholly-owned subsidiary of Walmart.

         The Trust filed petitions challenging the County's assessment of the three parcels. The tax court dismissed the petitions, however, because the Trust failed to provide the information required by the mandatory-disclosure provision before the deadline. The Trust filed timely certiorari appeals from the tax court's orders dismissing the petitions. It claims that it is not subject to the mandatory-disclosure rule because the Walmart stores are not "income-producing." We consolidated the three appeals for briefing and non-oral consideration. Because we agree with the tax court that the properties are "income-producing" and that the Trust's disclosures were inadequate, we affirm the dismissal of the petitions.

         FACTS

         Three of the Trust's retail properties are at issue here: Ball Road, Blaine ("Ball Road store"), Ulysses Street, Blaine ("Ulysses Street store"), and University Avenue, Fridley ("University Avenue store"). Although the Trust owns all three parcels, it receives no income tied to the properties because retail income is kept by Walmart and recorded as ordinary business income. Walmart does not pay rent to the Trust.

         Walmart has contracted with several "vestibule businesses" to operate within its stores. Among the three properties at issue, Walmart has vestibule arrangements with four entities: Twin Towers Trading Site Management, LLC, a franchisor of Subway sandwich restaurants; Da-Vi Nails Salon and Spa, LLC, which operates nail salons; Seva Beauty, LLC, which operates beauty salons and spas; and Regis Corporation, which operates hair salons. The Ball Road store has a Subway, a Da-Vi Nails salon, and a Seva Beauty salon. The Ulysses Street store has a Subway and a Regis hair salon. The Fridley store has a Subway.

         These vestibule arrangements are governed by generally applicable master lease agreements along with site-specific attachments to the master agreement. The Trust is not a party to any of these agreements. The master lease agreements are negotiated by Walmart on a national scale and include, among other terms, promises by Walmart to deliver possession of the premises to the vestibule occupant in exchange for promises by that occupant to pay rent. The site-specific attachments provide further terms, such as a description of the leased ...


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