The Property Tax “Aha!” Moment for Business Property Owners

By Robert A. Hill, property tax attorney and president, Robert Hill Law, Ltd.

You and your team pay attention to the sale of business properties near to or adjacent to your own properties. You easily find the sale price and likely will calculate the square foot price to compare to your own property’s market valuation.

It’s possible you may have even consider the tax assessor’s valuation of your property, but sat passively in frustration in the fact that the marketplace facts do not mesh with the assessed valuation.

The “Aha!” moment occurs when you hear marketplace stories of property owners or competitors that just saved $5 million in their property taxes. When one bears witness to peers having success that dramatically affects their bottom line year-after-year, curiosity is piqued.

I would suggest to you this: Pay attention to the market of similar properties. Watch for sales of those properties and watch closely those businesses geographically near to your property or very much like the market location of your property. When you see like-property sales that are less than your assessed value per foot, raise that red flag. Understand that good property tax attorneys exist that can quickly drive a compromise that directly affects your bottom line. I welcome your call/email to discuss your property tax red flags. We offer a software solution that simply and quickly can validate your concerns with tangible market facts.

Property Tax Reduction Case Studies:

  • Big Box Home Hardware Retailer – $9 million in savings over three years
  • Big Box Pharmacy Retailer – $2 million in savings over four years
  • Minnesota-based Food Retailer – $3.7 million in savings over three years
  • Well-known Food Brand – $250,000 in annual savings

Author Bio:

Robert “Bob” Hill has, for over three decades, successfully represented major companies in property tax appeals through both negotiations with tax assessors and litigation. His dedication to his clients has helped businesses throughout the United States save tens of millions in property taxes. Mr. Hill has earned Martindale-Hubbell’s highest peer review rating of AV-Preeminent for his legal knowledge, communication skills, high ethical standards, and his representation of clients in significant property tax cases.

Seeing a Trend of Buildings being Sold for Less Than Your Property’s Assessed Value?

By Robert A. Hill, property tax attorney and president, Robert Hill Law, Ltd.

As an owner of one or more business properties, you or your team are likely watching the sales of buildings near to or adjacent to your property. I’d call that a “best practice” in business property ownership. But, a “red flag” is the sale of buildings near your property that don’t match the property tax assessor’s valuation of your property.

If you sold your property today and cannot get payment that matches its assessed value, you’re paying too much in property tax. Why not keep that money to hire those needed employees or begin that business-transforming initiative you believe necessary to remain competitive?

Where do you start? Find a property tax attorney team that can help you quickly and efficiently collect the hard facts to ensure you have a case. Look for a team that is scalable and prides itself in compromise, instead of costly litigation.

We can start you and I’d welcome your call. We’ve built a proprietary software system that quickly and efficiently provides the details to determine whether your perceptions are valid and whether a case is to be made. Since we work strictly on a contingency fee basis, there is no risk to you – only the reward that comes from a substantially reduced tax assessment in line with market principles.

Put a team of relentless advocates to work for you.

Property Tax Reduction Case Studies:

  • Big Box Home Hardware Retailer – $9 million in savings over three years
  • Big Box Pharmacy Retailer – $2 million in savings over four years
  • Minnesota-based Food Retailer – $3.7 million in savings over three years
  • Well-known Food Brand – $250,000 in annual savings

Author Bio:

Robert “Bob” Hill has, for over three decades, successfully represented major companies in property tax appeals through both negotiations with tax assessors and litigation. His dedication to his clients has helped businesses throughout the United States save tens of millions in property taxes. Mr. Hill has earned Martindale-Hubbell’s highest peer review rating of AV-Preeminent for his legal knowledge, communication skills, high ethical standards, and his representation of clients in significant property tax cases.

Now Automated – Property Tax Assessments for Business Property Owners

By Robert A. Hill, property tax attorney and president, Robert Hill Law, Ltd.

Your business property has just been assessed and marketplace knowledge tells you this tax assessment just doesn’t seem right. What to do next?

You need additional facts and you need them quickly. You want a simple means to efficiently find hard facts and determine whether there’s the leverage to save your business hundreds of thousands – or millions – of dollars over the next few years.

We’ve built a proprietary software that offers an unequaled property tax assessment analysis. It’s fast (often completed in minutes), collecting and presenting the facts to prepare a case against the assessor’s valuation. No other property tax firm in the United States has built anything like it.

After a short conversation, we only require a copy of your property tax statement. Results are often tabulated within minutes. To engage our team is simple. Contact us by phone at 952-426-7373, or via our Contact Form. Since we work strictly on a contingency fee basis, there is no risk to you – only the reward that comes from a substantially reduced tax assessment in line with market principles. Put a team of relentless advocates to work for you.

Property Tax Reduction Case Studies:

  • Big Box Home Hardware Retailer – $9 million in savings over three years
  • Big Box Pharmacy Retailer – $2 million in savings over four years
  • Minnesota-based Food Retailer – $3.7 million in savings over three years
  • Well-known Food Brand – $250,000 in annual savings

bobAuthor Bio:

Robert “Bob” Hill has, for over three decades, successfully represented major companies in property tax appeals through both negotiations with tax assessors and litigation. His dedication to his clients has helped businesses throughout the United States save tens of millions in property taxes. Mr. Hill has earned Martindale-Hubbell’s highest peer review rating of AV-Preeminent for his legal knowledge, communication skills, high ethical standards, and his representation of clients in significant property tax cases.

Talking Points – Sale-Leaseback & Market Value

In last month’s article, I attempted to show practitioners how to address the legal issues associated with proving that saleleaseback transactions cannot demonstrate the actual market value of the underlying real estate. Regardless of the case law, however, most assessors still want to consider such transactions as being relevant to the assessments of real estate encumbered by lease payments which are typically fixed to provide for amortization of the purchase price over the term of the lease plus a specified return rate on the buyer’s investment. To educate assessors as to why they must reject such sales, it is wise to arm yourselves with talking points demonstrating various reasons why the real estate is not the only thing involved in a sale-leaseback. I have found the following points to be helpful in my practice and wanted to devote this month’s article to sharing them with my colleagues.

Seller Advantages

Converts Equity into Cash. With a saleleaseback, the seller regains use of the capital that otherwise would be tied up in property ownership; at the same time, the seller retains possession and continued use of the property for the lease term.

Improves Balance Sheet and Credit Standing. In a sale-leaseback, the seller replaces a fixed asset (the real estate) with a current asset (the cash proceeds from the sale). If the lease is classified as an operating lease, the seller’s rent obligation usually is disclosed in a footnote to the balance sheet rather than as a liability. This results in an increase in the seller’s ratio of current assets to current liabilities, which often serves as an indicator of a borrower’s ability to service its short-term debt obligations. Thus, an increased current ratio improves the seller’s position for borrowing future additional funds.

Avoid Debt Restrictions. Businesses restricted from incurring additional debt by prior loan or bond agreements may be able to circumvent these limits by using a sale-leaseback. Rent payments under a sale-leaseback usually are not considered indebtedness for such purposes, thus a business can meet its cash needs through the sale-leaseback without violating any previous agreements.

Deduction of Rental Payments. A seller’s decision to raise funds through a sale-leaseback frequently is based on substantial income tax advantages. The main tax advantage of a valid sale-leaseback is that rental payments under the lease are fully deductible. With conventional mortgage financing, a borrower deducts interest and depreciation only. The rental deduction may exceed the depreciation in three cases: if the property consists primarily of a non-depreciable asset, such as land (although land is not depreciable, rental payments for the lease of land may be deducted); if the property has appreciated in value (while depreciation deductions are limited by the cost of the property, rental deductions may equal the fair market value of the property); or if the property has been fully depreciated.

Capital Gain-Ordinary Loss Treatment. Because the property involved in a sale-leaseback generally is held for use in the seller’s trade or business, it qualifies for capital gain-ordinary loss treatment. Under Section 1231 of the Internal Revenue Code, if the property is held for the long-term holding period, gain on the sale, with some exceptions, will be taxable as long-term capital gain to the extent that the gain exceeds the losses in the same year from the sale of other Section 1231 property. However, the gain will be taxable as ordinary income to the extent of recapture income. But in the case that the sale results in a loss, it will be deductible in full as an ordinary loss to the extent the loss exceeds Section 1231 gains from the sale of other property in the same year. This can be a substantial advantage to the seller in a sale-leaseback transaction.

Buyer Advantages

Higher Return Rate. The buyer usually receives a higher rate of return in a sale-leaseback than in a conventional loan arrangement. Also, the buyer may be able to circumvent state usury laws that limit the rate of interest charged with conventional financing. In addition, at the end of the lease term, the buyer receives the benefit of any appreciation in the value of the property. Finally, the buyer can leverage the purchase with mortgage financing; this may further magnify the return rate on the cash invested.

Ownership of the Reversion. The buyer owns the reversionary interest in the property. If the seller has an option to purchase or an option to renew the lease, this may limit or postpone the time that the buyer actually realizes the profit potential. The buyer also bears the risk that the property value actually might decline over the lease term.

Built-in Tenant. Finally, in purchasing the property, the buyer has a built-in tenant, namely the seller.

By using these talking points in your discussions with assessors, you may be able to convince them that the value of the brick and mortar should be determined by actual market sales of similar properties, not the investment value of business transactions in which the value of the real estate is often not even considered – much less relied upon – by the actual market participants.

Sales Leasebacks: Are They Indicative of Market Value?

National retailers use sale-leaseback transactions to expand their businesses. In a typical sale-leaseback, a property owner sells real estate used in its business to an unrelated private investor or to an institutional investor. Simultaneously, the property is leased back to the seller for a mutually agreed-upon time period, usually 20-30 years. Lease payments typically are fixed to provide for amortization of the purchase price over the term of the lease plus a specified return rate on the buyer’s investment. The typical transaction is usually a triple-net-lease arrangement. Sale-leasebacks often include an option for the seller to renew its lease, and on occasion, repurchase the property.

The question is, are these atypical financing transactions indicative of market value for property tax assessment purposes? According to the Wisconsin Supreme Court in a case I tried years ago, the answer is a resounding no!

The Business Model

In Walgreens v. City of Madison, 752 N.W.2d 687 (Wis. 2008), the Wisconsin Supreme Court accurately described the most important aspects of the sale-leaseback business model. Under this model, the retailer identifies a prime business location in a high traffic area. The retailer then buys out the existing businesses and builds a store to fit the needs of the retailer. The retailer packages its hard and soft construction and due diligence costs, then offers investors the opportunity to purchase “certificates” representing a pro rata portion of the retailer’s overall expenses. As a part of the retailer’s lease payment to its investors, the “seller” compensates its buyer/investor for “all such financing, land acquisition, construction, development and financing costs, together with a profit margin.” Walgreens, 2008 WI 80, ¶ 6. Logically, the rent should be higher than normal because the investor is seeking to recover the original investment as well as a handsome return on its capital infusion into the retailer’s business model.

Valuing the Fee Simple Interest of the Real Estate

After establishing the business model of the sale-leaseback, the Walgreens court went on to discuss the framework for valuing the fee simple interest in the real estate under this business model. In the case in question, Walgreens pointed out the fundamental difference between real estate value and contract-derived “business investment” value – arguing that the increased value to the contractual rights associated with the leased fee estate was not a real estate but rather a contract “investment value.” Walgreens also pointed out that the duty of the assessor is to differentiate between the aspects of the contract that aren’t typical of the open real estate market. Walgreen’s argument was that the lessor’s rights in this case were contract rights associated with the leased fee estate and therefore not subject to evaluation for ad valorem property tax purposes.

Essentially, Walgreens maintained that the real property assessment should not be based on the above market rent that was paid due to its agreement with an investor. These conditions were not normal in the open market for real estate and didn’t reflect the market value of the fee simple absolute real estate at-issue. The high court agreed, stating that assessors should examine the financing terms in order to determine if the sale price reflects the market value of the real estate standing alone in the open market. The court continued, “If we were to expand the law in the direction the city requests, property assessments would in essence become business value assessments.” Id. ¶65.

The Wisconsin Supreme Court’s analysis in Walgreens applies equally to the valuation of all real estate subject to a sale-leaseback. In fact, Standard 5.9 of the International Association of Assessing Officers’ “Standard on Verification and Adjustment of Sales” provides: “Sales involving leasebacks are generally invalid because the sale price is unlikely to represent the market value of the property.” Hence, if your property is the subject of a sale-leaseback, you must make sure your local assessor is made aware of the terms and conditions of the business transaction. If you fail to do so, the assessor’s temptation to commingle the contract rents with the market rents can – and often will – result in an assessment well above the actual market value of the “sticks & bricks.”

Money Minnesota

Minnesota Commercial Property Taxes & Valuations

There are many factors that determine the size of a Minnesota commercial property tax bill.

The most important contributing factors to a Minnesota property tax bill are:

  • the state tax rate
  • local tax levies
  • the class of property owned by a business
  • and the valuation of the property

Minnesota subjects three types of property to taxes:

  • Property owned by a nonprofit community service-oriented organization. (Class 4c(3)(ii) property is subjected to the to tax at a special rate.)
  • Seasonal residential recreational properties (cabins and small resorts.)
  • Commercial and industrial properties, including class 3 commercial, industrial, and public utility property exclusive electric generating machines and certain unmined iron ore property.

Businesses Do Not Want Overvalued Property

There’s very little that a business can do to impact tax rates or property classes, but the proper valuation of a property may result in significant tax savings that can boost the profitability of a company.

In the residential market, increased home values are generally viewed as a positive thing that boosts the net worth of a homeowner. It’s the exact opposite for businesses – a substantial overvaluation of business property can make a company less profitable because it increases the tax burden on the business.

Many tax assessments are outdated or fail to take all relevant factors into consideration. Issues such as hidden renovation costs, pollution or asbestos abatement, and building code changes are often overlooked by Minnesota property tax assessors. These factors may significantly suppress the value of a property tax bill and make a business eligible for a property tax appeal.


The Minnesota tax code is known for its complexity and exceptions, so speak with one of the property tax experts at Robert Hill Law before making any decisions on your Minnesota property tax strategy. Call us at 952-426-7373.

Energy Efficient Bulb

How Midwest Businesses Can Leverage 179D Federal Tax Deductions

Many businesses in Minnesota and throughout the Midwest have reduced costs by retrofitting and remodeling their buildings with energy efficient technology. The reduction in energy waste and smaller energy bills are highly attractive for any company’s bottom line.

Business owners are constantly looking for other ways to increase profitability by reducing costs. One often-overlooked cost savings tool is the appropriate leveraging of Section 179D energy tax benefits.

Industry experts say that only 1 percent of eligible businesses take 179D tax benefits for past projects. The 179D Federal Energy Tax Deduction can be up to $1.80 per square foot, which adds up quickly.

Properties Covered for 179D Deductions

These types of property tax deductions are available for the following types of buildings:

  • Commercial buildings of any size
  • Apartment buildings that are over 4 stories high and leased
  • Commercial renovations
  • Retrofits of government-owned buildings

Benefits are retroactive for projects placed into service between 2006 and 2014.


The tax code is known for its complexity and exceptions, so speak with one of the property tax experts at Robert Hill Law before making any decisions on your property tax strategy. Call us at 952-426-7373

Minnesota Business Tax

Minnesota business owners may decrease their tax burden through engineering-based cost segregation

Minnesota businesses, just like people, have an obligation to pay taxes. Taxes are the price we pay to live in a civilized society and pay for the great quality of live we enjoy in our state.

Here at Robert Hill Law, we believe that although businesses owners have an obligation to pay taxes, Minnesota companies are not obliged to pay more taxes than are legally due. Funds unnecessary spent on taxes can be used to reinvest in business and employ more people across the state.

One of the primary tax burdens that Minnesota businesses face are property taxes. An accurate property tax assessment is a key part making sure that your company’s profit margins aren’t being unnecessary shrunk.

Engineering-based cost segregation is a powerful method that can significantly decrease the property tax burden of a business. This type of segregation is the IRS-approved way of identifying the appropriate classification of a business’s property for the purposes of depreciation recovery.

Property Depreciation Under the MACRS

Minnesota businesses can recover the costs of income producing property through annual property tax deductions. This is done gradually through a method called depreciation.

The IRS generally classifies building costs into three types categories. Each one of these categories has a different rate of depreciation. Under the “Modified Accelerated Cost Recovery System,” real property is generally appreciated over 39 years, land improvements are depreciated over 15 years, and tangible personal property is depreciated over 5 or 7 years.

Many businesses across the state can benefit from a cost segregation study to determine whether all company property is properly classified. By identifying which items are improperly classified as real property, a business may drastically increase the rate of depreciation they take and reap significant tax savings.

An engineering-based cost segregation study is the most methodical method that the IRS approves for supporting such deductions. Here at Robert Hill Law, we can help Minnesota businesspeople determine whether an engineering-based cost study is right for their company and its assets.

Our team of experts will provide your company with a cost and benefit analysis that will indicate the expected benefits and the flat fee required to complete the full engineering-based study. This will allow your company to make the most educated decision possible as to whether the study makes business sense based upon the projected return on investment. To learn more about cost-based engineering and our services, contact us at 952-426-7373.

Commercial office building

Minnesota businesses complain about high property taxes

Minnesota Public Radio recently ran a story detailing how some Minnesota businesses are struggling to compete along the North Dakota border. Moorhead convenience store and gas station operators were particularly hard hit because their customers can easily go to Fargo for the same services.

Brady Olson is one small business owner who took out a radio ad to voice his concerns regarding increasing sales and property taxes on his gas station.

“Hi, I’m Brady from Brady’s Service,” Olson said in the radio spot. “Minnesota has quietly been turning my business in to a tax collection business.”

Area officials say that Minnesota has traditionally had lower property tax rates than North Dakota, but the state’s surging oil wealth has changed that. Minnesota does provide some help to the Moorhead area, which is used to defray the cost of workers’ comp benefits and provide small incentives to new businesses.

State Representative Paul Marquardt told MPR News that the taxes Moorhead businesses pay contribute to the higher quality of life, infrastructure, and schools that Minnesotans enjoy compared to some of our neighbors. Marquardt also said that complete parity with N. Dakota is highly unlikely in the near future.

DFL lawmakers recently hinted that some Minnesota tax hikes could go away now that Olson and other local businesses are complaining loudly. One Lino Lakes warehouse owner says that the state’s tax on warehousing services is prompting his company to explore relocating.

“We’ve actually begun the process of looking for facilities in other states,” said Dave Smith, V.P. of Distribution Alternatives. “We’ve actually worked with a real estate agent already. We gave him the list of four or five states to look at.”

One thing that Minnesota property owners can do to combat property tax hikes is consider a reevaluation for their business. Over-assessments are common and a proper valuation can lower the tax burden of a company significantly more than a small legislative bump in rates.

Businesses that occupy single buildings and aging industrial sites are most commonly overvalued, but any type of commercial property can be improperly assessed.

Contact Robert Hill Law to discuss whether your business property may be overvalued.