Relating to Real Estate

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Tax Assessment of Casino Is Limited to Value of the Land

In Anne Arundel County v. PPE Casino Resorts Maryland, LLC, No. 1248, Sept. Term 2019, 2021 WL 5071889 (Md. Ct. Spec. App. Nov. 2, 2021), the Court of Special Appeals (CSA) affirmed the decision of the Tax Court regarding the property tax valuation of the land on which the Maryland Live! Casino is located in Anne Arundel County. In its decision, the assessed value of the property was reduced by $55 million from the amount that the Anne Arundel County Supervisor of Assessments set.

Anne Arundel County asserted that the assessments should be based on the terms of a “ground lease,” under which the casino operators are required to pay a base ground rent of $2 million per year with annual increases of 1%, plus 1% of the gross retail sales and revenue of the casino, less an annual credit of $1.5 million.

The property owners appealed the assessments for the 2011-13 and 2014-16 assessment periods to the Maryland Tax Court, where they argued that the Supervisor’s approach included intangible value not properly a part of real property tax assessments. The taxpayers asserted that the assessment should be determined using a cost approach that focused on the value of the land. The Tax Court agreed with the taxpayers in PPE Casino Resorts Maryland LLC v. Supervisor of Assessments of Anne Arundel County, Case Nos. 14-RP-AA-0503 (1-2) and 14-RP-AA-1276 (Dec. 26, 2017). See Relating to Real Estate April 2018. The County appealed to the Circuit Court for Anne Arundel County, which affirmed the decision of the Tax Court. The County then appealed to the CSA and the CSA affirmed.

The Tax Court noted that two-thirds of the rent under the lease is from the business-oriented percentage rent. Therefore, according to the Tax Court, “the lease revenues value more than just the property — they include the value of the operating business, and don't reflect the amount a willing buyer would pay a willing seller for the property.”

The CSA supported the Tax Court’s approach of considering the rent under the ground lease, but not relying on it solely. The CSA stated, “Without information from past sales and revenue from a casino located in this area or information from a similar deal negotiated between these parties, it was not unreasonable for the Tax Court to find that revenue projections increased the valuation beyond what a willing purchaser would pay for the land.” Instead, the Tax Court followed the direction of the taxpayers’ expert who used a sales comparison method based on probable alternative buyers for the Arundel Mills Mall property and comparable land sales to determine the assessed value of the property.

Practice Notes: Shouldn’t the PPE Casino case have application to any situation, not just for casinos, when there is a percentage rent component that the tenant pays? When does a transaction that includes a percentage rent provision shift from being a real estate deal, for which all of the components of rent are included in the calculations to determine the assessed value of the real estate, to being a business deal, for which a portion of the payments are not considered as part of the real property assessment?

The Tax Court and the CSA in the PPE Casino case focused primarily on what a willing buyer would pay for the land from a willing seller. But wouldn’t a willing buyer of the fee interest of the casino property pay an amount based on the anticipated income of that interest for years to come?

For commercial property that is leased, assessors typically rely on the capitalized income method to determine the assessment of the property. Retail leases often contain percentage rent clauses. In light of PPE Casino, commercial property owners should promote replacement cost values and comparable sales values if the income approach produces a high proposed assessment.

For more information, contact Edward J. Levin.


Ed Levin
410-576-1900 •


May 03, 2022




Levin, Edward J.


Real Estate