TagDisney

Disney Tax Ruling & Property Valuation [Lowndes Legal Talk]

Tune in to Lowndes Legal Talk featuring attorneys Jackie Bozzuto and Brendan Lynch discussing the closely-followed case, Singh vs. Walt Disney Parks and Resorts, in which the court ruled that the application of Rushmore was illegal as applied in the 2015 assessment of Disney’s Yacht & Beach Club property. They also address what the decision could mean for appraisers who continue to employ Rushmore to value hotel and resort properties in the state.

Lowndes Legal Talk is a video and podcast series designed to provide you with perspectives on the legal and business issues affecting you.

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Appellate Court Reconsiders Decision in Disney Property Tax Appeal

By: Brendan Lynch & Jennifer R. Dixon

On Friday, the Fifth District Court of Appeal issued a revised opinion in a closely-followed case, Singh vs. Walt Disney Parks and Resorts, a property tax appeal involving the 2015 assessment of Disney’s Yacht & Beach Club property. In its prior opinion, issued in June, the three-judge panel held that the valuation method employed by the Orange County Property Appraiser, a highly-scrutinized method known as “Rushmore,” was illegal in Florida because it failed to exclude the value of nontaxable, intangible business value from the appraisal. The sweeping conclusion by the appellate court—that Rushmore was patently illegal in Florida—promised to be a death knell to the appraisal method in the state, as previously reported.

Upon rehearing, the appellate court rolled back its categorical rejection of Rushmore—instead ruling that the application of Rushmore was illegal as applied in the Disney case. By limiting its analysis to the Disney case, the revised decision better aligns with the record on appeal and the relief the parties actually sought. Although amicus curiae appearing in favor of Disney had suggested that Rushmore be rejected globally, neither of the parties to the appeal requested such relief.

The revised decision does not signal that Rushmore will be widely adopted statewide. Remaining in the opinion is legal analysis that discusses the infirmities in the Rushmore method, and how it may not pass constitutional muster. Appraisers who continue to employ Rushmore to value hotel and resort properties in the state are certain to face challenges and litigation based upon this analysis.

Furthermore, the revised decision did not alter the court’s initial analysis related to ancillary income at resort-style hotels, which was the other significant result. The Orange County Property Appraiser is required to determine ancillary income (non-room income) by evaluating what the space would be rented for to a third-party, not based on how much revenue that particular space (restaurant; spa; banquet; etc.) brought in throughout a given year.

The revised appellate court decision can be found here.

Lowndes attorneys Jennifer Dixon and Brendan Lynch authored an amicus brief that was submitted in the case on behalf of the Central Florida Hotel and Lodging Association. If you have any questions about this case, or questions about your property taxes in Florida, please reach out to one of authors or to the members of our Property Tax Group.

Florida 5th DCA Says No More to Rushmore

By: Jennifer Dixon & Brendan Lynch

In a decision that will potentially have far-reaching implications in the property tax world, Florida’s Fifth District Court of Appeal issued an opinion today in Singh vs. Walt Disney Parks and Resorts, a tax appeal involving the 2015 assessment of Disney’s Yacht & Beach Club property. Although the appellate court technically reversed the lower court’s assessment of property value based on a lack of evidence, it ultimately agreed with Disney and the lower court and absolutely repudiated the challenged assessment methods previously employed by the Orange County Property Appraiser (OCPA) in its valuation of resort hotel properties.

Specifically, the appellate court concluded that the method used by the OCPA (the so-called Rushmore method) “violates Florida law because it does not remove the nontaxable, intangible business value from an assessment.” The controversial Rushmore method has been used throughout the country by a number of assessor’s offices, but has been judicially rejected in other states, including California. Today’s decision establishes the demise of the Rushmore method in the State of Florida.

In a time of great upheaval for the hospitality industry due to the financial impacts felt by the pandemic, this decision may bring welcome relief for those experiencing heavy property tax burdens that are in part based on intangible business value.

The OCPA has been instructed by the appellate court to revise its assessment on the Yacht & Beach Club (and, ultimately, for all hotels that have significant ancillary income) by using an income approach to value that compares rental rates for similarly-situated properties. For example, income from a restaurant or retail site on a hotel’s property should not be attributable to the net operating income of the hotel for property tax purposes. Instead a rental rate that would be attributable to that restaurant or retail space does contribute to the overall net operating income for the hotel.

In almost all circumstances, this rental rate revenue will significantly lower the net operating income used in such an income approach to value.

The full 19-page decision can be found here.

Lowndes attorneys Jennifer Dixon and Brendan Lynch authored an amicus brief that was submitted in the case on behalf of the Central Florida Hotel and Lodging Association. If you have any questions about this case, or questions about your property taxes in Florida, please reach out to one of authors or to the members of our Property Taxes Group.

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