McDonald's Corp. v. BOARD OF SUPERVISORS OF MENDOCINO COUNTY

The Board of Supervisors of Mendocino County appeals from a judgment requiring it to refund a documentary transfer tax paid by McDonald’s Corporation in connection with the extension of a long-term lease. The question on appeal is whether the trial court correctly determined the lease was not of sufficient duration to be subject to the tax.

Statement of the Case and Facts

On March 30, 1972, McDonald’s Corporation (McDonald’s) entered into a lease for property in Ukiah for a term of twenty-one years, expiring on June 1, 1993, with three renewal options of five years each. In 1992, it exercised its option to renew for the five-year term from 1993 through 1998.

On February 1, 1995, McDonald’s and the lessor entered into a “Memorandum of Amended Lease” extending the term of the lease to June 1, 2013, with two renewal options of five years each. When this amended lease was recorded, the Mendocino County Clerk-Recorder imposed a transfer tax of $990 under the authority of Revenue and Taxation Code section 11911, viewing the amended lease as creating a leasehold interest of over 35 years. McDonald’s paid the tax and informally appealed its imposition; this appeal was denied.…