Iowa Property Tax Board Finds County’s Assessment of Casino-Owned Real Estate was Excessive, in a Recent Case

In a case involving real estate associated with an Iowa casino operation, the Iowa Property Assessment Appeal Board (PAAB) rejected the county’s assessed value, which reflected substantial increases over prior assessed values, and ruled in favor of the property owner’s valuations. 

Recognizing the difficulties inherent in valuing the real estate of a casino, PAAB empathized with and quoted the Indiana Board of Tax Review:

Casino real estate is “a type of property that is not rented, not sold separate from the business assets except [when] in distress, and where there is sparse law on how it should be valued.  There is no rental income, there are no comparable sales, and the market never considers the value of the real property separate from the business assets.  Highly credentialed experts disagree on the most basic points of approach, method, and technique, and reach values nearly $100M apart….In the task at hand, the Board finds a certain affinity with the Roman haruspex as we must divine” the fair value of the real estate. 

Wild Rose Clinton, LLC v. Clinton County Bd. of Rev., No. 2023-023-00059C (Jan. 8, 2025). (quoting Switzerland County Assessor v. Belterra Resort Indiana, LLC, 101 N.E.3d 895,902 (Ind. T.C. 2018). 

Iowa’s property tax is generally imposed on the assessed value of land and buildings, structures, or improvements constructed on or attached to the land.  Property tax does not apply to personal property.  Importantly for casinos, Iowa’s property tax also does not apply to intangible assets. 

The value of real property can be established through several different approaches. Generally speaking, the sales comparison approach compares the subject property with sales of other properties with similar characteristics.   The cost approach to valuation generally considers the value of the land and the replacement costs of the improvements, while reducing the value for depreciation and obsolescence.  The income approach calculates the present value of the real property by factoring the anticipated or potential future net operating income and applying a capitalization rate.

In the recent casino case, PAAB found that the cost approach used by the taxpayer’s experts did a better job of separating the value of the real estate (subject to property tax) from the value of the gaming license (not subject to property tax).  PAAB noted that the “use of the sales and income approaches may incorporate the value of non-assessable business value.”  Iowa casinos derive much of their business value from their interest in one of Iowa’s 19 gambling licenses.  A valuation approach that considers sales of other casinos as a going concern or the income generated by the casino can cause the county assessor to incorrectly include value associated with the gambling license in the property tax assessment.

PAAB found the taxpayer’s expert properly accounted for obsolescence, which reduced the assessed value of the real property.  The taxpayer’s expert correctly applied obsolescence due to some features of the property and the presence of four casinos within a one-hour drive, all of which had higher admissions and overall revenues.  The county’s expert applied no obsolescence for these factors. PAAB specifically noted that the county’s failure to account for obsolescence made the county’s appraisals less reliable and less persuasive.   

PAAB found that Clinton County over-assessed the property by nearly $6 million, reducing the 2023 assessment from $27,313,370 to $21,500,000.  

Nyemaster Goode attorney Bruce Baker represented the taxpayer.  The case is:

• Wild Rose Clinton, LLC v. Clinton County Bd. of Rev., No. 2023-023-00059C (Jan. 8, 2025).

The Clinton County Board of Review has filed a petition for judicial review in the Iowa District Court for Clinton County.  That petition is currently pending.