Court Office of Appellate Courts
A. Van Cleve, Timothy A. Rye, Larkin Hoffman Daly &
Lindgren Ltd., Minneapolis, Minnesota, for relator.
Michael O. Freeman, Hennepin County Attorney, Sara L.
Bruggeman, Assistant County Attorney, Minneapolis, Minnesota,
Concession fees paid for the use of airport property are
subject to the mandatory-disclosure requirements of Minn.
Stat. § 278.05, subd. 6 (2018).
Minnesota Statutes § 278.05, subd. 6(a), requires that
the mandatory disclosures be made by the petitioner, not by a
appeal from the Minnesota Tax Court, we consider whether the
tax court erred in dismissing Avis Budget Car Rental's
property tax petition for failure to disclose certain
concession fee information as required by Minn. Stat. §
278.05, subd. 6 (2018). We conclude that it did not, and thus
facts of this case are largely undisputed. Avis Budget Car
Rental LLC (Avis) leases space within the Minneapolis-Saint
Paul International Airport, which is owned and operated by
the Metropolitan Airports Commission (MAC). The economic
arrangements between MAC and Avis are governed by what the
parties titled a "General Terms and Conditions Lease
Agreement" (Lease Agreement) and by Supplemental Lease
Agreements. Pursuant to the Lease Agreement, and for
each contract year, the companies make payments to MAC as
either "concession fees" or as a "minimum
annual guarantee," whichever is greater. The concession
fee equals 10 percent of the car-rental companies' gross
revenues from business authorized by the Lease Agreement. The
minimum annual guarantee is the greater of 85 percent of the
previous year's concession fee or the first-year bid
amount, which was $4, 624, 512 for Avis. Pursuant to the
Supplemental Lease Agreements, Avis pays rent for the use of
identified space on the leased property.
itself is exempt from property taxation under Minn. Stat.
§ 360.035 (2018). But lessees of property at the Airport
are assessed property tax "in the same amount and to the
same extent as though the lessee or user was the owner of
such property." Minn. Stat. § 272.01, subd. 2(a)
(2018); see also Nw. Airlines, Inc. v. Cty. of
Hennepin, 632 N.W.2d 216, 220-21 (Minn. 2001)
(concluding that tax provisions "shift the real property
tax liability to relator as a personal property tax in an
amount MAC would have had to pay had MAC not been an exempt
property owner"). In other words, the lessee-Avis-steps
into the owner's-MAC's-shoes for tax purposes.
County assessed the value of Avis's property as of
January 2, 2016, for taxes payable in 2017. Avis filed a
petition challenging that valuation. Because the property is
income-producing, Avis is subject to the property tax
mandatory-disclosure provision, Minn. Stat. § 278.05,
subd. 6, which requires that petitioners disclose certain
income information by August 1 of the taxes-payable year.
County provided Avis with a compliance checklist, which Avis
returned along with its disclosure. Avis represented in its
disclosure that it had a lease agreement by which it was
paying base rent of $30.46 per square foot on 459, 453 square
feet. In a Lease Abstract Report attached to a later
affidavit, Avis represented that the $30.46 base rent number
had been calculated as the sum of three numbers: "Mag
1" (minimum annual guarantee); "Overflow
Parking"; and "Rent Exp
Avis disclosed base rent calculations that were based, in
part, on the minimum annual guarantee. It did not disclose
that, pursuant to the Lease Agreement, the fee it was obliged
to pay was the higher of the concession fee-a percentage of
gross revenue-and the minimum annual guarantee. And it did
not disclose whether the actual payments to MAC were based on
the fee or the guarantee.
of the petition process, Hennepin County received information
from MAC regarding the sales revenue, percentage rent,
minimum annual guarantees, and overall rent paid for 2014 and
2015 for MAC's car-rental lessees, including Avis. MAC
provided this information as part of an informal disclosure
that it makes to Hennepin County on an annual basis. In other
words, MAC disclosed information that Avis did not. Avis
acknowledges that it did not know about MAC's disclosure
when it submitted its own disclosures.
County moved to dismiss Avis's petition for failure to
comply with the mandatory-disclosure requirements of section
278.05, subdivision 6(a). The tax court found that the
concession fees were rent, and were therefore subject to
mandatory disclosure. It also found that Avis, not MAC, was
required to make the disclosure under subdivision 6(a), which
it had not done. Based on these findings, the tax court
concluded that Avis had failed to comply with the
mandatory-disclosure requirements and that dismissal was
required. This appeal followed.
review of any final order . . . may be had on the ground that
the Tax Court was without jurisdiction, that the order of the
Tax Court was not justified by the evidence or was not in
conformity with law, or that the Tax Court committed any
other error of law." Minn. Stat. § 271.10, subd. 1
(2018). The tax court's application of law is reviewed de
novo, Langer v. Comm'r of Revenue, 773 N.W.2d
77, 80 (Minn. 2009), and the tax court's factual findings
are reviewed for clear error, Antonello v. Comm'r of
Revenue, 884 N.W.2d 640, 647 (Minn. 2016).
contends that the tax court erred in dismissing its petition
for two reasons. First, it asserts that disclosure of the
concession fee information was not required by the
mandatory-disclosure provision. Second, it argues that, even
if disclosure of the concession fee was mandatory, the
information furnished by MAC to Hennepin County satisfied
that requirement. We discuss each issue in turn.
Legislature's charge to property assessors is "to
consider and give due weight to every element and factor
affecting the market value [of properties]." Minn. Stat.
§ 273.12 (2018). To aid the assessors, Minnesota law
requires that tax petitioners contesting the valuation of
income-producing properties disclose six categories of
information, as itemized in Minn. Stat. § 278.05, subd.
6. Failure to comply with the disclosure requirements
"shall result in the dismissal of the petition."
Minn. Stat. § 278.05, subd. 6(b). Relevant here,
subdivision 6 requires disclosure of year-end financial
statements, rent rolls and identification of lease agreements
(including base rent and square footage leased), and
anticipated income and expenses relative to the property.
argues that the information-disclosure requirements in
subdivision 6 did not require that it disclose concession
fees paid under the Lease Agreement. The company's theory
is that such fees are not income attributable to the
property. The fees are paid, Avis contends, not as rent for
property, but solely for the right to conduct business at the
Airport. That is why they are denominated as "concession
fees," while payments made on a square foot basis
(detailed in the Supplemental Lease Agreements) are called
payment may be labeled is not irrelevant, but it is not
dispositive. As we said recently, the question under the
mandatory-disclosure rule is whether the property
"generates income." See Wal-Mart Real Estate
Bus. Tr. v. Cty. of Anoka, 931 N.W.2d 382, 388 (Minn.
2019). Thus, for example, in Wal-Mart, we decided
that properties were generating disclosable income through
what the property owner considered to be nationwide
"licensing" agreements for "vestibule"
viewing the agreements between Avis and MAC in their
entirety, these concession fees do not escape the
mandatory-disclosure provision's sweep. The fees were
rent or, at least, income that needed to be disclosed under
the statute, whether in the required financial statements, as
rent information, or as anticipated income. See
Minn. Stat. § 278.05, subd. 6(a). This is so for two
the relevant agreements between MAC and Avis show that
amounts paid as concession fees or as the minimum annual
guarantee are income attributable to the property. The very
name of the document that establishes the concession fee and
the minimum annual guarantee shows the connection; it is
entitled "General Terms and Conditions Lease
Agreement." The title ...