If you have ever been involved in a hotel property tax appeal where the assessor is defending the Rushmore method, the argument is usually familiar. The method is widely accepted, widely used, and widely cited. From that premise often follows the conclusion that there is little need to examine its underlying assumptions.
What is frequently overlooked, however, is Rushmore’s central premise: that deducting management and franchise fees from a hotel’s income stream adequately removes the value of intangible assets embedded within the hotel’s going-concern value. In some cases, courts have begun to question whether that assumption is always justified.
Hotels are not passive income-producing real estate like office buildings or apartment complexes. They are operating businesses in which value may be derived not only from land and improvements, but also from brand affiliation, reservation systems, loyalty programs, assembled workforces, food-and-beverage operations, conference facilities, and other business enterprise assets.
The question is not whether these intangible assets exist. It is whether a valuation methodology meaningfully separates their contributory value from the value of the real estate itself.
Recent Courts Are Looking Beyond Assumptions
A growing number of courts have subjected the Rushmore method to closer scrutiny, focusing on whether management and franchise fee deductions actually remove intangible business value rather than simply assuming they do.
In Olympic & Georgia Partners, LLC v. County of Los Angeles, the California Supreme Court examined what it referred to as “hotel enterprise assets,” including a hotel’s flag, food-and-beverage operations, and assembled workforce. The County argued that these assets had already been accounted for through management and franchise fee deductions under the Rushmore method. The Court rejected that premise, concluding that the County had failed to provide empirical support for the assumption that those deductions necessarily remove the full value of the hotel enterprise assets. Olympic & Georgia Partners, 2025 Cal. LEXIS 5622 (2025).
The Court emphasized a distinction between income attributable to the real property and income attributable to the business enterprise operating on the property. Hotel enterprise assets, it explained, can increase the value of the going concern without necessarily increasing the value of the real estate itself. As a result, intangible enterprise value cannot simply be presumed away through fee deductions.
The Minnesota Tax Court reached a similar conclusion in JPMC 2018-MINN SS TRA, LLC v. Hennepin County, involving a full-service Hilton hotel in Minneapolis. After comparing the Rushmore approach to the Parsing Income Method, the court concluded that management and franchise fee deductions did not persuasively address the value attributable to the hotel’s brand affiliation, management relationship, and significant food-and-beverage operations. The court ultimately adopted the Parsing Income Method because it more directly identified and allocated income away from intangible business assets before valuing the real estate.
Several years earlier, a Florida appellate court raised similar concerns in Singh v. Walt Disney Parks & Resorts US, Inc. There, the court concluded that deducting management and franchise fee expenses does not necessarily remove all intangible business value from an income stream. The court explained that while the Rushmore method deducts management and franchise fee expenses, it does not first remove intangible business value from the gross income stream. The court found that the methodology failed to establish that assets such as goodwill, assembled workforce, favorable operating rights, and brand value had been excluded from the assessment and ultimately held that Disney’s assessment improperly included intangible business assets. Singh, 325 So.3d 124, 130-31 (Fla. Ct. App. 2020).
The Broader Significance
These decisions are not significant because they reject a particular valuation method. Nor do they stand for the proposition that the Rushmore method is always inappropriate. In some circumstances, management and franchise fee deductions may adequately account for intangible value.
Rather, the significance of these cases lies in a broader principle: courts are increasingly unwilling to accept assumptions without proof. Where a valuation methodology claims to remove intangible business value, courts are asking whether the methodology actually accomplishes that result.
That principle has implications well beyond California, Minnesota, and Florida. Many states distinguish between taxable real property and non-taxable intangible or business enterprise value. Because hotels are frequently bought and sold as going concerns consisting of real property, tangible personal property, and intangible assets, valuation methodologies must account for the possibility that some portion of a hotel’s income stream is attributable to something other than real estate.
Conclusion
For years, the Rushmore method has often been defended more by acceptance than by analysis. Recent decisions suggest that courts are increasingly willing to look beyond a methodology’s reputation and examine whether its underlying assumptions hold up against the economic realities of hotel operations.
For hotel owners, assessors, and practitioners alike, these decisions reflect a broader shift toward rigorous scrutiny of hotel valuation methodologies. Valuation is not an exercise in applying wooden formulas. It is an exercise in identifying economic reality. And in the hotel context, that reality may include intangible enterprise value that cannot simply be assumed away through management and franchise fee deductions.
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