Until Monday’s decision in People v. Fletcher (see here), there hadn’t been any 4-3 Supreme Court opinions during the 2024-2025 term that concludes Sunday. Today’s ruling in Olympic and Georgia Partners, LLC v. County of Los Angeles produced a second one, although the disagreements are more limited. The point of contention is what types of income can be considered in determining a hotel’s property tax assessment.
Interpreting state constitutional and statutory provisions, the court’s opinion by Justice Joshua Groban holds the assessment in the case properly included income from both a nightly occupancy tax a city agreed to assign to the original hotel developer as an incentive to construct the hotel and a one-time “key money” payment that a hotel’s management company paid to the property owner for the right to manage and brand the hotel. Although intangible assets are sometimes excluded, the court says these two income sources are includable because both “derive from a type of intangible asset that effectively enable the property itself — as opposed to the business operating the property — to generate more revenue.”
The county assessor didn’t win on everything, however. All seven justices are of one mind in finding insufficient evidence that the assessor fully accounted for three types of conceded non-taxable “enterprise assets” by deducting management fees paid by the property owner.
Justice Goodwin Liu writes separately to disagree with the inclusion in the assessment of the “key money” payments. Otherwise he agrees with the majority’s other holdings.
Justice Leondra Kruger, joined by Justice Kelli Evans, also concurs and dissents, but her disagreement is greater than Justice Liu’s. She contends that both the “key money” payments and the occupancy tax money should be excluded from the tax assessment.
The court reverses a 2-1 published opinion of the Second District, Division Eight, Court of Appeal, as to the occupancy tax and “key money” inclusions and affirms regarding the “enterprise assets” calculation.
