Lead Opinion
OPINION
This рroperty tax appeal raises two issues. The first is whether Minn.Stat. § 278.05, subd. 6(a) (2002),
Relator Kmart Corporation leases retail property in Stearns County, Minnesota. Under the terms of the lease, Kmart is responsible for paying the property taxes.
Chapter 278 provides “an adequate, speedy, and simple remedy for any taxpayer to have the validity of his claim, defense, or objections determined by the * * * court ⅛ matters where the taxpayer claims that his real estate has been partially, unfairly, or unequally assessed.” Cont’l Sales and Equip. Co. v. Town of Stuntz,
Information, including income and expense figures, verified net rentable ar*764 eas, and anticipated income and expenses, for income-producing property must be provided to the county assessor ■within 60 days after the petition has been filed under this chapter. Failure to provide the information required in this paragraph shall result in the dismissal of the petition, unless the failure to provide it was due to the unavailability of the evidence at that time.
Id. The subject of this appeal is the requirement that the petitioner produce “expense figures” and “anticipated * ⅜ * expenses.”
Within 60 days of filing each petition, Kmart provided Stearns County with a site drawing of the leased property and a copy of its lease. The lease indicates that Kmart is responsible for paying certain expenses including property taxes; insurance on common areas; costs of repairs, maintenance, and improvements; and all utilities (gas, water, sewage, telephone, electricity, еtc.). Kmart did not provide Stearns County with statements that detailed or separated the amounts it paid for each of these expenses.
Stearns County moved to dismiss all three petitions for failure to comply with the 60-day rule. Stearns County argued that the 60-day rule requires Kmart to produce information concerning the real estate expenses that Kmart was responsible for under the terms of the lease. Kmart argued that only owner-paid, and not tenant-paid expenses are required to be produced under the 60-day rule. Kmart also argued that the petitions should not be dismissed because Kmart’s failure to provide tenant-paid expenses “was due to the unavailability of the information,” within the meaning of the 60-day rule. Kmart submitted an affidavit stating that Kmart does not maintain any records that “separately identify the operating expenses for the real estate of the subject property.”
The tаx court held that “[t]he plain language of the statute and the Minnesota Supreme Court’s holding in BFW requires real estate expense information to be produced.” Kmart Corp. v. County of Stearns, Nos. CX-00-404, CX-01-1465, C2-02-1387,
Kmart moved for reconsideration and also argued that if its motion was denied, Steams County I creates a new principle of law that should only be applied prospectively. The tax court denied the motion and further determined that its decision did not create a new principle of law that would warrant prospective application. Kmart Corp. v. County of Stearns, Nos. CX-00-404, CX-01-1465, C2-02-1387,
We review a tax court decision “on the ground that the Tax Court was without
I.
We begin by considering the correct interpretation of the 60-day rule provided in section 278.05, subdivision 6(a). Kmart asks us to interpret the 60-day rule to distinguish between who pays the real estate expenses for rental property: Without arguing that tenant-paid real estate expenses are not relevant to the appraisal of the real estate, Kmart says the “well-settled” rule is that “the expenses called for by the 60-day Rule are the owner’s expenses of operating the underlying real estate, and not those of a retail tenant whose business is operated at the subject property.” (Emphasis added.) Kmart interprets the 60-day rule to only require from a tenant disclosure of income produced by the property in the form of rent.
We recognize that the tax court has stated, in a series of cases, that the 60-day rule does not require a tenant to produce information on tenant-paid real estate expenses. See Kmart Corp. (Anoka) v. County of Anoka, Nos. CX-01-2784, C5-02-2881, C8-03-4232,
The statute refers to “expense” without qualification. It does not limit the. information to owner-paid expenses. In fact, the question of which party is responsible for these expenses under the lease is irrelevant to the purpose of the 60-day rule to facilitate a speedy, efficient remedy for the taxpayer. In other words, if the real estate related expenses for taxes, insuranсes, utilities, maintenance, and repair are required to be produced under the 60-day rule when paid by the owner, there is no logical reason why they-are not similarly required to be produced when paid by the tenant. The 60-day rule focuses on the “expenses,” ■ not on which party has paid them.
■ Although our past decisions interpreting the 60-day rule deal only with the “income” component, they uniformly support a broad reading of the rule. Thus, in BFW, we held that:
[T]he statute’s text requires the petitioner to provide all information within its possession, even though the petitioner deems certain portions of that information to be incomplete or not fully accurate. In addition, we conclude that the statute clearly requires the petitioner to provide any of the required information within- its' possession on the date of the deadline. The unavailability of one type of evidence does not render unavailable other types of information within the possession of the petitioner.
BFW,
Also, in Kmart Corp. v. County of Becker, we declined to limit the scope of the
Consistent with our past decisions, we interpret the 60-day rule to require production of expense information that is useful and relevant to the appraisal process. Because the undisputed facts of this case and the generally recognized principles of real estate appraisal make it clear that tenant-paid real estate expenses are useful and relevant to the appraisal process, we interpret the 60-day rule to require that they be produced within 60 days of the filing of a chapter 278 petition.
The focus of a property tax appraisal is to determine the fair market value of the property to the owner (the landlord). See Minn.Stat. § 278.01, subd. 1 (2004). There are three recognized methods for conducting such an appraisal. Montgomery Ward & Co. v. County of Hennepin,
Lease expense information may not be relevant to the cost or comparable sales methods, but it is relevant to the income model. The affidavit of Dwight Dahlen, Stearns County’s appraisal expert, explains why this is so. Dahlen states that the goal of the income model is to estimate the “potential gross rent, the rent that would be collected if the property were fully occupied at mаrket rent.” To determine market rent, the appraiser first examines the rents for comparable properties. In order to make that comparison valid, the appraiser adjusts for variations in the manner that the underlying leases allocate the operating expenses between the owner and the tenant by including all operating expenses by whomever paid. This enables the appraiser to compare “expenses reported for the subject property to expense information for comparable properties.” Through this comparison, the appraiser attempts to determine how closely the contract rent for the subject
In summary, tenant-paid real estate expenses are relevant to the process of appraising the value of rental property and the 60-day rule requires that they be provided to the county within 60 days of filing a chapter 278 petition. Because Kmart did not disclose any tenant-paid real estate expenses, the tax court correctly determined that Kmart violated the 60-day rule.
II.
We next turn to Kmart’s argument that if we affirm the tax court’s interpretation of the 60-day rule, we should only apply our holding prospectively because it would constitute a new principle of law and defeat strong reliance interests. We note at the outset that this argument can only apply to Kmart’s 2001 and 2002 petitions because the tax court decisions stating that tenant-paid real estate expenses need not be provided under the 60-day rule were filed after the expiration of the 60-day disclosure deadline for its 2000 petition.
Kmart has not referred us to any recognized theory of law that would support its request that the tax court decision in this case (or our decision affirming it) should only be applied prospectively. Kmart relies on the purely prospective ruling doctrine that has, in limited circumstances, been applied to decisions of this court. We conclude that doctrine is not applicable to decisions of the tax court. Further, because Kmart’s arguments are founded on a claim of reliance, we have also analyzed them under principles of equitable estoppel. We find those principles equally unavailing.
A. Purely Prospective Ruling Doctrine
As a general rule this court’s decisions are given retroactive effect. State v. Baird,
First, the decision to be applied nonret-roactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, * ⅜ * or by deciding an issue of first impression whose resolution was not clearly foreshadowed ⅜ * *. Second, it has been stressed that “we must * * ⅞ weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” ⅜ * * Finally, we have weighed the inequity imposed by retroactive application, for “[w]here a decision of this court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of nonretroactivity.”
Hoff v. Kempton,
Kmart bases its request for a purely prospective ruling on a series of tax court decisions that said tenant-paid real estate expenses are not required to be produced under the 60-day rule. The first decision on this point was a 2001 order on a motion for reconsideration in another Kmart case. Douglas County,
The value of the property, as determined under the income approach, requires capitalizing the value of the income stream from the property after the expenses that reduce the income stream are deducted. Since expenses that are paid by the tenant do not reduce the income to the landlord, those expenses are not relevant in calculating the value of the property.
Id. at *2. Although the court concluded that Kmart’s failure to provide “tenant paid business expensеs related to real estate” did not provide a basis to dismiss the petition, it dismissed the petition on other grounds. Id. at *3, 5. Thus the language concerning tenant-paid real estate expenses was not dispositive.
In another order published on the same day, the tax court denied St. Louis County’s motion to dismiss one of Kmart’s four petitions. St. Louis County,
The dissent relies on the two cоurt of appeals decisions to support the proposition that there are some limits on the ability of an agency to depart from precedent, but those cases only require that there be a reasonable basis for any departure. The conclusion that precedent was based on an erroneous interpretation of a statute surely provides a reasonable basis to depart. Here, it is unclear whether the tax court is departing from Douglas County and St. Louis County.because, as noted, the interpretation, of the 60-day rule in those cases was not clear. But, to the extent the tax court did depart, it did so by correctly interpreting the 60-day rule, which provided a reasonable basis for departure and prevented its decision from being arbitrary or capricious.
We conclude that the decisions of the tax court do not qualify as precedent for purposes of retroactivity analysis. This conclusion is reinforced by the fact that the tax court serves as an alternative venue to the district court for chapter. 278 petitions.
Moreover, even if the doctrine of stare decisis were to apply to some orders of the tax court, it would not apply to orders “which are in conflict with the express provisions of statutory law.” Murphy Motor Freight Lines, Inc. v. Witte Transp. Co.,
The dissent expands on Kmart’s arguments by referring to the test for retroac-tivity of administrative agency decisions followed by a line of federal cases. These cases were not discussed by the parties, likely because they have no application to an administrative agency’s interpretation of the plain meaning of a statute.
The dissent fails to distinguish between different types of administrative actions. Some administrative actions involve the agency’s quasi-legislative power to make policy, including rules or regulations, within the framework of an enabling statute. See Minn.Stat. § 14.05 (2004); St. Paul Area Chamber of Commerce v. Minn. Pub. Serv. Comm’n;
The cases cited by the dissent in support of a prospective test do not involve a change in an agency’s interpretation of a statute when made in its quasi-judicial capacity, but a change in the agency’s interpretation or application of its own policies, rules or regulations, made in a quasi-legislative capacity. E.g., Williams Natural Gas Co. v. Fed. Energy Regulatory Comm’n,
The only federal decision that appears to discuss this prospectivity test in the context of an agency’s interpretation of a statute is Microcomputer Technology Inst. v. Riley,
If the languagе of the statute plainly resolves the point, we of course must enforce it. * * * But if the statute is ambiguous, we must defer to “reasonable interpretations” made by the agency charged with administering it.
As applied here, there is no claim that the legislature’s enactment of the 60-day rule left open any question of policy for the tax court to decide. In fact, the tax court is not even charged with the exclusive administration of the 60-day rule. As noted, the tax court is only one adjudicative body that may hear claims under chapter 278, as an alternative to the district court.
Because we hold that the plain words of the 60-day rule require production of tenant-paid real estate expenses, we conclude that the federal prospectivity test does not apply to any changes the tax court may have made in its interpretation of the 60-day rule concerning tenant-paid real estate expenses. Any other conclusion would enable an executive branch administrative agency to ignore or amend the plain language of a statute enacted by the legislature, in contravention of separation of powers.
For all these reasons we decline to extend the purely prospective ruling doctrine to decisions of the tax court.
B. Equitable Estoppel
We note that Kmart’s argument presents, some elements of equitable estoppel, although Kmart does not specificаlly refer to that doctrine. A governmental agency may be estopped from taking an enforcement action when the plaintiff demonstrates “[1] that the defendant, through his language or conduct, induced the plaintiff [2] to rely, in good faith, on this language or conduct [3] to his injury, detriment or prejudice.” See Ridgewood Dev. Co. v. State,
Although Kmart may have relied on the tax court decisions for taxes payable in 2001 aiid 2002,
Further, equitable estoppel is generally applied only where the action giving rise to estoppel was taken by the administrative body that seeks to enforce a contrary rule. Here, Kmart does not claim to have relied on any actions of Stearns County, the taxing authority. Stearns County should not be estopped because of actions taken by the tax court.
The decision of the tax court is affirmed.
Notes
. Section 278.05, subdivision 6(a), was amended in minor ways in 2003. Act of May 25, 2003, ch. 127, art. 2 § 19, 2003 Minn. Laws 731, 776. The 2002 version was applicable to the three property tax years (2000, 2001, and 2002) for which appeals in this case were taken.
. This makes Kmart a proper party to file the chapter 278 petition. Minn.Stat. § 278.01, subd. 1 (2004).
. In 2001, Kmart provided Steams County a “net profit report,” which describes broad categories of expenses that may include some related to the operation of the real estate. Although absent from the record, Kmart says it provided the same report in 2002. Kmart does not argue that the real estate expense figures in these reports satisfy the requirements of the 60-day rule. Thus we do not decide that issue.
. The dissent misconstrues our holding when it refers to the majority's “adoption of the tax court's new interpretation of Minn.Stat. § 298.05.'' Because we review the tax court's interpretation of the statute de novо, we do not defer to the tax court's interpretation but instead make our own interpretation.
.See also Appraisal Institute, The Appraisal of Real Estate 497, 501 (12th ed. 2001) ("To derive pertinent income and expense data, an appraiser investigates comparable sales and rentals of competitive income-producing properties of the same type in the same market. For investment properties, current and recent incomes are reviewed, and vacancy and collection losses and typical operating expenses are studied.”).
. Because Kmart did not disclose any expense information, we do not address what level of detail might be minimally necessary to satisfy the 60-day rule where partial information is provided.
. As we noted in Baird, the terms "retroactive, nonretroactive, and prospective have been variously defined.”
. We are mindful that both Douglas County and St. Louis County involved Kmart leases similar or identical to the leases in this case.
. Kmart Corp. (Anoka) v. County of Anoka,
.See FACS of New Ulm LLC v. County of Brown, No. CX-00-222,
. For a brief discussion concerning the limited authority on the precedential nature of tax court decisions, see Jerome A. Gеis & Barry R. Greller, The Minnesota Tax Court: The Taxpayer’s Choice of Forum to Litigate a State Tax Liability, 21-Hamline L.Rev. 407, 431 (1998) (noting that although not strictly bound by its own decisions, as a practical matter “the Tax Court follows its prior decisions unless provided with a good reason as to' why the decisions are distinguishable or are no longer good law”).
. Taxpayers petitioning for review of property assessments can elect to file in the district court in the county where the tax was levied. Minn.Stat. § 278.01, subd. 1. The tax court was created to provide a speedier and more efficient alternative forum for this purpose, not a substitute forum with lawmaking authority. See Land O’Lakes Dairy Co. v. Sebeka Village,
. Because Smart's 60-day rule submissions were identical for taxes payable in 2000, before any tax court decisions on the subject were filed, Kmart’s reliance arguments are not strong.
Concurrence Opinion
(concurring in part and dissenting in part).
I concur in part and dissent in part. I agree with the majority that Kmart must, under Minn.Stat. § 278.05, subd. 6(a) (2002), provide the information at issue in this case. But I tаke issue with the majority’s characterization of how the Minnesota Tax Court must respect its own precedent, and I disagree with the majority’s decision to retrospectively apply our adoption of the tax court’s new interpretation of Minn. Stat. § 278.05, subd. 6(a).
First, I write to clarify that an executive branch court such as the tax court, while not bound to follow its own precedent to the same degree as a judicial branch court, is still required to accord some respect to its own precedent. In its effort to make Kmart’s reliance on tax court precedent appear unjustified, the majority presents only part of the story of the existing Minnesota case law on the issue of tax court precedent. For instance, the majority cites In re Whitehead for the proposition that Kmart’s reliance on tax court decisions in previous Kmart cases was not reasonable, but on the contrary, Whitehead implies that some reliance on tax court decisions is justified, as “an agency may [not] abandon its own precedent without reason or explanation. * * * Failure to explain such a departure indicates that the agency’s action is arbitrary and capricious.” In re Whitehead,
Whitehead is not the only case holding that an agency cannot change its precedent capriciously.
I do not intend to imply that the tax court’s new interpretation of MinmStat. § 278.05, subd. 6(a), is unreasonable, though I do believe that the tax court’s failure to explain why it abruptly changеd its position is violative of the general requirement laid down by federal courts and by our court of appeals that an agency must provide a “reasoned explanation” for a change of mind or position. See, e.g., Stroe v. I.N.S.,
I more definitively part company with the majority on the issue of retrospectivity. I conclude that we should follow the example of several federal courts in applying the prospective test formulated by the District of Columbia Circuit Court of Appeals for use in just this type of situation— when, due to an agency’s abrupt shift of policy, justice would be better served by a prospective application of the agency’s new interpretation of the law. Williams Natural Gas Co. v. Fed. Energy Regulatory Comm’n,
The D.C. Circuit Court has held that when an agency shifts its interpretation, fairness may require that the new rule should be applied prospectively to those subject to the new interpretation. Williams Natural Gas Co.,
(1) whether the particular case is one of first impression, (2) whether the new rule represents an abrupt departure from well established practice or merely attempts to fill a void in an unsettled area of the law, (3) the extent to which the party against whom the new rule is applied relied on the former rule, (4) the degree of the burden which a retroactive order imposes on a party, and (5) the statutory interest in applying a new rule despite the reliance of a party on the old standard.
Id.; see also Chang v. United States,
In the case before us today, fairness requires that we apply a rule similar to the rule articulated by the D.C. Circuit Court. Here, the tax court disregarded its prior holding without explanation or excuse for its shift in position.
When we apply the D.C. Circuit Court’s prospective applicatiоn doctrine to this case, all five factors tilt in favor of prospective application, or at least in favor of allowing Kmart to submit the additional information. First, this case is one of first impression. Second, the new interpretation of the statute represents an abrupt departure from two prior tax court cases — given
The majority rejects this highly relevant federal doctrine, stating that the cases within which the doctrine has been applied have been cases in which the agencies have been involved in interpretation of their own rules or policies, not interpretation of a statute.
Instead of applying the federal prospective application doctrine, the majority applies our purely prospective doctrine, which is generally confined to addressing changes in court case law, not agency case law. In support of its holding, the majority tries to make Kmart’s reliance on two directly applicable tax court opinions appear to be unjustified.
While I believe that this case does satisfy the purely prospective doctrine because Kmart’s reliance was natural and reasonable, I also believe that this is exactly the type of case for which the federal courts have fashioned their prospective application doctrine. The federal prospective application doctrine was created to deal with the injustice that occurs when agencies abruptly change their interpretation of a law or rule upon which a person or entity had reasonably relied. With such doctrines available to us, there is no reason why we should permit this and future similar injustices to occur. Therefore, I would hоld that our adoption of the tax court’s new interpretation of Minn.Stat. § 278.05, subd. 6(a), should be applied prospectively.
. Agency law applies to the tax court because, as we have previously held, the tax court is an administrative agency of the executive branch. Great Lakes Gas Transmission L.P. v. Comm’r of Revenue,
. The majority cites one case, Sprint Spectrum LP v. Comm’r of Revenue,
. See, e.g., In re Detailing Criteria and Standards for Measuring an Elec. Util.’s Good Faith Efforts in Meeting Renewable Energy Objectives under Minn.Stat. 216B.1691,
. See, e.g., N.Y. Pub. Interest Research Group, Inc. v. Johnson,
. The tax court did mention the previous tax court cases, but holds that they were decided on other grounds. It fails to address and discuss what the majority openly admits — that its holdings included a statement that Kmart need not produce the information required here.
. See supra notes 3-4 and accompanying text.
. Importantly, there is no evidence cited by the majority that the federal courts would not apply the federal prospective application doctrine to cases wherein an agency consistently interpreted a statute in one way, then abruptly shifted its interpretation. It may be that such a case simply has not yet come before the federal courts of appeals.
. The majority also overlooks the pertinent fact that the tax court rulings here were issued in two prior Kmart cases which are part of a series of Kmart cases. This case is also one of that series. The fact that these cases аre all, in a sense, linked and are taking place at roughly the same time and with the same petitioner makes it more reasonable for Kmart to have relied upon the rulings of the tax court in the prior cases. For additional tax court cases in this series, which were decided after the expiration of the 60-day deadline following Kmart's filing of its 2002 petition, see footnote no. 9 of the majority opinion.
.The majority further mentions that the tax court is not bound by its prior decisions if those prior decisions are in conflict with the express provisions of statutory law. But the issue here is not whether the tax court is forever bound to uphold a prior incorrect ruling; even this court may overturn its own