Federated Retail Holdings, Inc. v. County of Ramsey

Dayton's built a department store beneath a mall and, by lease, obtained an exclusive, assignable right to use adjoining basement space for store operations. Dayton's later sold the store to Federated Retail Holdings (plaintiff), which converted it to a Macy's and received an assignment of the lease. Ramsey County (defendant) assessed the store's taxable value to include the value of this leasehold interest. Federated challenged the assessment. The tax court found the leasehold added real value — rent-free use of adjoining space — but held it lacked jurisdiction to tax it because the two parcels had never been formally consolidated. The Minnesota Supreme Court first confirmed it had jurisdiction, then addressed whether the leasehold should be included in the taxable value.