DFS Grp., L.P. v. Cnty. of San Mateo

*1062 DFS Group, L.P. (DFS), which engages in the business of duty-free sales *406 at airports around the country, holds an exclusive lease and concession to sell merchandise duty-free at San Francisco International Airport (SFO), in retail space located within SFO's international terminal. 1 This dispute concerns the San Mateo County Assessor's (Assessor) reassessment of the value, for property tax purposes, of the possessory interests DFS obtained under a seven-year extension of its agreement with SFO.

At issue is whether the Assessor's valuation methodology, by including the value of DFS's exclusive concession rights, violated Revenue and Taxation Code provisions that bar the taxation of intangible rights. 2 Among them, section 110, subdivision (d)(3) expressly exempts from taxation the exclusive right to operate a concession. It states: "The exclusive nature of a concession, franchise, or similar agreement, whether de jure or de facto, is an intangible asset that shall not enhance the value of taxable property, including real property."

The Assessor utilized a valuation methodology known as the income method (also called the "capitalization" method), which estimates the fair…