Let’s Talk About Tax

Commercial property taxpayers had an eventful year at the Minnesota Tax Court, which handed down several taxpayer wins but also several notable losses. As we reach the end of 2025, we take a moment to look back on some of this year’s biggest valuation decisions in the commercial property tax space.

Diamond Lake Road Industrial Owner, LLC v. County of Hennepin (Case No. 27-CV-22-12786, 4/22/25)

This case concerned a single-tenant distribution warehouse located in Rogers. Three months before the valuation date, the property sold for $27.3 million. At the time of the sale, the buyer knew that the property would become vacant shortly thereafter, which the County argued rendered the property “effectively vacant” when it sold. Because property in Minnesota must be assessed based on its “fee simple” value, the County argued the subject property must be assessed as if it was occupied at “market” levels. The County therefore argued in favor of a large upward adjustment to the sale price based on the theory that the property sold at a below market level of occupancy, and it valued the property at $34.8 million. The taxpayer’s expert disagreed that any upward adjustment was required and valued the property at $28 million based heavily on the sale price. The Court rejected the County’s argument, finding that the property would likely “perform over the long-term at market levels” of occupancy, and reiterated long-standing case law holding that although a recent property sale is not “conclusive” of value, it “may be one of the most important elements to be considered.” 

Key Takeaway: A recent sale of the subject property is compelling evidence of taxable value, even if the property is vacant at the time of sale.

Macy’s Retail Holdings, LLC v. County of Hennepin (Case Nos. 27-CV-22-6000 & 27-CV-23-4809, 7/10/25) 

Macy’s urged the Tax Court to conclude that the highest and best use of its 31-year-old anchor department store in the Edina Southdale Center was for redevelopment because there was no market for the sale or lease of the property to a new user for continued use as a department store. The County argued that because the subject property was currently operated as a Macy’s, the property’s highest and best use was for continued use as a department store. Although describing it as a “close call,” the Court ultimately agreed with the County, because the Macy’s representative did not testify that the property’s location was no longer viable as a department store. However, due to the lack of recent comparable sales or leases of similar department stores, the Court valued the property relying entirely on the cost approach, despite acknowledging that using the cost approach was “not ideal for older buildings.” This resulted in the Court’s increasing the subject property’s assessed value by several million dollars for each tax year.

Key Takeaway: When comparable sales or leases are unavailable for owner-occupied retail properties, taxpayers should be prepared to address the limitations of the cost approach and present compelling evidence for alternative valuation methods. (*Note: a decision denying Macy’s motion to amend this decision was issued Dec. 4, 2025. As of the date of publication, the deadline to appeal that decision to the Minnesota Supreme Court had not yet expired.)

Abbott Laboratories, Inc. v. County of Hennepin (Case No. 27-CV-23-4032, 8/19/2025)

The County assessed Abbott’s Plymouth office and laboratory/production space, plus a negligible amount of warehouse space, at $38.5 million. While Abbott’s appraiser valued the property at $33.7 million, the County’s appraiser valued it at $49.5 million. The Tax Court relied primarily on Abbott’s sales comparison approach, which considered comparable sales of large single-occupant facilities comprised primarily of office space similar to the subject. The Tax Court rejected the County’s analysis, finding that it improperly relied on sales, leases and costs for distribution warehouses that did not account for the subject’s large amount of office space or that were located in dissimilar submarkets.

Key Takeaway: All three valuation approaches require appraisers to consider data of truly comparable properties. Relying on data relating to dissimilar properties undermines an appraisal’s credibility.

JPMC 2018-MINN SS TRA, LLC v. County of Hennepin (Case Nos. 27-CV-18-06406, 27-CV-18-12499 & 27-CV-20-06876, 10/17/2025)

This case concerns the proper method for isolating real estate value from business value when assessing the downtown Minneapolis Hilton hotel. Petitioner’s expert used the Parsing Income Method to conclude with values ranging from $77.5 to $92.9 million. The County’s expert used the Management Fee Approach to conclude with values ranging from $133.7 to $149.2 million. These approaches apply different methods for removing a hotel’s business value in order to isolate its real estate value. Although many hotel buyers use the Management Fee Approach, the Tax Court recognized that buyers are typically buying an operating hotel and not “hotel real estate only.”  The Tax Court concluded that the Management Fee Approach failed to adequately remove all of the business value, and that the Parsing Income Method was more appropriate. Accordingly, the Tax Court largely adopted the Petitioner’s analysis to arrive at values ranging from $88.24 to $98.46 million.

 Key Takeaway: For property tax purposes, the Parsing Income Method more accurately removes business value and isolates real estate value than the Management Fee Approach. (*Note: at the time of publication, the deadline to appeal this decision to the Minnesota Supreme Court had not yet expired.)

Walmart, Inc. (#1864) v. County of Hennepin (Case No. 27-CV-24-4367, 10/20/2025)

Walmart challenged the County’s $11.8 million assessment of its Brooklyn Park store and introduced an appraisal valuing the property at $7.9 million. The County did not offer its own independent appraisal but instead relied only on a review report critiquing Walmart’s appraisal. The Tax Court agreed with Walmart’s appraiser on almost every issue, concluding: (i) Walmart’s deductions for obsolescence and depreciation in the cost approach were sufficiently supported; (ii) all but one of Walmart’s comparable sales were reliable; and (iii) Walmart’s income approach credibly considered actual leases of comparable big-box stores. Accordingly, the Court lowered the assessment to Walmart’s proposed valuation of $7.9 million.

Key Takeaway: A review report may be insufficient to counter the taxpayer’s well-supported appraisal. (*Note: at the time of publication, the deadline to appeal this decision to the Minnesota Supreme Court had not yet expired.)