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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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President Trump Signs Executive Order Deferring Certain Payroll Tax Obligations Through December 2020

By: Amanda Wilson & Ferran Arimon

On Saturday, August 8, President Trump enacted four executive orders after Democrats and the White House were unable to reach an agreement on a new stimulus bill last week. Among the four executive orders, the President included a payroll tax deferral. The relevant order states as follows:

To that end, today I am directing the Secretary of the Treasury to use his authority to defer certain payroll tax obligations with respect to the American workers most in need. This modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most.

The order calls for deferral of the employee portion of payroll taxes, 6.2% for Social Security and 1.45% for Medicare, for workers making less than $100,000 a year through the rest of 2020. Any amount deferred pursuant to the implementation of this order may be deferred without any penalties, interest, additional amount or addition to the tax.

However, as it stands, employees will still owe the deferred taxes at the end of the year since President Trump cannot eliminate the tax liability without legislation. In an effort to address the concerns regarding payment at the end of the year, the following language was also included in the White House’s Memorandum on Deferring Payroll Tax Obligations:

The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.

President Trump has stated that if reelected he plans to forgive these deferred taxes and make permanent cuts to payroll taxes. Again, though, this requires legislative action. If the President is not reelected, workers will presumably be required to pay these taxes at the end of the year.

The other three actions signed on Saturday include as much as $400 in enhanced unemployment benefits, an executive order on assistance to renters and homeowners and a memorandum further deferring student loan payments through December 31, 2020.

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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